Keystone Property Finance is introducing separate stress test for individual and limited company borrowers.
From 14 June, individuals will face stress tests of 145 per cent at pay rate or a notional rate of 5.25 per cent, whichever is higher, if they take out a term tracker or three-year fixed rate. Borrowers choosing a five-year fixed rate will be stressed using the pay rate.
Stress tests for limited companies will remain at 125 per cent of pay rate or a notional rate of 5.25 per cent, whichever is higher, for term trackers and three-year fixed rates. Borrowers choosing a five-year fixed rate will be stressed using the pay rate.
Keystone managing director David Whittaker says: “We are keen to demonstrate that we take borrowers’ affordability extremely seriously and have been working on this criteria update with [funder] Paratus AMC for some weeks now.
“Crucially, individual borrowers who can show that they are basic rate tax payers now – and are likely to be in future – can ask for the lower stress test to be applied. These applications will be considered on a case-by-case basis. Our underwriters will assess the individual’s circumstances and portfolios very carefully and ask to see the last two years’ tax returns to prove that income is within the lower tax bracket limits.
“The stress test for limited company applicants will remain at 125 per cent of pay rate because corporate vehicles will not be financially affected by the new tax relief restrictions.”
Last month, The Mortgage Works upped its rental cover requirements from 125 per cent to 145 per cent and cut its maximum LTV from 80 to 75 per cent.