London landlords struggle to get high LTV finance

Increasingly stringent lender criteria has led to buy-to-let investors in London struggling to obtain high LTV mortgages, according to mortgage broker Springtide Capital.

It says that BM Solutions recent change of policy whereby it now uses a notional figure of five per cent to calculate rental coverage as opposed to the interest pay rate of the deal, leaves landlords needing to find significantly higher rental incomes to cover the lender’s requirements.

A selection of lenders including Woolwich and Clydesdale still calculate the rental coverage required of landlords based on the interest rate of the mortgage itself.

Springtide Capital managing director Henry Knight says: “The main challenge for buy-to-let investors is that whilst house prices have risen, rental incomes have remained static, which is why its increasingly difficult to get access to the right level of finance.

“We would like to see more lenders follow the example of Clydesdale and Woolwich in offering a greater number of options to buy-to-let investors particularly looking at individual circumstances rather than adopting a blanket approach.”

John Charcol senior technical director Ray Boulger says the move by BM a few weeks ago brought it into line with the majority of the market.

But he says: ”I would agree that it is mainly going to affect properties where you want a high LTV and the yield is quite low. Those will tend to be higher-value properties such as you find in London.”