Specialist lender Precise Mortgages is planning to launch a new offering it says will allow customers with excess income to bridge the gap between the rent achieved by their property and the rent required to achieve the loan they want.
The income-supported buy-to-let (BTL) roll-out is in addition to its existing products. The lender, via intermediaries, typically targets customers who may find themselves excluded from the BTL market by traditional lending policies.
The lender said income-supported BTL products can open the market to more customers, as there are fewer restrictions on products.
Its new range is available for purchase and remortgages, including capital raising, so customers who do not want the additional administration of a limited company could have an alternative option. Brokers will be able to provide information on their client’s circumstances, online.
The information required includes the customer’s income and will present achievable loans based both on an interest cover ratio (ICR) and on a combined ICR/income basis.
Danny Belton, head of lender relationships at L&G Mortgage Club, said: “After what has been a tough year for the buy-to-let market, it’s great to see a lender such as Precise Mortgages recognising the challenges in the sector, and providing solutions for both mortgage intermediaries and their clients.”
Back in September, the Prudential Regulatory Authority rolled out new rules for portfolio landlords with four or more mortgaged BTL properties.
Introduced in January this year, the first set of regulations included restrictions on lending criteria, including stricter affordability tests, such as ensuring the ICR, the impact of recent tax changes, and a stress test on interest rate rises.
The regulatory burdens on portfolio landlords also mean lenders have to implement a special underwriting process.
The BTL market was dealt a further blow following the Budget announcement from chancellor Philip Hammond in November.
These changes are in addition to the market struggling under the weight of tighter regulations and a 3 per cent stamp duty surcharge on additional property purchases.
Provider view:
Alan Cleary, managing director of Precise Mortgages, said: “We believe that income-supported BTL will be a real game changer, particularly where customers are struggling to get the loan size they need. We have built this into our online systems, so the sales process should be very slick.”
Adviser view
Tony Silver, director of White House Mortgages, said: “It is a good idea. The problem we have is the crazy way some of the lenders are stress testing the life out of mortgages.
“The whole reason for doing this is the absolutely high stress-test [criteria] that has been imposed on the BTL lenders. This move by Precise will be welcome by brokers, but then proof will come in practice when we start throwing the business at the computer to see what is accepted."
Charges:
N/A
Verdict:
BTL landords have been hit hard by regulatory rules over the past 12-18 months. The plans by Precise in theory should ease the pressure that landlords and advisers are feeling when trying to match the lenders' criteria. However only time will tell how many times the computer will say yes.
