View more on these topics

Barclays allows borrowers to use income to cover rental cover shortfall

Barclays has loosened its buy-to-let lending criteria by allowing applicants to use disposable income to cover any shortfall in its rental cover calculation.

The lender uses a rate of 5.79 per cent to assess affordability, as opposed to the mortgage rate itself. For example, a £100,000 loan on a 3.29 per cent fixed rate would require a rental income of £603 a month to cover the mortgage (£100,000 x by 125 per cent x 5.79 per cent / 12).

From today, applicants may use their own disposable income to guarantee any shortfall in that calculation, while previously they were required to provide evidence that the rent would cover it. 

TBMC chief executive Andy Young says: “This is a sensible approach to adopt because as with any lending decision, you should always take into account the borrower’s financial circumstances.

“That may come from different sources and I think this is a far more sensible way to underwrite buy-to-let purchases. I’d like to think other banks will follow suit.”

Barclays managing director of mortgages Andy Gray says: “There are only a handful lenders that allow any shortfall in the rental income used to calculate affordability to be met by the applicant’s disposable income. Barclays’ new policy provides a greater opportunity for those planning for their financial future and choosing to invest in rental properties to help support their longer term goals of, for example, paying for their children’s’ university fees or enhancing their lifestyle in retirement.”

Recommended

Nationwide-Building-Logo-Closeup-700x450.jpg

Nationwide undercuts Barclay’s 10-year fixed-rate deal

Nationwide Building Society has undercut Barclays by launching the lowest 10-year fixed-rate deal. The lender is offering existing mortgage customers a 60 per cent LTV 10-year fix at 2.84 per cent while new customers are offered a rate of 2.94 per cent. The product has a £999 fee, reduced to £499 for first-time buyers. Remortgage […]

Mario-Draghi-700x450.jpg

ECB announces QE policy of €60bn a month

The European Central Bank has announced a programme of quantitative easing to the tune of €60bn (£45bn) a month until the end of September 2016, or beyond, to fight deflation in the eurozone. Announcing the policy last week, ECB president Mario Draghi said the programme of buying euro-denominated investment grade securities will continue until there […]

mole

The Mortgage Mole: Pressing too hard?

Pressing too hard? Not too long ago, Mole informed our readers about a particularly amusing press release received by the Mortgage Strategy desk that contained a template for creating the perfect press release. The team was bewildered to see the email, which unwittingly laid bare the process of releasing a press statement by disclosing rules […]

ANDREA ROZARIO

Analysis: Equity release can help pensioners

The pensioner debt index recently produced by the Equity Release Council revealed that unsecured debt among retired homeowners is rising. A 16 per cent annual spike has caused the average indebted homeowner aged over 65 to owe more than £1,500. However, as can be the case with statistics and data analysis, there is more to […]

Auto-enrolment: tips for employers

The Pensions Regulator (TPR) has released advice on communications for employers, including three tips to help you with your auto-enrolment duties. 1. Allow enough time to select your pension schemeIt’s recommended that you start to prepare for auto-enrolment at least 12 months in advance of your staging date; additionally, give yourself time to choose the […]

Newsletter

News and expert analysis straight to your inbox

Sign up
Comments
  • Post a comment
  • Ahsan Qureshi 26th January 2015 at 5:03 pm

    In your Barclays illustration for £100000 loan @ 3.29% and 125% rental income (£100,000 x by 125 per cent x 3.29 per cent / 12) is £342.71 and not £603 may be a typing error..

  • Good Mortgage Man 26th January 2015 at 1:38 pm

    Hmm, so they reduce their lending on residential mortgages twice in one week, but increase lending on BTL?? They are sending out some seriously mixed messages at the moment. Left hand, right hand and all that…