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YBS Commercial Mortgages has changed its stress rates to improve affordability calculations for landlords. 

Following broker feedback the lender will reduce the stress rates applied on its commercial buy-to-let products. 

This will see the lender apply a 125% interest cover ratio (ICR) at pay rate, with the pay rate being the interest rate on the loan. Previously it was applying a 125% ICR at the pay rate plus 0.3%. 

This new stress test will effectively increase the amount that landlords can borrow, subject to remaining within the lender’s 75% loan-to-value (LTV) criteria.  

YBS says that for each £1m of assets, based on a yield of 4% (rental income of £40,000 per year) and assuming a five-year fix at 5.60%, landlords will be able to borrow around 5.5% or £30,000 more.

These changes are designed to support landlords in areas where rents are lower relative to property value, taking into account the costs faced by landlords. 

YBS Commercial Mortgages says this change recognises the challenging interest rate environment faced by landlords, alongside ongoing economic headwinds. Being able to borrow more will enable landlords to invest in property upgrades, repairs and energy efficiency it says.

YBS Commercial Mortgages managing director Tom Simpson says: “We understand the role that landlords play in providing much needed, quality rented accommodation, which in the current climate, are in short supply.

“We hope that reducing our stress rate will provide the support that brokers’ landlord clients need, improving their ability to borrow more in the current, more challenging interest rate environment.”

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