As we reach then end of the first week of March 2023, the mortgage market has already seen a lot of changes coming in from mortgage lenders. Not all of them positive! Unfortunately a few lenders have started to increase their mortgage rates again, despite reducing them all at the beginning of the year. Although, the majority of lenders are still keeping rates low and reducing their products. Why this is happening? It is not entirely clear, but is definitely something that we need to keep an eye on. However, we’re here to talk about two lenders implementing some positive changes to their stress rates today.
BM Solutions Make Changes To Buy-To-Let Core Products Stress Test Rates
Birmingham Midshires (BM Solutions) the buy-to-let only lender have announced that they will be making some changes to their buy-to-let lending affordability stress tests for all of their core products. Like many buy-to-let mortgage lenders, BM solutions fell afoul of the post min-budget chaos and as a reaction, they tightened their buy-to-let mortgage affordability criteria. Meaning, that potential BTL mortgage borrowers had to prove a lot more income and affordability, before BM would approve their loan. Due to this, the BTL mortgage market did take a bit of a hit at the end of 2022 and is only now starting to recover.
On thing that impacted BTL lending the most was lender stress tests or the level of income and potential rental income that a landlord would receive. Lenders increased the minimum income multiples and stress rates so that many potential borrowers who would have been able to afford the loan before, were being rejected due to the stress rate being too high. In a communication to all brokers this morning, BM announced that they would be reducing most of their stress test rates. Here is a breakdown of what is changing.
BM Solutions Stress Rates
From today, Monday 6th March, we are removing the maximum 60% LTV restriction for qualifying like for like remortgages.
The stress rate for all like for like remortgages is now 6% or pay rate +1%, whichever is higher, for qualifying customers. To qualify customers must have a minimum income of £55,000 or more across the application (Applicants 1 and 2 only).
Qualifying income can be made from:
- All employment
- Self-employment
- Pension income
- Profit from UK land and property.
Like for Like Remortgage (all products with no capital raising)
Minimum earned income of £55k (per application)
6% or product rate + 1% whichever is higher
- 5 year fixed
Max 60% LTV and Minimum earned income of £55k (per application)
6% or product rate + 1% whichever is higher
Rental Cover Ratios remain exactly the same.
If all applicants are basic rate taxpayers, RCR must be 125%
I one or more applicants are higher/additional rate taxpayers, RCR must be 145%
To work out which RCR is applicable, the below income is used to establish whether customer earns over £50,271 pa (£43,663 pa in Scotland).
- All employment
- Self-employment
- Pension income
- 80% share of the gross rental income for all properties that the applicant will own on completion.
For further borrowing
- 125% RCR if all customers are basic rate tax payers and 145% if one or more customers are higher / additional rate tax payers.
- Stress rate is 6.5% or pay rate +2%, whichever is higher.
Skipton For Intermediaries Changes To Stress Rates
Likewise, Skipton for intermediaries have also announced new changes to their buy-to-let mortgage stress rate tests. Here is a breakdown of what these changes are from Monday the 6th of March.
- For products with a fixed term of less than 5 years, our BTL Stress Rate is reducing from 7.60% to 7.15%
- For products with a fixed term of 5 years or more, the BTL Stress Rate will remain at 6.00%
The rate at which we assess any background BTL properties is reducing from 7.60% to 6.00%.
If you or anyone you know has a buy-to-let mortgage and wants to look at remortgage options, or if you are looking to get your first buy-to-let loan and want to know what you options are, please give our team a call. We are experts in buy-to-let loans and we are happy to help.
