Ahead of what some consider as the likely tightening of buy to let mortgage lending criteria by the Bank of England later this year, Britain’s second-largest BTL lender has announced its own voluntary restrictions.
The Nationwide Building Society’s Mortgage Works division wants a much higher rental income relative to the costs of a landlord’s mortgage.
From next Wednesday the Mortgage Works says “in order to help landlords safeguard positive cash flow, as future tax relief changes begin to phase in from April 2017, we're making the following changes - rental coverage requirement increased from 125 per cent to 145 per cent, and the reducxtion of the maximum loan-to-value proportion from 80 per cent to 75 per cent.”
This will be calculated using either the ’stress rate’ which is currently 5.49 per cent for loans of 65 per cent to 75 per cent or 4.99 per cent for loan amounts below that figure.
Existing customers of The Mortgage Works will not be affected by the changes if they chose to remortgage, providing no extra borrowing is required.