Suffolk Building Society has brought a “tiered approach” for its interest coverage ratio (ICR) assessment for buy-to-let (BTL) and holiday let mortgages.
The lender is introducing a 125% ICR on the stress rate for basic- or nil-rate taxpayers.
The current 145% ICR will stay in place for higher-rate or additional-rate taxpayers.
For joint applications, if one applicant is a basic-rate taxpayer and the other a higher-rate taxpayer, both parties will be treated as if in the higher-rate band, requiring 145% ICR.
Suffolk Building Society explained that the tax payable for basic- or nil-rate taxpayers for income on property is “significantly less than the liability payable for higher- or additional-rate UK taxpayers”.
‘Greater flexibility’ for landlords
The lower ICR will up the amount that basic- or nil-rate taxpayer landlords can borrow, subject to staying within the firm’s 80% loan to value (LTV) criteria.
The lender said that the changes would appeal to those in lower tax bands, including expats, and would be of interest for landlords operating in areas where property prices are higher than average.
Suffolk Building Society has no upper age limit for BTL applicants and will consider non-owner-occupiers and first-time buyer landlords on a referral basis.
Charlotte Grimshaw, Suffolk Building Society’s head of mortgages, said: “By providing landlords with greater flexibility in terms of affordability and the ability to borrow more, we are helping them continue to provide good quality properties for tenants.
“Although the mandate to make energy-efficient changes has been removed, we know that responsible landlords still want to make upgrades that result in better, safer and greener homes for the private rental sector [PRS].”
She continued: “These ICR changes complement our BTL light refurb mortgage product, which bases the rental calculation on a property’s estimated rental income after refurbishment work has been completed, and not on its current rental value.
“We’re also not yet home and dry in terms of inflation and interest rates, so by reducing our ICR demands, we’re giving brokers another option for their landlord clients in the lower tax brackets.”
Suffolk Building Society has been altering its proposition, changing criteria around currencies, child maintenance and maximum storeys for flats and entering into the large loan market earlier this year.
Anna is currently the deputy editor for Mortgage Solutions and editor for Specialist Lending Solutions. She has worked as a journalist since 2019, having secured her Gold Standard NCTJ diploma from News Associates in a fast-track six-month course.
She started her career as a report at specialist publication The Insurance Insider covering a wide range of areas before joining Mortgage Solutions and Specialist Lending Solutions in 2021.
In her role, she helps put together and structure the news agenda for the day and writes up press releases, reports, interviews, analyses and exclusives across both titles. She also commissions blogs for Specialist Lending Solutions and hosts online masterclasses and in-person events across the business.
She has been shortlisted for three journalism awards, which include BIBA Journalist and Media Awards Scoop of Year Award in 2020, Headline Money Mortgage Journalist of the Year Award (B2B) in 2022 and 2023.
Prior to being a journalist, Anna worked in ecommerce across Snow + Rock, Cycle Surgery and Runners Need websites, and before that worked at specialist financial PR firm Rostrum.
In her spare time, Anna enjoys reading, seeing live music, and cooking for friends and family. When she gets a chance, she also enjoys hiking, skiing and indoor rock climbing.
