Redwood Bank has announced changes to its lending criteria aimed at easing affordability constraints for professional landlords operating in the residential buy-to-let sector.

The move is intended to increase leverage for borrowers and follows a period of consultation with a number of mortgage brokers.

The specialist lender is responding to the challenges posed by sustained higher interest rates. The changes are designed to support both the acquisition of new investment properties and the refinancing or equity release of existing portfolios.

Redwood’s senior lending product manager Tom Worbey said the changes reflect the bank’s understanding of the pressure faced by landlords, particularly in regions such as the South where yields tend to be lower.

“Professional landlords have handled many challenges in recent times, including elevated interest rates that have eroded their returns and reduced their leverage, notably in the South where property yields are lower,” he said.

Worbey (pictured) acknowledged that many landlords are now reaching the end of fixed-rate terms secured when rates were at historic lows, creating new pressure on affordability. “At Redwood we support experienced property landlords and know that many of them are now approaching the end of deals held on historically low rates. We knew we needed to act to help support them to achieve the leverage they need in this current interest rate environment in order to continue to invest in and grow their property portfolios.”

The bank had already taken initial steps in this direction last year with the launch of its Alternative Fee product, which allows landlords to opt for a higher arrangement fee in return for a lower interest rate — a structure aimed at boosting affordability over the term of the loan.

Now, following further consultation with broker partners, the lender is removing previously applied automatic cost deductions in its affordability calculations, a move expected to improve loan size availability for landlords.