OneSavings Bank (OSB) will be implementing changes to its affordability assessments for all new buy-to-let mortgage applications through its trading brands of Kent Reliance and its subsidiaries InterBay Commercial and Prestige Finance from 28 December.
A summary of the key changes the OSB Group will be implementing later this month are as follows:
- The minimum stress rate applicable for rental cover purposes will be 5.5%, or the initial pay rate plus 1.55%, whichever is higher
- Remortgages with no additional borrowing will not be subject to a minimum stress rate, with rental cover assessed against the initial pay rate plus 1.05%
- 5 year fixed rate applications will continue to be stress-tested at the initial pay rate, with no additional margin or minimum rate applicable
- OSB has extended its definition of Standard property to include HMO/multi/student lets up to 5 rooms, or blocks of flats with up to 4 units, as well as single dwellings
- Unless borrowing through a limited company, applicants will be defined as a:
– Portfolio borrower: If any individual applicant owns 4 or more investment properties, including the subject property
– Non-portfolio borrower: If each individual applicant owns 3 or less investment properties, including the subject property
- Limited company borrowers will require lower rental cover than individuals borrowing in their own name, meaning they will typically be able to borrow more against the value of a property
Richard Wilson, OSB’s group chief credit officer, said: “We have invested a significant amount of time and resource reviewing the new policy and our changes reflect a fair and equitable position for the markets we serve. Utilising the deep experience of our credit, risk and real estate functions, we analysed landlords’ property holding costs in different scenarios, factored in the new tax regime and delivered a rental stress that considers the net impact of market rent and interest rate rises. We believe what we have delivered is a robust and responsible revision to our policy in line with the new PRA rules.”
John Eastgate, sales & marketing director, OneSavings Bank, said: “As an established, specialist lender, we have a pool of expertise and experience that we have been able to draw upon to make these changes. By taking a forensic approach in response to the PRA changes we’ve continued to support our broker partners with changes that meet both regulatory requirements and also the needs of their customers.”
David Whittaker, CEO at Mortgages for Business, added: “As you would expect with a seasoned Specialist buy-to-let lender, OSB is positioning its Stress Matrix to add value to landlords buying properties in Limited Companies as well as continuing to prudently support landlords with properties still held personally. Their definitions between smaller and larger HMOs and blocks of flats are helpful in allowing brokers to determine where these transactions sit within the Kent Reliance and InterBay brands and will be welcomed by the market.”
