Used as one measure of the mortgage lender’s perceived risk to assess the amount it will be prepared to loan, several lenders have reduced their rental cover requirement, including Bank of Ireland Mortgages, Bristol & West Mortgages and most recently West Bromwich for Intermediaries.
Alan Harper, senior analyst at eMoneyfacts.co.uk, commented that West Brom’s move was only good news on the surface, as the rate had moved from a 4.85 per cent with a minimum rental cover requirement of 120 per cent to basing the calculation on a notional rate of 1 per cent above Bank of England Base Rate – 5.75 per cent.
Harper pointed out: “Most of the buy-to-let products currently available from West Brom actually carry an interest cost less than 5.75 per cent. In other words, the actual cost of the mortgage is likely to be less than the amount the lender is asking the borrower to cover. While 100 per cent rental sounds good in theory, advisers need to be on the ball to ensure the lenders’ requirements are looked at in the round before making a final decision.”
Harper added other lenders with 100 per cent rental cover take a different approach, such as loading the arrangement fee.
But Mark Sismey-Durrant, chief executive of Heritable Bank, believed the worth of a product depended on the circumstances of the client.
He explained: “If a buy-to-let mortgage product only takes one source of the client’s income into account, then I would not say it is a good thing. But we look at other sources of income the client has for covering the cost of the mortgage and in those circumstances it could be the right product for them.”
