Leeds reduce stress rate on BTL fixed rate deals


Leeds Building Society has reduced its stress rate on buy-to-let (BTL) fixed rate contracts for five years or more.

The stress rate has been reduced from 5.5% to 4.5% for BTL purchases or remortgages with additional borrowing on longer term fixed rate mortgages.

Martese Carton, Director of Mortgage Distribution, Leeds Building Society, says: “Reducing our stress rating for longer term fixed rate products gives the applicant greater borrowing power with an added opportunity to raise capital to improve the energy efficiency of its properties.

While the Leeds Building Society has reduced its stress rating, other lenders, including Santander, have increased their stress rating for BTL loans.

Santander has increased its 145% to 4% over five years set at 150% to 4.25%, meaning that on a rental income of £1,000 the maximum loan would rise from around £206,000 to £188,000.

Similarly, Metro has increased its stress rate from 140% at 3.5% to 140% at 4%, a reduction of around £244,000 to £214,000 on the same £1,000 monthly rental income for a owner.

Metro falls under a specialty lending line similar to that of Molo Finance, which last week announced the temporary suspension of its BLT product line due to funding.

A message on its website said the changes were due to both “rampant inflation” and recent interest rate hikes by the Bank of England, which rose again to 1% today.

Commenting on the trend, Private Finance CTO Chris Sykes said: “There may be some association here with Metro trying not to be inundated with apps that no longer work with Molo.”

Sykes explains: “This change potentially indicates that lenders are concerned about the evolution of the BTL market and long-term rental vacancies and are looking to mitigate risk in this area amid tenants facing rising rental costs, the average cost of renting a property in England increasing by 0.5. % to £1,012 in April, combined with runaway inflation and a cost of living crisis.

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