Coventry for intermediaries has announced changes to its buy-to-let application process, aimed at improving affordability for landlords. The key adjustment is the reduction of reference rates across various fixed-rate periods, enabling landlords to potentially borrow more against their rental income.
Under the new scheme, a basic rate taxpayer with a rental income of £900 opting for a 5-year fixed rate can now borrow up to £181,895, an increase from the previous amount of £157,091, all within a 75% loan-to-value limit.
The updated reference rates are set at 4.75% for 5-year fixed rates (down from 5.5%), and 5% for 2-year fixed rates on remortgages without additional borrowing (previously 5.5%). For 2-year fixed rates applied to purchases and remortgages that involve additional borrowing, the new rate is 6.5%, adjusted from 7%. These rates will apply or the product pay rate, whichever is higher.
Additionally, the policy stipulates that the minimum rental income must equal 125% or 145% of the mortgage payments, calculated using the reference rate relevant to the application.
To assist brokers in navigating these changes, Coventry for intermediaries provides affordability calculators on its intermediary website, simplifying the process of determining maximum loan amounts or the required rental income.
Jonathan Stinton, head of intermediary relationships at Coventry Building Society, commented on the initiative: “Landlords help provide homes for those who are waiting to buy or simply not in a position to buy. Our affordability changes should help make it easier for new and existing landlords to finance their rental properties and help keep up with tenant demand.”
Stinton further emphasised the ease of application for brokers, noting: “We try to make it as easy as possible for brokers to help their landlord clients, which is why we don’t ask for a minimum income – we simply look at rental income. Our buy-to-let calculator helps brokers easily see how much their landlord clients can borrow, and these new changes to our reference rate will likely mean many of those clients can borrow more if they need to.”
