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Lenders rethink BTL criteria

Rising interest rates are putting pressure on buy-to-let lenders to revise their lending criteria, says Moneyfacts.

The Mortgage Works has cut its maximum rental income ratio for BTL mortgages from 130 per cent to 125 per cent.

Earlier this year, the firm reduced its nominal rate for calculating income ratios from bank base rate plus 1.95 per cent to bank base rate plus 1.45 per cent.

Other lenders, including Scarborough Building Society, Bristol & West, Skipton Building Society, Platform Home Loans, BM Solutions and Paragon Mortgages, have also revised their policies.

Skipton previously used its standard variable rate to calculate the rental income req-uired but because of rate inc-reases, it now uses Libor.

BM Solutions has switched from using its standard variable rate to bank base rate plus 1.95 per cent.

Moneyfacts spokeswoman Jane Damson says: “Buy to let is a very different product than when it was introduced. Rates were lower than commercial borrowing but there was far more disparity between BTL rates and residential mortgage rates than there is now.

“At that time, lenders had no historical BTL lending book to help it assess risk but to date, BTL borrowing shows a far lower level of default than residential borrowing. Also, many BTL borrowers are experienced landlords with a proven track record.”

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