Buy-to-let mortgage lender TMW have announced that they are making changes to their mortgage affordability stress test. But this time, it looks like they are going to be making it easier for borrowers. A great sign that the buy-to-let mortgage market will hopefully be returning soon.
TMW, the buy-to-let arm of Nationwide Building society were always a popular lender due to their easy to navigate affordability checks are fairly straight forward application process. However, during the first days of the mortgage market chaos that was caused by Kwasi Kwarteng’s mini budget, TMW along with countless other lenders increased their available mortgage rates, removed certain products from the market and tightened their mortgage affordability.
Changes To Mortgage Stress Tests
With buy-to-let lenders, a stress test is applied to all affordability checks to make sure that the rent being received or to be received will be enough to cover the mortgage payments. They will also often test that your own income will be enough to afford the loan, should you lose your rental income for whatever reason.
Generally, buy-to-let lenders were pretty good on the stress test front and buy-to-let mortgages go through a lot more smoothly than residential purchase. Unfortunately, the shakeup of the mortgage market really rattled TMW and they increased the rate at which they stress test their new loans so that a lot of people who they would normally lend to, could no longer afford the loans that they wanted to borrow.
The New Stress Rate
TMW will reduce it stress test rates for lower rate taxpayers by Wednesday the 7th of December 2022. This change will see a 125% interest cover ratio introduced. On a 1 or 2-year fixed loan for buy-to-let purchases, buy-to-let remortgages and further advances, TMW begin to test for the higher of the pay rate plus 2% or 5.50%. For a like-for-like remortgage, the stress rate is the higher of the pay rate plus 0.50% or 5.50%, for a five- or 10-year fix, the pay rate plus 0.50% is tested for and, for trackers and variables, the calculation is the higher of the pay rate plus 2.75% or 5.50%.
Buy-to-let mortgages have really taken a battering over the last few months and there was a period of time were becoming a landlord, really wasn’t as financially beneficial as it once was. Thankfully it looks like things are turning around and an appetite for buy-to-let lending is returning to the banks and building societies. Rates are dropping across the board and stress test rates are coming back down.
If you or anyone you know has a buy-to-let mortgage or is considering getting a rental property, feel free to give our advisors a call today for a free initial mortgage consultation. We are here to help.