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Santander increasing ICR calculations "an affordability blunderbuss" and "disaster for buy-to-let"

Journalist: Newspage News Desk

ended 27. August 2023

In the latest blow to the buy-to-let market, Santander has just announced that, from Wednesday 30th August, they are increasing their ICR calculations. Below is a screen grab of the changes. Free UK news agency, Newspage, sought the views of brokers on how this will impact new buy-to-let applications, what it means for those needing to remortgage their buy-to-let properties and whether this will be the final nail in the coffin for buy-to-let. Their views are below.

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10 responses from the Newspage community

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Ashley Thomas
Director at Magni Finance
This is an absolute hammer blow to the buy-to-let market ahead of the Bank Holiday weekend. Landlords have already had a tough time with rising rates, and this will make it more challenging, especially for those with lower yields in London. For many landlords, the walls really are closing in.
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Riz Malik
Independent Financial Adviser at R3 Wealth
Santander might as well hang a sign on the door that reads 'Closed for Buy to Let Business in London and the South'. This move reduces the already limited options available and curtails market competition, which isn't promising for landlords and tenants. However, announcing this just before the Bank Holiday weekend might have been a good time to bury bad news.
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Justin Moy
Managing Director at EHF Mortgages
Any increase in ICR calculations makes it far more challenging for landlords to borrow, so the move from Santander is a little 'out of the blue' given recent fixed rate reductions. It looks more like an opportunity to price themselves out of buy-to-let for a while, similar to what NatWest did in June, and given there is little purchase or remortgage business in this sector it's not a market meltdown by any stretch. If this means that Santander can improve its offering for residential products, this might be some brilliant news. It's just news that has been wrapped up the wrong way.
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Elliott Culley
Director at Switch Mortgage Finance
Today's announcement is just another to add to the list of bad news for the BTL market. Lenders need to be supporting the BTL market but moves like this add further pressure. BTL is once again starting to become a specialist market. Right now if clients want to afford the lending on the buy-to-let, then they'd need to expect high fees or have a good income to utilise top slicing.
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Kundan Bhaduri
Property Developer and Portfolio Landlord at The Kushman Group
Put plainly, these unrealistic ICR calculations of up to 8.52% make borrowing for new BTLs almost impossible. They also create a daunting challenge for those seeking to remortgage their existing BTLs. Worse still, landlords will be forced to increase rents to keep up with the ICR, which will in turn hurt those at the bottom of the housing ladder. Banks have been profiting from high margins for years and are now tightening their belts at the expense of borrowers. Landlords play a significant part in providing homes for millions of people, including those who are not yet ready or able to purchase their properties. The government and CMA in particular must intervene given the implications of these stringent stress tests on the rental market. If borrowing becomes too challenging for landlords, it could lead to a reduced supply of rental properties, driving up rents and potentially exacerbating the housing crisis. It's a delicate balancing act that policymakers must navigate carefully.
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Darryl Dhoffer
Founder at The Mortgage Geezer
Wow. This is great news to hear on a Friday afternoon, just before a Bank Holiday weekend. I'm sure landlords up and down the country who were looking forward to the long weekend are thrilled. This means yet more pain for landlords to endure, and even more pain for the renters out there that will bear the brunt of these changes.
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Ross McMillan
Owner/Mortgage Advisor at Blue Fish Mortgage Solutions
It's been clear for some time now that for most of the mainstream lenders, buy-to-let has become the problem child that they would seemingly much rather have sat on the naughty step perpetually than welcome back into the playroom.

Santander has just raised the stakes in effectively banishing their buy to let business well into the corner of a darkened room and time will tell if it will ever be let out again or whether this is a final death knell for landlords with this particular lender. In general,it's alarming that -seemingly regardless of what trends are evident in the general residential mortgage market- either via outrageous product fees or unreasonable stress testing,lenders seem hell-bent on ensuring that landlords pay a heavy price for attempting to continue to plug the gap that governments are seemingly unable or unwilling to and provide desperately needed rental property. Actions such as this must mean many are close to selling up and so who will plug the gap then?
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Natalie Anderson
Mortgage & Protection Adviser at Connect Mortgages
To be honest I think I would respect it more if they decided to withdraw from the BTL market temporarily than this pretty unworkable increase in ICR calculation! More bad news for the BTL lending sector & landlords overall.
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Peter Stamford
Mortgage Expert at Stamford Home Finance
The buy-to-let sector is on the brink of a crisis. With Santander's unexpected ICR calculations reaching up to 8.52%, borrowing for new and existing properties becomes a daunting task. This could force landlords to hike rents, further straining tenants already grappling with high costs. Despite recent fixed-rate cuts, Santander's move, eerily reminiscent of NatWest's earlier action, seems like a tactic to distance from the buy-to-let market. While it might bolster their residential offers, the timing—just before a Bank Holiday—suggests burying unfavourable news. If unchecked, this could limit rental availability, amplifying the housing crisis. Government intervention is essential
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Christian Duncan
Managing Director at Manchester Mortgage Centre
I believe Santander has increased their ICR calculations in a bid to rule out the less attractive buy-to-let applications. This week we've seen principality reduce their ICR calculations and make positive steps towards helping investors. Its a pitty Santander couldn't have done the same to support highstreet borrowers.

In my opinion, we are only just touching the surface of the rocky terrain ahead to let landlords over the next couple of years. This week I have spoken to two portfolio landlords that are in negative equity and need to inject cash into their portfolio.

Lenders need to be a little more sympathetic when it comes to buy to investors. Let's not forget, buy to let mortgages are statistically the least likely mortgage loans to default.