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Buy-to-let stress rates

Journalist: Anna Sagar, Mortgage Solutions / Specialist Lending Solutions

ended 30. August 2023

Looking to get mortgage broker views on BTL stress rates. 

Natwest recently lowered its BTL stress rate, whereas Santander upped theirs. 

  • What are average BTL stress rates currently? What is the highest and the lowest? 
  • How is it impacting landlords and ability to place cases? 
  • What advice are you giving to landlord clients currently?

5 responses from the Newspage community

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Stephen Perkins
Managing Director at Yellow Brick Mortgages
Landlords are being stuck like a spider in a bathtub with the increased stress-testing rates on buy-to-let mortgages. It completely stops new purchases without large deposits and even remortgaging to a different lender is often not an option. So the landlord can product transfer or sell the property. Most investors now see Houses in Multiple Occupation (HMO) and holiday lets as the only good margin property options.

Stress-testing on buy-to-let is non-sensical. As most are on interest-only and at lower Loan to Values, making the increases in payments usually less than residential mortgage holders, the rates are already higher and typically as rates increase, so do the rental payments landlords can charge.

Personally, lenders should base it on the current product rate at 125% and simplify the process and affordability.
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Elliott Culley
Director at Switch Mortgage Finance
Placing BTL cases has become quite tough. The recent changes in stress test from NatWest are not revolutionary and it's more about them trying to come back into the market, after they raised the stress test not so long ago. With the economic forecast currently predicting better rates in 2025 most landlords are seeking 2 year products, but stress tests for 2 year products are difficult to achieve. Especially for highly geared properties on a single family AST basis. So we are seeing quite a few product transfers as a result. Specialist lenders are trying to combat this by offering lower rates but with higher arrangement fees. However I don't think that's the long term answer and the current universal affordability model should be looked at.
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Kundan Bhaduri
Property Developer and Portfolio Landlord at The Kushman Group
There is a looming mortgage crisis, poised to hit London homeowners with unprecedented force. The government and the CMA need to intervene immediately to the potential oligopoly of some lenders ramping up the product fees on mortgages beyond affordable levels. These homeowners, who embarked on hefty home loans during a period of historically low interest rates now find themselves teetering on the brink of financial turmoil as those once-favorable fixed-rate deals near their end. The relentless march of two-year fixed rates toward six percent adds to the uncertainty. Concurrently, the Bank of England's anticipated interest rate hike exacerbates the economic strain caused by inflation's unexpected resilience. While rates may still be below those of the early Nineties, the impact on personal finances is a lot more severe this time, painting a bleak picture for London's property market as homeowners and landlords continue to grapple with surging costs.
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Peter Stamford
Mortgage Expert at Stamford Home Finance
Landlords are feeling trapped with these new stress-testing rates on buy-to-let mortgages, making buying or switching tough without hefty deposits. While interest rates might rise, rents often follow suit. Lenders should simplify the process, focusing on current rates and affordability. Looking to the future and hoping for reduced rates isn't good enough, we need action now.
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James Bull
Mortgage Broker at JB Mortgages
It is welcome that Natwest have lowered its offering, but in the scheme of things the difference this will make is negligible. In many cases the rental incomes achieved are not high enough to cover the stress rates, meaning higher deposits for landlords. There are a few lenders who allow any shortfall in stress rates to be covered by personal income, ie top slicing. These mortgages have been recommended more and more regularly recently so landlords can borrow the amount required, this is expected to continue to be the case as long as interest rates stay at their current levels.