Redwood Bank has introduced changes to its affordability criteria in order to support residential buy-to-let landlords.
As part of this support, the bank is altering criteria across its lifetime interest-only mortgage range, including HMOs, allowing investors to keep outgoings as low as possible.
The main alterations include: a reduction in the Interest Coverage Ratio (ICR) coverage for the bank’s residential buy-to-let proposition; a reduction in the existing 2.50% stress rate that is applied to all variable, 2- and 3-year fixed rate mortgages, as well as the introduction of lifetime interest only for most HMO categories.
Leon Marklew (pictured), 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.”
He added: “Higher interest rates mean that property income is increasingly unable to drive the required quantum of debt available to landlords, so by reducing our 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 also introduced 2- and 3-year fixed-rate mortgages last year and has recently added a limited edition 5-year fixed rate product that has the advantage of not requiring any additional stress testing.
The 5-year fixed rate product provides an opportunity to generate additional debt leverage, and provides greater certainty of future regular loan repayments, which will help landlords navigate some of the challenges they may face on the horizon.
Marklew concluded: “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.”
