Buy to Let Mortgage Appraisal changes

With recent changes in Taxation and comments from the PRA (Prudential Regulation Authority), many lenders have reconsidered their sensitivity calculations, with some now requiring up to 145% rental cover v payments at a sensitivity rate of c.5.5%. This demonstrates that The Bank of England and the PRA have concerns over the Buy to Let market.

This market is typically funded on interest-only mortgages on variable or short-term fixed rates and, therefore, may be susceptible to changes in interest rates in the medium term. By introducing an affordability test, lenders are constrained in the value of the loan that a particular rental income can service. Therefore, recommending a higher or stricter test level should reduce the amount of debt in the market and help protect both lender and borrower in an economic downturn or during a period of rising interest rates.

A potential solution?

While we believe lenders should be prudent, they are not forced to follow the above rates. At Pinpoint Finance, we now have access to a product where the sensitivity calculation can be worked out against a reversion rate of 3.98%. This means that the product could be used to access a Loan to Value up to 80% which will broaden the appeal to the Buy to Let market. Please get in touch if you think this may of interest to you: info@pinpoint.finance