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Affordability tests blamed for dip in buy to let mortgage lending

The Mortgage Works, the buy to let lending arm of the Nationwide, has seen a dip in the amount borrowed by property investors in the six months to the end of September - and it blames tougher affordability tests. 

The Mortgage Works lent £2.8 billion in the six month period, down from £2.9 billion in the same period a year earlier.

“The buy-to-let sector is going through a period of substantial change from new rules on landlord taxation [to] guidance on underwriting and affordability standards” says Nationwide chief executive Joe Garner.


Nationwide has voluntarily reduced its loan to value borrowing ratio - from earlier this year it would lend only a maximum of 75 per cent of a property’s value, down from 80 per cent. 

It also says predicted rental income must be 145 per cent or more of any monthly mortgage repayment on the investment property, up from 125 per cent.

Similar measures are likely to become mandatory following the news that the Bank of England has confirmed it will receive more powers to control buy to let lending, with loan-to-value maximum thresholds the most likely means of control.

As a result of passing on lower interest rates to customers the Nationwide’s underlying profits dropped in the half year from £802m to £615m - a 23 per cent slump which it blamed on more competition, rising costs and its desire as a mutual to pass the falling base rate on to its customers.

Nationwide says UK house prices will remain subdued over the coming year, rising no more than three to six per cent thanks to Brexit, but it doubts there will be falls.


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