The Coventry building society is the latest buy to let lender to tighten its portfolio buy to let criteria ahead of new Prudential Regulation Authority rules coming into force at the end of next month.
From September 14, Coventry applicants with four or more buy to let units - or with three currently and a fourth in the process of being purchased - will be permitted to have a maximum loan to value ratio of 65 per cent.
There will also be a minimum income coverage ratio of 125 per cent against a notional ‘stress test‘ rate of 5.5 per cent across their entire portfolio.
Portfolio landlords must have acquired their first buy to let property more than two years before future applications, with no more than three properties permitted to be purchased in the past 12 months.
More generally, the PRA rules mean that all lenders are obliged to ensure borrowers are not over-exposed to risk, so they will look into the entire BTL portfolio whenever a new borrowing request is made. This means:
- questions on the applicant’s property investment experience;
- details of the total mortgage borrowing across all properties;
- the applicant’s assets and liabilities, including tax liability, to be revealed;
- details of any business planning for the properties;
- historical and future expected cash flow from the portfolio;
- and the applicant’s income from property and other activities.