The Mortgage Works has announced improvements to its buy-to-let mortgage affordability criteria. This news spells good things for landlords and property investors, making it easier for them to borrow money and expand their property portfolios.

The core of this update revolves around the reduction of interest cover ratios (ICRs) across The Mortgage Works’ range of buy-to-let mortgages. In simpler terms, the ICR is a measure used by lenders to assess a landlord’s ability to cover mortgage payments from rental income. It’s a crucial figure, determining how much landlords can borrow.

For higher-rate taxpayers, the ICR has been trimmed from 165% down to 160%. Meanwhile, for those who are lower rate taxpayers or operate their rental properties through limited companies, the ICR has seen a reduction from 130% to a more manageable 125%.

What does this mean? Essentially, landlords will now find it easier to qualify for larger mortgages, as the required rental income to cover mortgage payments has been lowered. This is a significant boost for landlords aiming to expand their portfolios or enter the market.

Eased Portfolio Stress Tests

Additionally, The Mortgage Works is easing its grip on existing portfolio rental calculation stress tests. The stress rate, which is a kind of safety check to ensure landlords can handle rate increases, has been reduced from 5% to 4.5%. This adjustment means that landlords’ existing property portfolios will need to meet a slightly lower income requirement to pass the lender’s stress test, further easing the path to borrowing.

A Sustainable Borrowing Environment

Joe Avarne, a senior manager specialising in buy-to-let mortgages at The Mortgage Works, commented on the updates, “We regularly review our affordability policy to ensure borrowing is sustainable for our landlords. With these latest changes we’re pleased to be able to reduce our interest cover ratios so that landlords can borrow more and achieve their buy-to-let aspirations.”