High rates negating the benefit of stressing rental income at pay rate
With rising rates pushing up stress tests, loan sizes offered to buy-to-let borrowers have decreased significantly in the last six months, data analysis by Mortgage Broker Tools (MBT) has found.
The broker research platform compared the loan sizes available based on typical calculations for three different tiers of rental payments.
For buy-to-lets with a monthly rental of £750, borrowers are getting almost £90,000 less than the loan sizes available six months ago. Those with monthly rental fees of £1,250 and £1,750 are only able to borrow amounts that are lower by as much as £148,000 and £208,000, respectively, when compared with the amounts that they would have received six months prior.
Read more: Landlords warned of rent price ceiling.
“It’s no surprise that the loan sizes available to buy-to-let investors have fallen in recent months as rate rises have significantly impacted stress tests,” Tanya Toumadj (pictured), chief executive at Mortgage Broker Tools, commented. “However, our data analysis has revealed the scale of change, particularly as the benefits of stressing rental income at the pay rate of the mortgage have now been eclipsed by the size of the rate increases.
“In the current environment, many landlords may be tempted to take uncompetitive product transfer rates offered by their lenders at the end of their existing deal, so it’s vital that brokers have access to a research platform that enables them to quickly and easily assess the options available to their clients, to prevent them from making a potentially expensive mistake.”
Toumadj said MBT Affordability can provide brokers with accurate calculations of how much their clients can borrow from a panel of more than 40 residential and nearly 70 buy-to-let lenders, based on affordability and criteria.
