Rates remain stable and historically low as lenders compete for market share. However, it is a challenging market for investors with the government restricting tax relief on mortgage interest, removing the wear and tear allowance, and introducing additional stamp duty from April.
Several lenders have changed their criteria accordingly, moving away from the industry standard of 125 per cent of the mortgage interest payment at a notional stress rate of 5 per cent to a rate of 5.5 per cent and above. This has a significant impact on the level of debt investors can secure when purchasing new property. London rental yields remain modest, so borrowing more than 60 per cent loan-to-value in the capital is a challenge.
We are aware of a small handful of lenders who, if the borrower can demonstrate excellent personal financial standing, will forgo this stress test, allowing for significantly higher levels of borrowing.
Please get in touch if you feel we could be of assistance.