2018 has seen Landbay make changes to its underlying portfolio stress test for portfolio landlords, in a bit to combat an increasingly complex buy to let market.
Landbay will now require rents to cover 125 per cent of the mortgage at an interest rate of 5 per cent. This has changed from the standard 125 per cent at 5.5 per cent.
Should any application fail this test, Landbay may consider applications that use 10 per cent of the declared income. However, this is only provided that the applicant had a minimal personal income of £100,000. The specialist lender has confirmed that in such circumstances, the outcome would be determined on a case-by-case basis.
The lender said these changes were part of its ‘ongoing commitment’ to being fully equipped for customers for the recent PRA changes.
The PRA changes, which came into effect in September 2017, now require lenders to apply additional affordability tests on landlords with portfolios of four or more mortgaged properties. Initially, the result of this was that more stringent lending criteria was introduced. However, this new move by Landbay may lead to the initial correction of this trend.
The new portfolio stress tests mark the latest in a series of updates to Landbay’s credit policy. Just last week, the lender also announced that it would offer buy to let mortgage deals for all first time landlords who do not currently own a residential property. The one downside of this deal is that a high minimum personal income of £85,000 is required to access these loans.
Landbay’s managing director of intermediaries, Paul Brett commented on the new changes: ‘The buy to let market is set to become more complex in 2018, and as landlords move to navigate the changing environment, so too must lenders ensure that their approach to lending is robust. This is why we have chosen to refine our underlying portfolio stress tests, demonstrating our ongoing commitment to portfolio landlords.’