TSB to increase interest coverage ratio and rental cover calculations

Mortgage Introducer

June 30, 2016

TSB

TSB is increasing its interest coverage ratio for buy-to-let mortgages from 125% to 145%. 

The bank will also be increasing its rental cover calculation from 125% to 145%.

For loan-to-values (LTV) up to 65% the rental cover calculation will be 145% of 5% of the pay rate whichever is higher. With LTV’s from 65.01% to 75% a calculation of 145% of 5.5% or pay rate whichever is higher.

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All pipeline applications, including accepted DIP’s keyed before 8pm on Wednesday 29 June 2016 will not be impacted, unless the DIP or application is cancelled and a new DIP or application is started at a later date.

This change will also apply when considering affordability for a residential mortgage, when the customer has BTL mortgages in the background. The rental income should cover 145% of the BTL mortgage at the customers pay rate. Any shortfall will be included in the affordability assessment.

Roland McCormack, mortgage distribution director at TSB, said: “Today’s change will bring TSB in-line with other lenders in the market. We will continue to work with brokers, through our award-winning service, to best guide landlords through this change.”