BM Solutions not prioritising mortgage prisoner exemption

Ryan Bembridge

April 17, 2017

BM Solutions seems unlikely to follow Santander and The Mortgage Works’ lead by loosening buy-to-let stress tests for remortgagors who applied before the new rules came in.

Phil Rickards, head of BM Solutions, said the lender is more focused on dealing with the specialist underwriting requirements for landlords with four or more properties coming into force on 30 September.

When asked if BM will follow Santander and TMW, he said: “Having deployed a number of initiatives recently including our tailor made rental coverage calculator and a differential 5-year stress rate, our immediate priority remains working through portfolio underwriting requirements ahead of September.”

Santander will assess buy-to-let remortgagors who applied before 1 January 2017 with 125% rental cover at a rate of 5% from Wednesday.

The Prudential Regulation Authority has granted lenders an exemption from more stringent stress tests for borrowers who applied before this year in a bid to prevent landlords from becoming mortgage prisoners.

Despite BM Solutions’ verdict Bob Young, chief executive of Fleet Mortgages, which stress tests at 125% and 5% but is unregulated, does expect some other leading buy-to-let lenders to start using the exemption.

He said: “Will lenders follow? Yes, but it depends on how they view risk. If a landlord has been paying at 125% and 5% in the last two years why wouldn’t they keep paying?

“That person has proved they will pay that much back every month.

“Some other lenders might argue they are taking a bigger credit risk because of the upcoming tax changes.

“But in my view if the landlord has been paying for two years it probably isn’t an issue as a rule of thumb.”

Paul Brett, managing director of intermediaries at Landbay, which is utilising the exemption like Santander and BM Solutions, can’t see why other lenders wouldn’t do so providing they can get it set up on their systems.

He said: “The reason borrowers are refinancing is to get a better interest rate and put them in a better position.

“Yes, the tax changes are a factor, but if you let people refinance onto a better interest rate they are going to be in a better position than if they stayed as they were.

“If you deny people borrowing the same amount a lower interest rate because of the tax changes you are telling everyone on a variable rate to redeem and sell their property.”

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