An industry source told Mortgage Introducer that rental cover was merely the best guess by a valuer of how much a borrower may be able to receive in rent for the property and was discussed as a way of acting as insurance and something to be relied upon.
The source said he did not provide lenders with any true rental cover at all, as the rent could end up being less than the valuer put it or there might be a rental void. He added that the BTL market would not see point-of-sale offers until rental assessments were removed.
The source said: “Rental cover is no cover at all. It is a valuer’s guess at how much the property might be let for. Lenders should focus on profiling the borrower rather than rely on spurious notions of ‘cover’.”
However, Colin Snowdon, chief executive of Wave, said: “I don’t agree. Rental cover is not an exact science, but lenders should always want a guide. It would be very dangerous to ignore rental values altogether. We’re starting to see non-status BTL products and that’s not a good development, but with high rates and rental yields an issue we’ll see more of these. But within that product, rental cover is important.”
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