Accord Mortgages has reduced the stress rate used for buy-to-let affordability assessments.
The bank said the change reflects stabilization of interest rates and is designed to help more landlords access finance while still ensuring repayments are manageable if interest rates rise again.
For landlords remortgaging on a like-for-like basis, the interest coverage ratio (ICRR) for products with tenors of five years or more is now 4.75% or the product rate plus 35 basis points (whichever is higher), whichever is lower than the product rate plus 100 basis points
For products with an initial tenor of less than five years, the ICRR will decrease from 5.5% to 4.75%, or the product rate plus 70 basis points – whichever is higher.
For landlords who purchase a property with financing or remortgage, the ICRR for a five-year term or longer will be 4.75% or the product rate plus 50 basis points, which is lower than the product rate plus 100 basis points.
For short-term products, the ICRR remains at 5.5% or the product rate plus 200 basis points, whichever is higher.
The interest coverage ratio (ICR) for lenders remains unchanged at 125% for basic rate taxpayers and 145% for higher rate taxpayers.
Nicola Alvarez, head of strategic partnerships and proposals at Accord Mortgages, said: “We recognize the increasing pressure landlords are facing and as a buy-to-let lender we are committed to adapting our approach to help them access the finance they need.
“Refining our affordability standards enables us to support brokers in helping their landlord clients navigate a challenging environment without compromising their long-term sustainability.
“The private rented sector is vital to a healthy housing market and the functioning of the economy, so it’s important that as an industry we continue to look for opportunities to support them and help maintain the supply of good quality rental homes across the UK.”
