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Relaxed calculations are a welcome relief

Brokers have applauded The Mortgage Works&#39 decision to relax lending calculations on its buy-to-let product.

The intermediary lender of the Portman has reduced the measure by which it determines rental calculations from Bank base rate plus 1.95% to Bank base rate plus 1.45%.

This is the figure by which lenders &#39stress-test&#39 a loan, setting the amount of rent a property will draw in against the amount needed to service the mortgage.

With interest rates rising and rental prices falling borrowers have greater leeway, effectively being able to borrow more. This is particularly welcome in London and the South-East, where affordability has been stretched in the wake of recent base rate rises.

Matthew Wyles, Portman group development director, says: “It is a case of being consistent. This means that we will be able to lend taking a long-term view of interest rates rather than making tactical responses to base rate rises.”

Platform Home Loans has also revised the way it calculates rental income by using the initial pay rate rather than the reversionary rate on products lasting five years or more. With Platform&#39s core five-year tracker loan at Bank base rate plus 0.90%, £115 less rental income is now needed per month to service a £100,000 loan – or alternatively an extra £20,000 could be borrowed for the same rent.

Guy Batchelor, sales and marketing director at Platform, says: “The changes have been introduced in response to feedback from intermediaries who deal with buy-to-let borrowers particularly in areas where the ratio between rental income and amounts borrowed has narrowed. They will now be able to offer Platform&#39s products to a wider group of clients.”

Jonathan Cornell, technical director at Hamptons International Mortgages, says: “Interest rates rising and rents under pressure was a double whammy on buy-to-let so it is refreshing to see companies doing this.”

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