Redwood Bank has introduced changes to the affordability criteria on its lifetime interest-only mortgages, including HMOs.
The lifetime interest-only products are aimed at landlords who are looking to maximise their cashflow and the bank has made changes to its credit policy to provide “simplified and competitive” affordability.
The main recent changes made are:
- Reducing the ICR coverage for the residential BTL proposition
- Providing lifetime interest-only now for most HMO categories
- Reducing the existing 2.50% stress rate that is applied to all variable and 2/3-year fixed rate mortgages to 2.00%.
Leon Marklew, Redwood’s director of business development, said: “The past few years have created an unprecedented situation for residential landlords and left many of them struggling. We want to take away some of their stress to allow them to continue making a success of their businesses.
“We have enhanced our products to provide residential property investors with the opportunity to generate more leverage in a high-interest rate environment. Higher interest rates mean that property income is increasingly unable to drive the required quantum of debt available to landlords, so by reducing our Interest Coverage Ratios (ICRs), we are able to provide them with the opportunity to generate greater leverage, if required, despite industry-wide high rates.
“Redwood has always been popular with brokers from an HMO perspective – and by further enhancing our HMO propositions with lifetime interest only, we are making a statement that we have an appetite for the more complex deal types that HMOs usually fall under.”
The Bank introduced two and three-year fixed-rate mortgages last year, and has recently added a limited edition five-year fixed rate product that has the advantage of not requiring any additional stress testing. The five-year fixed rate product provides an opportunity to generate additional debt leverage, and provides greater certainty of future regular loan repayments.
Marklew added: “We have always prided ourselves on supporting British businesses, and right now with the current high Bank of England base rate and inflationary pressures causing significant uncertainty, these changes will help to remove some of the stress and anxiety for our customers.”
