The Mortgage Works (TMW) is making changes to its rental calculation and maximum LTV.
From 11 May 2016, the lender’s rental coverage requirement will be increased from 125% to 145%. At the same time, its maximum LTV will be reduced from 80% to 75%.
David Whittaker, managing director of Mortgages for Business, said: “I’m not surprised. This is the direction of travel for the sector and I’ve been on the road in recent weeks attending trade show for brokers and investors forecasting that lenders would start to increase their income cover ratios for individual borrowers.
“As one of the biggest mainstream buy-to-let providers, TMW is taking the lead and demonstrating to the market and the regulators that it truly understands the forthcoming tax relief changes. It will be interesting to see how other providers react. I anticipate a few will be making similar preparation, some will wait until the outcomes of CP11/16 are known and others will bury their heads in the sand.
“ICRs on products for limited companies will remain generally the same as they are now because these borrowing vehicles will not be subject to the new tax relief restrictions. Indeed, it will be the lenders with products in this category who will be the likely winners out of this in the long term.”