West One Loans has unveiled a range of limited edition products with enhanced debt service coverage ratio criteria.
The new range is aimed high-quality borrowers who are locked out of the market, or cannot borrow as much as they could 12 months ago because yields have failed to keep pace with rapidly rising mortgage rates.
Each of West One’s four new five-year fixed rates comes with a lower debt service coverage ratio (DSCR) of 100%, rather than the usual 125.
It means landlords need only charge rent covering 100% of the mortgage repayments rather than 125%, therefore allowing them to borrow more.
However, while West One has enhanced its DSCR criteria, landlords will still have to pass the lender’s underwriting process.
The new products are available to finance the purchase or remortgage of standard or specialist properties and are as follows:
- W1 Standard with rates starting from 6.09% and a 5.0% fee
- W1 Standard with rates starting from 6.59% and a 2.5% fee
- W1 Specialist with rates starting from 6.29% and a 5.0% fee
- W1 Specialist with rates starting from 6.79% and a 2.5% fee
Despite the new products having higher rates than some products available within West One’s range, the lower DSCR requirements mean landlords can borrow much more. The increased leverage available is further enhanced for HMO/MUFB and Higher rate taxpayers where an increased rental stress ordinarily applies.
For example, on a property yielding 3.5-4%, the maximum LTV a landlord could achieve at an interest rate of 5.5% at 125% DSCR would be around 50%.
However, on the new 100% DSCR range, the maximum LTV would be 57%, or potentially tens of thousands of pounds more depending on the value of the property.
Meanwhile, the specialist lender has launched a series of limited edition fixed rates that have lower rates and higher fees to help borrowers who need to maximise loan size and affordability.
The new range of two and five-year fixed rates are available on standard and specialist properties and start at 5.09%.
Andrew Ferguson, managing director of buy-to-let at specialist lender West One Loans, said: “Meeting a lender’s debt service coverage ratio requirements is the number one challenge facing landlords at the moment.
“Base rate rises coupled with market volatility have shifted rates upwards of 5.5%. However, in many parts of the country yields haven’t yet caught up, leaving many high-quality borrowers with limited options upon product maturity other than to accept high reversion rates or inject personal cash into the transaction to facilitate the remortgage.
“By launching our new limited edition enhanced DSCR range, we hope to help brokers’ clients meet this challenge and to offer them the finance they need.
“However, this doesn’t mean we are dropping our standard. In order to protect borrowers and to maintain the quality of our lending book, landlords will still have to go through the same bespoke and rigorous underwriting process they always do.”
