Improvements to our Buy to Let Affordability Assessment  

From 26 February 2018, the Buy to Let interest coverage ratio (ICR) applicable to both Standard and Specialist property types is being simplified, with some also being reduced, meaning your customers could potentially borrow more against their property.

In addition, ICR calculations will no longer depend on the number of properties a customer owns. Instead, ICR will simply depend on whether the application is a personal or limited company name, and whether the property is Standard or Specialist. 

 Standard Property:

• Single dwellings 
• HMO/ Multi/ Student lets with up to 5 rooms
• Freehold blocks/ title of land up to 4 units

Personal	Limited Company
125% Rental Cover	140% Rental Cover

Specialist Property:

• HMO/ Multi/ Student lets with 6 or more rooms
• Freehold blocks/ title of land with 5 or more residential units 

Personal	Limited Company
145% Rental Cover	160% Rental Cover

 

Affordability:

Affordability stress rates remain unchanged: 

• Minimum stress rate applicable for rental cover purposes is 5.5%, or the initial pay rate plus 1.55%, whichever is higher
• Remortgages where no additional borrowing is being raised are not subject to a minimum stress rate, with rental cover assessed against the initial pay rate plus 1.05% 
• 5 year fixed rate applications are stress tested at the initial pay rate, with no additional margin or minimum rate applicable

For more information on the changes to our ICR requirements, please visit our Commercial, Semi-Commercial or BTL/HMO mortgages.