Skipton, one of the leading mortgage providers in the UK, has announced significant changes to its buy-to-let criteria, affecting landlords across the UK. The modifications include adjustments to the Buy-to-Let Stress Rate for different fixed-term products. The stress rate is used by a lender to determine a landlord’s eligibility for a mortgage. Normally, it calculates the level of rental income needed to cover the mortgage payments and make a profit on the investment property. By increasing or decreasing the stress rates, lenders aim to adapt to the evolving economic climate and ensure borrowers can comfortably manage their mortgage commitments.
Changes to Buy-To-Let Stress Rates
Starting from Monday the 24th of July 2023, Skipton will introduce the following adjustments to its buy-to-let mortgage stress rates based on the fixed term of the product:
- For products with a fixed term of less than 5 years, the BTL Stress Rate will increase from 7.56% to 8.14%.
- For products with a fixed term of 5 years or more, the BTL Stress Rate will remain at 6.29%.
Skipton’s Standard Buy-to-Let Mortgage Criteria
Different mortgage lenders have different criteria that borrowers must meet. Because of this, not every lender will be able to offer you the mortgage that you need. That’s why you should always discuss any kind of buy-to-let mortgage application with a specialist mortgage broker before committing to any lender. At Oportfolio, we are specialists in buy-to-let mortgages and portfolio landlords. Here is a brief breakdown of Skipton’s current buy-to-let criteria.
- Loan-to-Value (LTV): Lending is available up to 75% LTV, allowing landlords to secure a mortgage with a minimum deposit of 25%.
- Maximum Loan Amount: Borrowers can obtain a maximum loan amount of £1.5 million per case, facilitating investments in various property types.
- No Mortgage Valuation Charge: Skipton a free mortgage valuation for properties valued below £1.5 million on all BTL applications, whether for purchase or remortgage. Saving borrowers potentially thousands depending on the case.
- Skipton will potentially lend to individual landlords with portfolios of up to ten properties, with a maximum of five mortgaged properties with Skipton itself.
- Gifted Deposits Accepted: Landlords can take advantage of gifted deposits as the sole source of deposit.
- Stress Rate for Basic Rate Tax Payers (Landlords): Basic rate tax payers are stressed at 125% at 8.14% (or 6.29% for fixed products of 5 years or more), ensuring sustainable borrowing.
- Rental Income Calculation: Skipton considers 100% of rental income, provided it is verified through UK Land and Property Income as shown on SA302. Two years of SA302s will be required to assess rental income eligibility.
Criteria for Portfolio Landlords
Portfolio landlords with four or more mortgaged BTL properties will have specific criteria:
- Minimum guaranteed earned income of £45k (or £60k for joint applications), with net rental income included in the total.
- Stressed at 145% @ 8.14% (or 6.29% for fixed products of 5 years or more).
- Background properties will be assessed at 145% @ 6%.
- All BTL products can be used for portfolio landlords.
Minimum Submission Requirements:
As a minimum requirement when applying for a Buy-To-Let mortgage with Skipton, you will need to provide the latest full month’s payslip, bank statement, P60 (if using additional employment income), SA302s, and evidence of rental income for the past two months. Other than that, Skipton has quite a relaxed approach to mortgage submission documents and your mortgage broker will be able to let you know if anything else is required at application stage.
Speak To a Buy-To-Let Mortgage Broker
It is a challenging time for buy-to-let mortgages. Increased interest rates and higher stress test have meant that it is more difficult to get a mortgage and more difficult to make a profit on your investment. However, the buy-to-let market isn’t dead. Far from it! Demand for rental properties is very high. Supply and demand for rental properties in London alone is 26% supply and 48% demand, meaning that there is an abundance of people looking for a rental property. Having a buy-to-let property is still a good investment and getting the right guidance and advice when purchasing or remortgaging is essential. Call our expert buy-to-let mortgage advisors today for a free initial mortgage consultation. We are here to help.