Increased lending available for UK Buy-To-Let property

Skipton International, the Guernsey-licensed bank, has announced an enhancement to its lending criteria on UK Buy-To-Let mortgages for overseas residents.

The change in criteria, which comes into effect immediately, is available on loans over £250,000, and allows for the Rental Income Cover to be 110%, rather than standard 125%, therefore giving the opportunity for customers to potentially borrow more. To take advantage of this enhancement, certain criteria is required, including:

• Minimum Loan size £250k;
• The applicant (or one applicant in the case of a joint application) must earn over £100k p.a.;
• Maximum loan to value remains at 75%;
• Debt/income ratio to be below 20%.
• This offer is only available on the basis of one facility per client at 110%.

The below example details the additional borrowing that could be achieved using the new Rental Income Cover scheme of 110% (when compared to 125%)

For a property valued at £1 million, with a rental of £2,250 pm, and based on Skipton International’s current 5-Year Fixed Rate of 3.24% (4.5% APR), the following could potentially be borrowed.

Prior rental income coverage (125%): £666,600 
New rental income coverage (110%): £750,000  (max LTV 75%)
Potential additional borrowing: £83,400

When measuring affordability for UK Buy-To-Let mortgages, Skipton International stress tests applications at 5.50% on Base Rate tracker products and at the pay rate on 5-Year Fixed Rate products. For which the rental income is required to be 110%.

If customers do not meet the criteria for the reduced Rental Income Cover, the standard annual rental income of 125% will apply.

Roger Hughes, Business Development Manager, said: “The reduction in the Rental Income Cover means Skipton is able to account for more of the rental income than previously, which could potentially lead to enhanced lending.

“The UK property market remains in pretty good shape and, whilst some uncertainty remains, the fears of COVID resulting in mass unemployment, recession and falling property prices has abated.

“Customers meeting the criteria will now have their mortgage application assessed at 110% of the annual rental income on our three-year base rate tracker, at 5.5% stress test, or at the payrate on any five-year fixed rate. This, therefore, gives greater borrowing capacity against their rental yield”