Accord Mortgages is updating the interest coverage ratio (ICR) used to assess the affordability of a customer who wants to finance their own home, but has buy-to-let properties with an outstanding mortgage.
From Wednesday 10 March, a customer’s buy-to-let portfolio can be classed as self-financing, and therefore not included in the affordability assessment if rental income meets a minimum of 145% of the mortgage payment
s at a stressed rate of 4.5%.
Currently the ICR is 135%, stressed at a rate of 5%.
Where the ICR is not met, the shortfall will be used in the affordability assessment.
This change applies to both new and existing customers with background buy-to-lets who want to apply for additional borrowing or make changes to their mortgage where an affordability calculation is required, such as transfer of equity.
Nicola Alvarez, corporate account manager at Accord Mortgages, said: “We’re confident this change to the ICR will help more landlords finance their residential property without the need to include their buy-to-let portfolios in affordability assessments.”