Landlords could soon borrow more under new lending rules
The Mortgage Works (TMW), a subsidiary of Nationwide Building Society, has reduced its affordability stress rate by 0.50% on certain new applications, a move expected to help landlords borrow more amid ongoing financial pressure in the rental market.
The lender is lowering its stress rate to 4.00% or the pay rate, whichever is higher, for new buy-to-let applications with up to 65% loan-to-value (LTV). The revised rate applies to five-year fixed rate terms and like-for-like remortgages across all fixed product terms.
This adjustment is targeted at individual applications, including buy-to-let, large portfolio, and houses in multiple occupation (HMO). However, the change does not extend to limited company mortgage applications, which will remain on existing stress rates.
Damian Thompson, director of landlord at The Mortgage Works, described the changes as a measure to enhance affordability while upholding lending standards.
“These positive changes to our stress rates will serve to boost affordability. They will enable landlords to borrow more with us but, at the same time, will ensure that we continue to lend responsibly,” he said.
Under the updated stress rate structure:
- Like-for-like remortgage at 65% LTV or lower: 4.00% or pay rate
- Like-for-like remortgage above 65% LTV: 4.50% or pay rate
- Purchases or remortgages with capital raising (one- and two-year fixed terms): 5.50% or pay rate + 2.00%
- Five-year fixed at 65% LTV or lower: 4.00% or pay rate
- Five-year fixed above 65% LTV: 4.50% or pay rate
The move has been welcomed by mortgage brokers, who view it as a practical step toward revitalising the private rental sector.
Jeni Browne, business development director at Mortgage Finance Brokers, said the change could provide vital relief to landlords who have been constrained by tighter lending conditions following successive interest rate hikes.
“So many landlords have been unable to remortgage or acquire new properties because of the more onerous rental calculations that have been in play on the back of higher interest rates – this has been at a huge cost to the private rental sector,” she said.
“Seeing the UK’s largest Buy to Let lender tackle this head on by reducing their rental calculations thus allowing landlords to borrow more per pound of rental income, will mean that property investors will be able to remortgage thus accessing better mortgage rates, and get investing once more.”
Established in 1988, TMW manages assets of £42.4 billion and supports over 330,000 landlords through a 700-member team, primarily located in Bournemouth.
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