Loan to income ratio on Buy to Let – what could be next?Make Text Bigger
It has been announced that the Nat West and RBS group will be tightening their Buy to Let mortgage criteria even further. They will be limiting their loan to income ratio to 4.99.
The move became effective as from the 14th July and this criteria change follows on the heels of a recent reduction in the maximum number of BTL properties to 4 owned by the applicant.
Other High Street lenders have also tightened their BTL criteria in recent weeks including Woolwich with a change to calculating maximum mortgage size at a “nominal” rate of 5.79% rather than the product pay rate. In some circumstances, especially lower yielding properties, this new calculation can have the effect of reducing the maximum LTV of a BTL mortgage quite considerably.
Both lenders are citing “Affordability of the mortgage contract” as reasons for the change. This has echoes of the recent MMR (Mortgage Market Review) changes, which applies to the residential market. There could be similar tightening of criteria from other lenders too.
This has been followed by hints from the Council of Mortgage Lenders (CML) that Buy to Let may be looked at next by the Bank of England as part of the Financial Stability report.
This report resulted in Banks being capped to no more than 15% of their residential loans being over 4.5 times income multiples. Could some sort of cooling measure or cap be placed on Buy to Let next?
It is almost certain that the “Gaming” of BTL where purchasers try to avoid earned income multiples on residential properties by claiming they are for BTL will be clamped down on.
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