Lenders have started to announce changes to their buy-to-let policies
following the Prudential Regulation Authority’s decision to phase in new
The PRA said in September that lenders must take the borrower’s income
and personal circumstances into account as well as rental income when assessing
buy-to-let mortgage applications.
Lenders must also apply a ‘stress test’ of a minimum interest rate of
5.5%, unless the mortgage rate is fixed for 5 years or more.
These requirements don’t come into effect until January next year, but
some lenders have already announced changes to the way they underwrite
Santander was the first major lender to confirm their changes, and will
tighten the rental calculation from 23rd November.
The bank currently requires landlords to receive 125% of their mortgage
liabilities in rental income. This will change to 145%.
At the moment Santander applies a stress rate of 5% for some deals with
a 60% loan to value, or 5.50% above that, but this will change to 5.50% for all
Other lenders are expected to announce changes in the coming weeks.