Barclays has become the latest lender to respond to the Prudential Regulation Authority’s (PRA) new minimum underwriting requirement.
Lenders must comply with it by 1 January 2017.
Barclays Mortgages says it already complies with these new standards and has taken the opportunity to simplify the affordability assessment and minimum gross income requirements for new buy-to-let lending.
The lender is removing the separate rental coverage requirement. It is also simplifying the minimum gross income requirement, to £25,000 per annum for joint applications (with at least one applicant earning £25,000).
Barclays already considers both personal and rental income within the affordability calculation and undertakes a full affordability assessment of the landlord.
The current income affordability test includes all relevant landlord costs, such as those associated with renting out buy-to-let properties, applicant level tax liability (including mortgage interest tax relief changes being phased in from April 2017) and assumes a minimum borrower interest rate of 5.5% for existing and applied for buy-to-lets, and therefore we will no longer need a separate rental coverage ratio test.
All applications submitted from 14 December will be assessed using these new criteria. Full application submissions received before this date will continue to be assessed under previous criteria.