Foundation Home Loans to increase rental coverage ratio


Foundation Home Loans is set to become the latest lender to increase its rental cover requirements.

In June the lender will increase its rental cover requirements from 125 per cent to 145 per cent for individual applications, while limited company products will remain 125 per cent.

The Bracknell-based lender’s commercial director, Simon Bayley, says: “There is no doubt that with the new restrictions on tax relief which landlords can claim back and now the hardening of the rental cover calculation, the limited company option is really gaining ground for a greater percentage of landlords, particularly those who are coming to BTL at this point.

“We have been delighted by the response to our limited company offering, which is priced at the same rate as our individual BTL products. Intermediaries and their landlord clients are recognising the efficacy of a limited company option and as long as there is a recognition of the pros and cons, the scales are coming down more heavily in favour of this approach.”

The move comes after the Prudential Regulation Authority’s proposed rules on underwriting standards, which will bring in tougher lending practices later this year, and the incoming reduction in tax relief landlords receive.

The Mortgage Works and Keystone to announce increases to their rental coverage ratios in recent weeks.