New buy-to-let requirements for portfolio landlords have been unveiled by The Mortgage Works (TMW) ahead of the introduction of the new Prudential Regulation Authority (PRA) underwriting standards.
The Bank of England’s PRA’s underwriting standards is due to be implemented on 30 September for landlords with four or more mortgaged properties, as part of its efforts to cool the buy-to-let market.
The change means that, for the first time, lenders will need to undertake a full analysis of a landlord’s entire property portfolio as part of the lending process.
TMW, the buy-to-let arm of Nationwide Building Society, said the interest cover ratio is 145%, with HMOs remaining at 170%, regardless of a landlord’s tax status.
In addition, landlords who own portfolios with 10 properties or fewer, the aggregate stress rate for all properties is 4.5%, while for those with 11 or more properties, or where the total borrowing with the Nationwide Group is greater than £1m, the aggregate stress rate is 5.5%.
Like-for-like remortgage applications will be excluded from portfolios of fewer than seven properties and will not be subject to portfolio landlord criteria.
The TMW has set up a dedicated team to support brokers and portfolio landlords cope with the introduction of the new rules.
There will be no changes to loan-to-value limits, maximum loan size or minimum income criteria. TMW will continue to accept portfolios of all sizes, with no limit to the number of properties.
Paul Wootton, managing director of TMW, commented: “We have taken a pragmatic and considered approach to the introduction of the new PRA standards, drawing on our long experience in the portfolio sector.
“We have invested in a new online system and a dedicated portfolio team to support the process, as well as offering clear and ongoing guidance to both landlords and brokers from an early stage to help them prepare for the new rules, amid a range of changes affecting the buy to let sector. The aim is that for many landlords and brokers it will be business as usual.”