In a move that could impact landlords and property investors across the UK, BM Solutions (also known as Birmingham Midshires) has today announced significant changes to its buy-to-let stress rates, set to take effect on Thursday the 7th of September 2023. These changes are the latest in a number of potentially damaging policy changes from buy-to-let lenders in the UK mortgage market, that could mean bad news for landlords looking to remortgage and/or purchase property.
BM Solutions, a subsidiary of Lloyds Banking Group, plays a crucial role in the buy-to-let mortgage sector in the UK and is known for its competitive mortgage products normally. However, as the mortgage market has generally struggled over the last few months, BM has tightened their mortgage affordability and increased their stress rates. It is essential for potential borrowers and existing landlords to stay informed about these changes, as they could have a significant impact on their affordability assessments and future earning potential.
Key Changes to BM Solutions’ Buy-to-Let Stress Rates
The adjustments to BM Solutions’ buy-to-let stress rates encompass a range of scenarios, affecting both new purchases and existing mortgage applications. Here’s a breakdown of the notable changes:
For Purchase, Let to Buy, Remortgage with Capital Raising, and Further Advance Applications:
- 2-Year Fixed Rate Products: The stress rate for 2-year fixed rate products will increase from 6% to 6.5%, or it will be calculated as the pay rate plus 2%.
- 5-Year Fixed Rate Products: The stress rate for 5-year fixed rate products will be 5.5%, or it will be calculated as the pay rate plus 1%.
- 5-Year Fixed Rate Products at 65% LTV or Less: The stress rate for 5-year fixed rate products at 65% LTV or less will decrease from 1% to 0.5%, making it 5% or the pay rate plus 0.5%.
For Like-for-Like Remortgages:
- 2-Year Fixed Rate Products: The stress rate for 2-year fixed rate products will increase from 5.5% to 6.5%, or it will be calculated as the pay rate plus 1%.
- 5-Year Fixed Rate Products: The stress rate for 5-year fixed rate products will decrease from 1% to 0.5%, making it 5% or the pay rate plus 0.5%.
Additionally, for further advances to qualify for 5-year stress rates, the total loan, including all existing balances, must be fixed for 5 years or more at the point of application.
These changes will have a substantial impact on borrowers, particularly those seeking 2-year fixed rate products, who will now face a higher stress rate when applying for a mortgage. ON the other hand, those opting for 5-year fixed rate products at lower loan to values will see a slight reduction in their stress rates.
Seeking Expert Advice is Crucial
Given the volatility and constant adjustments in the mortgage market right now, it’s more important than ever for potential borrowers and landlords to seek professional guidance from qualified mortgage advisors. Experts such as our advisors at Oportfolio Mortgages have a deep understanding of the evolving lending landscape and can help borrowers navigate changing stress rates to find the most suitable mortgage products. A qualified mortgage advisor can provide invaluable insights into which buy-to-let mortgage products align with your financial situation and investment goals. They can also assist in ensuring that your mortgage application is submitted accurately and has the best chance of approval, even with the adjusted stress rates.
If you or anyone you know is looking into getting a buy-to-let mortgage, and wants to discuss things in more detail with a qualified professional, then please feel free to get in touch. Send us an email or give us a call today. We are here to help in any way that we can.