A broker has stated that BM’s BTL products cannot be accurately called 100 and 110 per cent rental income deals as the rental payments are calculated at a notional rate of Bank Base Rate plus 1 per cent, not the pay rate. He said the problem was exacerbated by Trigold, which was advising the product at actual pay rate.
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The broker told MI: “I think it’s an issue when BM is claiming the product is 100 per cent rental coverage, but it doesn’t use pay rate to calculate the payment, therefore not making it 100 per cent. I cannot believe it can claim this, as the description of the product is misleading.”
The broker pointed out that, using a basic calculation for a £100,000 mortgage, the rental coverage for BM’s three-year fix at 5.85 per cent would work out to be 107 per cent.
He added: “I have fallen foul of this and I’ve been a broker for 15 years. The main lenders who venture to 100 per cent coverage use actual pay rate and not a notional rate. It’s fundamental to the product when you’re working out mortgage payments.”
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However, Matt Grayson, head of PR for BM Soltuions, responded: “The use of a notional rate to calculate rental cover is prudent and responsible lending. It helps to protect both the borrower and the lender. Currently, Trigold cannot reflect the different lender rental calculations on its system. However, they are fully communicated in intermediary notes.”
