Coventry for Intermediaries is staving off the risk of creating buy-to-let mortgage prisoners by bringing in transitional affordability rules for remortgagors.
The lender will apply rates of 125 per cent at 5 per cent to landlords who have gross annual incomes below £40,000.
The 5 per cent rate assumes the landlord wants no additional borrowing.
The new rules are available to all remortgagors.
They will be of particular interest to landlords who took out loans before 1 January 2017, when the Prudential Regulation Authority brought in tougher affordability rules.
Without the transitional arrangements, some landlords run the risk of their terms ending but being unable to remortgage and getting trapped on lender SVRs.
If landlords earn more than £40,000, or are a higher rate taxpayer, Coventry will stress at a rate of 5 per cent and interest cover ratios of 140 per cent.
Coventry director of intermediaries Kevin Purvey says: “We’re delighted to be making positive changes by introducing our transitional buy-to-let affordability policy.
“We believe that the changes will provide more choice for brokers and their clients.”
The firm will be announcing the details of its approach to portfolio landlord lending soon.
That’s a step in the right direction and hopefully other lenders will follow. Some market leading rates from one particular lender have been falling down, at the last hurdle, due to surveyors suggesting the lower rents that the current market suggests. I understand that this particular lender, is about to stop using these particular surveyors, but the problem can be resolved by employing a similar to what the Coventry are proposing.