Ahead of what some consider as the likely tightening of buy to let mortgage lending criteria by the Bank of England later this year, Britain’s second-largest BTL lender has announced its own voluntary restrictions.
The Nationwide Building Society’s Mortgage Works division wants a much higher rental income relative to the costs of a landlord’s mortgage.
From next Wednesday the Mortgage Works says “in order to help landlords safeguard positive cash flow, as future tax relief changes begin to phase in from April 2017, we're making the following changes - rental coverage requirement increased from 125 per cent to 145 per cent, and the reducxtion of the maximum loan-to-value proportion from 80 per cent to 75 per cent.”
This will be calculated using either the ’stress rate’ which is currently 5.49 per cent for loans of 65 per cent to 75 per cent or 4.99 per cent for loan amounts below that figure.
Existing customers of The Mortgage Works will not be affected by the changes if they chose to remortgage, providing no extra borrowing is required.
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Screwed by politicians and their Masters The Banks again !! Just give Private Landlords a Free CGT Window of 2 years and the Institutions can have it all.
These changes are prudent for such a large high-street lender given market conditions. Many smaller specialist lenders cater for niche markets that require higher borrowing.
The worry is that the PRA may implement these rules before we see the full extent of the impact of upcoming tax changes. Excessive intervention could derail the buy-to-let sector, which would be a disaster for a housing market that comprises such a high proportion of renters.
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