The Society’s rental calculation is currently based on 100% interest only cover at Bank Base Rate + 1%. However, in a rising interest rate environment, this type of calculation can cause some borrowers issues raising sufficient funds. The calculation is based on a fixed notional rate of 5.95%, so even if rates do rise again, as they are widely predicted to do, the rental calculation will remain unaffected.
Paul Marland, AGM Intermediary Sales at West Brom for Intermediaries, said: “Brokers have found it increasingly difficult to place BTL applications in a market where interest rates have been on the increase. A further rate rise will make life even tougher and many borrowers are being forced to top-up the rental using their earned income.
“In setting the notional rate at 5.95%, we have considered where we anticipate bank base rate will be in 2008. The society’s view is that 5.95% will result in a rental calculation similar to our current calculation of BBR + 1%. Our fixed notional rate of 5.95% will make life a lot easier and provide brokers and borrowers with certainty in a market where there is considerable conjecture that we’re in for another rate rise."
