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NatWest stress test

ended 22. September 2022

A Newspage broker has just alerted us to a new stress test on BTL from NatWest, which will make it harder to borrow the maximum as a BTL investor. 

  • Effective immediately, we’ve changed our Buy to Let 5-year stress rate from 4.75% to 5.1% and our Buy to Let Like for Like remortgage stress rate from 4.75% to 5.1%.

It means rent might need to be higher, which will clearly impact tenants. What are the ramifications of this for landlords, tenants and the property market as a whole?

7 responses from the Newspage community

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Graham Cox
Director at Bridging Hub
Some landlords will try to increase the rent so they can afford the mortgage and pass the debt stress test. But there's only so far they can push them, for fear of losing their tenants, who are already struggling with the cost of living crisis. Others will decide to sell up, putting further downward pressure on prices. It feels like the chickens are coming home to roost, after the folly of years of ultra-low interest rates, and laissez-faire attitudes to property prices.
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Marcus Wright
Managing Director at Bolton Business Finance
If I was a landlord with low yielding buy-to-let properties, I would be extremely worried right now about the rising rate climate. Buy to let properties with low yields under 5% may well struggle to remortgage if they cannot pass the stress tests. However, it tends to be less of a concern in the North and Scotland because yields are much higher, with some postcode areas having average yields up to 11%.
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Rob Peters
Principal at Simple Fast Mortgage
NatWest are the first out of the blocks for increasing stress-testing for landlords; this is the test which dictates how much a landlord can borrow based on the property's rental income. With interest rates rising fast it was inevitable the stress test threshold was follow. This will be of particular concern to those landlords that have low yields, leaving many with no option but to increase rent. With rents potentially increasing further, and house prices way out of sync compared to wages, it's certainly not getting any easier for first time buyers.
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Ashley Thomas
Director at Magni Finance
It's highly likely tenants will suffer in the long term from increased rent due to the higher mortgage costs landlords are incurring.
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Lewis Shaw
Owner and Mortgage Expert at Shaw Financial Services
Many lenders will update their stress tests, and it's no surprise that NatWest is first out of the traps as they had a more lenient stress test to start with. It won't impact many borrowers unless they're higher-rate taxpayers looking to buy in an expensive area. For my clients, it's plain sailing as I stress all my landlord's mortgage loans at 145% of the mortgage amount at a rate of 5.5%, even if a lender is lower for this reason. Rates were always going to rise, and this game is about having a broker that's got one eye on the future, so borrowers don't find themselves in tricky positions.
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Mark Robinson
Managing Director at Albion Forest Mortgages
Natwest have been pulling a few interesting moves this week and it is unsurprising given their current turnaround times. This will compound an existing problem of fewer landlords with rising rent costs and push more people into home ownership. I imagine the Bank of Mum and Dad will be utilised more than ever going forward as people are forced onto the property ladder early, using schemes such as Joint Borrower Sole Proprietor and Equity Release to help children into home ownership.
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Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
If the government cut certain taxes, this causes inflation and interest rates will go up. This causes housing costs to increase including rents as landlords push up prices to cover the costs of their mortgages. Natwest are just reacting to increased rates to ensure that they don't lend irresponsibly. Responsibility ends with the government and their fiscal policies.