YBS Commercial Mortgages has announced a major improvement to its buy-to-let mortgage offerings.

YBS Commercial Mortgages has made a key adjustment to the way it calculates buy-to-let affordability, specifically concerning its commercial buy-to-let products. The lender has opted to reduce the stress rate used in these calculations. Previously, the stress rate was set at a 125% Interest Cover Ratio (ICR) at the pay rate plus 0.30%. Now, it has been adjusted to a 125% ICR at the pay rate. But what does this actually mean for landlords?

Simply put, this change means landlords can now borrow more money. By reducing the stress rate, YBS is effectively increasing the maximum amount of lending they can offer to borrowers. This is especially beneficial for landlords operating in areas where rental incomes are relatively low compared to the property values, as it considers the various costs landlords face.

For landlords, this adjustment allows them to borrow more money against their properties, staying within the lender’s 75% Loan-to-Value (LTV) criteria. This could mean more funds for investing in new properties or for carrying out essential maintenance on existing ones, ultimately enhancing the quality of the accommodation they offer.

To put this into perspective, consider a landlord with £1 million in assets and a rental yield of 4% (equating to £40,000 per year). With these changes, assuming a five-year fix at an interest rate of 5.60%, a landlord could borrow approximately 5.5% more. That’s around £30,000 extra, which could be a significant amount for property improvements or expansions.

A Win-Win for Landlords and Tenants

Tom Simpson, the managing director of YBS Commercial Mortgages, emphasises the dual benefit of this update, “We understand the role that landlords play in providing much needed, quality rented accommodation, which in the current climate, are in short supply. We hope that reducing our stress rate – which is another example of how we continue to respond to broker feedback – will provide the support that their landlord clients need, improving their ability to borrow more in the current, more challenging interest rate environment. As a responsible lender, focussed on the importance of high-quality accommodation, these changes will also benefit tenants, as more landlords have access to our product suite.”