Leeds, Paragon and Accord announce buy-to-let rental calculation changes
Leeds Building Society has announced its new rental income calculations following the Prudential Regulation Authority's changes to underwriting standards for buy-to-let mortgages.
Leeds’ income coverage ratio for buy-to-let and holiday let mortgages will go up to 140%, from 125%. The affordability stress test rate will be 5.50% for purchase and capital raising re-mortgages, although it is 5% when there is no additional borrowing.
An income coverage ratio will not be required for existing Leeds Building Society buy-to-let customers who have come to the end of their existing deal, and there is no additional borrowing.
Richard Fearon, chief commercial officer at Leeds Building Society, said: “We believe the combination of an income coverage ratio (ICR) of 140%, a specific and lower stress test rate for re-mortgages, our supporting criteria, and market expertise brings a unique proposition to the buy-to-let market.
“Around 60% of buy-to-let advances are re-mortgages and our affordability stress test rate where there is no additional borrowing is 5.00%, which will support a significant number of landlords with existing properties looking to refinance their portfolio.”
The society has also removed the minimum income requirement, which was previously £25,000 per annum or £40,000 for joint applicants.
Paragon and Accord also making amendments
Other mortgage lenders have also made rental calculation changes, including Paragon Mortgages and Accord Mortgages.
Paragon is assessing the tax status of the individual landlord and amending its affordability calculation accordingly. As a result, the ICR will not change for landlords who are unaffected by the tax changes.
Landlords paying basic rate income tax and corporate landlords will continue to be assessed at an income coverage ratio of 125%. For higher rate tax payers, an increased ICR of 140% will be used when calculating the maximum loan size.
Accord Mortgages is also increasing its rental calculations for new applications from 125% of 5.50%, to 135% of 5.50%. It has also modified the rental calculations for landlords taking out a five-year fix from 125% of 5%, to 135% of 5%.
For help to secure a buy-to-let mortgage, call Trinity on 020 7016 0790.
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