Rent rises counteracting increasingly tougher B2L stress testing


Landlords’ ability to take out larger loans is not being harmed by increasingly tougher stress testing criteria due to rising rents, according to research from Buy to Let Club.

Lenders’ norm for many years has been 125 per cent at 5 per cent, but this is increasing, according to Buy to Let Club managing director Ying Tan.

Tan says that TSB, Paragon, TMW, BM Solutions and Godiva all calculate rent cover at 125 per cent at 5.5 per cent for 65 per cent LTVs and over, due to more focus on stress testing and Government tax changes.

But the average rent cover on rentals provided for applications was 163 per cent at 5.5 per cent in the fourth quarter of 2015, according to the club.

Tan says this gives BTL borrowers “sufficient breathing space” and should not harm current borrowing levels.

He says: “This analysis shows that LTVs are sensible and rents are high enough to sustain the extra rent stress testing lenders are implementing.

“The analysis is nationwide, however the rent coverage is tighter in the south. The only mainstream lender that still operates at 125 per cent at 5 per cent is Santander. With their slick processing they are gaining business, particularly in London and the South East where yields are lower.”