The Prudential Regulaton Authority (PRA) have implemented new rules for standardising Buy to Let criteria, the first part of which around interest coverage ratios and affordability came into play on 1st January 2017. PS28/16 stated that lenders must change their interest coverage ratio (ICR) to a standard 5.5% for all products with less than a five-year term. The second part of the paper involves changes to what is classed as a professional landlord and the stress testing of properties in the background for clients who have more than 4. From 30 September 2017, all lenders have had to make changes to the way in which the underwrite any buy to let applications for portfolio landlords.

If you would like to read the policy statement in full then please click below:
 
                  PS28/16 – Policy statement paper
                  

What is a portfolio landlord?

The PRA define portfolio landlords as: “borrowers with four or more distinct mortgaged buy-to-let properties, either together or separately, in aggregate.”

Lender Matrix

A number of lenders have announced how they are approaching portfolio landlord lending and Paradigm have now created a factsheet containing a range of relevant information on each lender’s portfolio landlord underwriting policies so as to provide a document that advisers can use to cross-check and compare.

We have captured the following information:

  • How the lender defines a portfolio landlord.
  • Whether the lender allows portfolio landlord applicants and whether it has a specific scheme for them.
  • The number of allowable buy-to-let properties with the lender and elsewhere.
  • Document requirements and the range of additional underwriting that will be carried out.
  • The lender’s rental assessment calculation, what additional rental checks there are and whether the lender will ‘top-slice’ income.
  • Appropriate dates for the lender’s introduction of its portfolio landlord criteria and any further dates

Please click here to view the latest version of our Lender Criteria Matrix which we will keep up to date as more Lenders announce their position on this.

Business Plan

We have created an example of a portfolio landlord business plan for you to use which covers off the current, and future, investment strategy details and can be used to provide information on the landlords’ properties such as location, type, tenant profile, property management, supporting business infrastructure, rent to cost model, and details of any professional service providers. This can also be downloaded here.

 

Paradigm's BTL Guides

Paradigm has also produced the following guides which we hope will help you with regards to dealing with the Buy to Let market changes.

PS28/16 implementation of reviewed ICR rates - 28 July 2017

The PRA set out their new rules for standardising Buy to Let criteria, of which the first part around interest coverage ratios and affordability came into play on 1st January 2017. The paper stated that lenders must have changed their interest coverage ratio (ICR) to a standard 5.5% for all products with less than a five-year term. 
 
Paradigm have created this sheet with the recent changes for each Lender.

Paradigm's BTL Top Tips - December 2017

Paradigm’s Mortgage Helpdesk team have produced this guide to help alleviate the work involved when sourcing BTLs. This document provides guidance on:

  • Which lenders use top slicing of income in affordability
  • Which lenders offer the best five year fixed rate
  • Which lenders offer Limited Company BTLs, and
  • Which lenders use a lower stress rates and/or ICR calculation for re-mortgage transactions with no extra borrowing

Government guides for your landlord clients

We hope this is of help to you all, and as always, if you have any questions then please get in touch via the Mortgage Helpdesk or by ringing Christine Newell on the relevant phone numbers.

Further Lender Support

Please click on the Lender logos to see further content they have produced regarding the new PRA changes.

Accord

Aldermore

Barclays

BM Solutions

Coventry

Metro Bank

Santander

Skipton

Skipton

Accord

Vida Home Loans