Recent months have seen landlords being unfavourably affected by a sudden rise in interest rates on their mortgages. The Bank of Ireland case, in which they increased the margin differential on their lifetime tracker mortgages, has been particularly exposed.
Many banks have moved away from lending for buy-to-let purposes on account of the risks involved in letting private properties. Recent reports, however, have revealed that Santander have broken the trend and loosened their criteria for landlords. This is to open up to amateur landlords.
Santander Breaks the Trend
Santander’s director of retail assets, Phil Cliff, discussed the new measures, saying: “The buy-to-let market is continuing to see strong growth and the latest improvements to our criteria herald the next step in our journey to becoming the intermediary partner of choice, demonstrating our continued commitment to this market.
“We’re keen to support the non-professional landlords sector and will continue to review our buy-to-let criteria to ensure we’re offering your clients the right mortgage with features to meet their needs now and in the future.”
The lender has reduced their buy-to-let affordability rate from 6% to 5%. The maximum loan size per property will also be increased, from £500,000 to £750,000 from Friday 27th September.
In addition, the Buy to Let Business Managing Director, Ying Tan, said: “This is fantastic news. Lenders are solely but surely moving more towards larger landlords who have been neglected during the past few years. Santander is one lender that can start to compete with BM and TMW with its balance sheet and proposition. It’ll certainly get business.”1
Under the revised criteria, landlords with a maximum of seven buy-to-let properties will be able to apply for a buy-to-let mortgage with Santander Intermediaries, while those with up to five properties can apply to Santander.
The minimum gross rental income requirement remains at 125% of the mortgage payment. Applicants must already have a residential or buy-to-let mortgage. At least one of the borrowers must be employed and earn over £25,000 per annum. Houses in multiple occupation are not eligible.
Additionally, the lender will also consider applications from those who have a minimum of one and a maximum of ten secured credit commitments at the time of application.
Santander is also launching a range of two-year residential track mortgages available up to 90% loan-to-value, with no early repayment charges.
With a high demand for private rental property, it is unsurprising that Santander aim to take a larger share of the buy-to-let lending market. However there are risks involved. Since the recession, evictions due to rent arrears have increased, meaning that landlords are more likely to miss one of their mortgage repayments without rent guarantee insurance. Any landlord thinking of applying for a mortgage through Santander in the near future should ensure they are financially secure and can realistically afford the repayments.