The Mortgage Works, the buy-to-let arm of Nationwide Building Society, has unveiled its criteria for portfolio lending in response to the new Prudential Regulation Authority underwriting standards.
The PRA is bringing in tougher rules for portfolio landlords – those with four or more rental properties – on 30 September.
It expects firms to adopt a more specialist underwriting process to reflect greater complexity of lending to portfolio landlords.
The Mortgage Works said the interest cover ratio is 145%, with HMOs remaining at 170%, regardless of a landlord’s tax status.
In addition, for portfolios of 10 properties or fewer, the aggregate stress rate for all properties is 4.5%. For 11 or more properties, or where the total borrowing with the Nationwide Group is greater than £1million, the aggregate stress rate is 5.50%.
Like-for-like remortgage applications will be excluded from portfolios of fewer than seven properties and will not be subject to portfolio landlord criteria. There will be no changes to loan-to-value limits, maximum loan size or minimum income criteria. TMW will continue to accept portfolios of all sizes, with no limit to the number of properties.
A dedicated team has been put in to support brokers and portfolio landlords after the introduction of the new rules.
In addition, TMW has invested in a new online system to allow brokers to fill in portfolio property details on mortgage applications, which can be validated automatically and sent for assessment to the specialist portfolio underwriting team, so they are dealt with in the most efficient way.
Paul Wootton, managing director of The Mortgage Works, said: “We have taken a pragmatic and considered approach to the introduction of the new PRA standards, drawing on our long experience in the portfolio sector.
“We have invested in a new online system and a dedicated portfolio team to support the process, as well as offering clear and ongoing guidance to both landlords and brokers from an early stage to help them prepare for the new rules, amid a range of changes affecting the buy to let sector. The aim is that for many landlords and brokers it will be business as usual.”
A property schedule will be requested for all portfolio landlord applications, with additional questions asked at the decision in principle stage to identify portfolio landlords, including the number of properties in a landlord’s portfolio.
If the customer has or will have four or more mortgaged properties, there may be additional questions about the value, rental income and outstanding mortgage balances secured against the whole portfolio. More complex cases may require further information such as a business plan.
