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Virgin Money is the latest lender to announce changes to its buy-to-let mortgage calculations to comply with the Prudential Regulation Authority's new rules.  

Buy-to-let mortgage lenders use the rental income generated from a property and apply an interest coverage ratio to work out the maximum loan size.

From Monday 5 December, Virgin’s calculation is increasing from 125 per cent to 145 per cent.

The bank is also changing the interest rate stress test figure from its buy-to-let variable rate +1% (currently 5.74%) to 5.50% for all tracker and fixed rate products of less than five years.

The stress rate for Virgin’s five-year fixes will be the higher of the product rate or its buy-to-let variable rate, currently 4.74 per cent.

Aaron Strutt, product director at Trinity Financial, says: “If a property generates £1,500 rental income each month, previously landlords would have been able to borrow up to £250,871. The figure has been reduced to £225,705 for all short-term fixed and tracker mortgages, but increased to £261,984 when landlords take a five-year fix.”

New buy-to-let portfolio limit

Virgin Money has also announced plans to stop new lending to landlords with more than 11 mortgaged properties. The bank’s maximum portfolio limit of £2m and/or four properties with Virgin Money will remain unchanged.

To secure a buy-to-let mortgage, call Trinity Financial on 020 7016 0790 or complete our enquiry form.

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