Specialist mortgage lender OneSavings Bank is the latest to announce that it is introducing stricter affordability assessments for all new buy to let mortgage applications.
From December 28 OSB, through its trading brands of Kent Reliance and its subsidiaries InterBay Commercial and Prestige Finance, is falling in line with many other lenders and with the guidelines advised by the Bank of England’s Prudential Regulation Authority in its bid to control excessive buy to let lending.
OSB says that from next week the minimum stress rate applicable for rental cover purposes will be 5.5 per cent or the initial pay rate plus 1.55 per cent, whichever is higher.
OSB has also extended its definition of ‘standard property’ to include HMO/multi/student lets up to five rooms, or blocks of flats with up to four units, as well as single dwellings.
“Our changes reflect a fair and equitable position for the markets we serve. We analysed landlords’ property holding costs in different scenarios, factored in the new tax regime and delivered a rental stress that considers the net impact of market rent and interest rate rises. We believe what we have delivered is a robust and responsible revision to our policy in line with the new PRA rules” says Richard Wilson, OSB Group chief credit officer.
Back in September the Bank of England set out new rules with minimum expectations that lenders should meet in underwriting buy-to-let mortgages, specifically:
- Affordability assessments should take into account a borrower’s costs including tax liabilities, verified personal income and possible future interest rate increases - so-called stress tests;
- Lending to portfolio landlords (defined as being individual with four or more mortgaged buy to let properties) should be assessed using a specialist underwriting process.