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.
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.”