Barclays to increase stress testing after Summer budget tax relief cuts to LandlordsMake Text Bigger
Barclays, and its mortgage arm Woolwich, are one of the first high street lenders to take action after the announcement in the Summer Budget that there will be a gradual tapering down of tax relief for Buy to Let borrowers to the basic rate of tax from April 2017.
From the 7th of December all new Buy to Let loans will be stress tested with interest cover at 135% up from 125%, but the Notional rate will stay the same at 5.79%. This means that for every £1 of rent per month a property can achieve you can now borrow £153.52 down from £165.80.
In a statement to brokers Barclays said: “Given the changes to the Buy to Let tax regime announced in the Summer Budget, there will be the potential for increased future costs for both new and existing BTL landlords. Barclays continues to have a desire to support the BTL market by best serving the aspiring landlord segment who may be looking for a long term investment.
As a responsible lender, Barclays wants to ensure that our aspiring landlord customers can afford the increase in tax liability once these changes come into force.
Barclays has already changed the affordability criteria to enable applicants to use personal disposable income (including bonuses) to make up any shortfall in our rental cover calculation.”
With this first blink by a Major high street lender I would expect other banks to be carrying out similar reviews in the not too distant future.
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