A buy-to-let lender is toughening up its affordability criteria for mortgages to landlords.
From next week (Dec 7), new landlord applicants will have to show Barclays they can cover their mortgage repayments by 135% rent.
Barclays’ current rental cover ratio is 125%.
Barclays is making the changes because of the cuts to mortgage tax relief announced in the summer Budget, which will reduce profits for most landlords who are mortgaged.
Buy-to-let mortgage applications submitted before December 7 will be assessed using the current criteria.
In a note to mortgage brokers, Barclays says it is making the change because “it is expected that landlords may incur higher costs as a result of the tax change and therefore we are amending our affordability calculation to reflect this”.
It adds: “The increase in the rental cover ratio will ensure we protect our new customers as they look to invest in buy-to-let in the long term.”
Other lenders are expected to follow suit.
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