With immediate effect, Suffolk Building Society has introduced a new tiered approach to its Interest Cover Ratio (ICR) assessment for buy-to-let and holiday let mortgages.
A new 125% ICR on the stress rate has been introduced for basic or nil-rate taxpayers.
The current 145% ICR on the stress rate will remain in place for higher-rate or additional-rate taxpayers.
These tiers have been agreed upon as the tax payable for basic or nil-rate taxpayers for income on property is significantly less than the liability payable for higher or additional rate UK taxpayers.
The new lower ICR tier will increase the amount that basic or nil-rate taxpayer landlords can borrow, subject to remaining within the society’s 80% loan-to-value (LTV) criteria.
Charlotte Grimshaw, Suffolk Building Society’s head of mortgages, said: “By providing landlords with greater flexibility in terms of affordability and the ability to borrow more, we are helping them continue to provide good quality properties for tenants.
“Although the mandate to make energy-efficient changes has been removed, we know that responsible landlords still want to make upgrades that result in better, safer and greener homes for the private rental sector.
“These ICR changes complement our buy-o-let light refurb mortgage product which bases the rental calculation on a property’s estimated rental income after refurbishment work has been completed, and not on its current rental value.
“We’re also not yet home and dry in terms of inflation and interest rates, so by reducing our ICR demands, we’re giving brokers another option for their landlord clients in the lower tax brackets.”
