Santander will be setting a minimum income requirement this week for residential borrowers requesting any part of their mortgage on interest only, reflecting the prudent approach to lending and affordability necessary and in line with current market conditions.
The new criteria to Santander interest only mortgages does not apply to existing mortgage customers moving home if their interest only balance remains the same. Single mortgage applicants will now face a minimum gross income requirement of £50,000, while joint applicants must have a combined gross income of £70,000. This can, however, be made up of a mixture of primary and secondary sources of income.
Santander has also announced the reduction of its income multiples for all first time buyers, or any applicant taking out a mortgage over 90% loan to value (LTV). The maximum income multiple is now 4.45 x income, reduced from the previous 4.49 x income.
In line with this, Woolwich Mortgages has increased the minimum rental cover required for all new buy to let applications. Following tough changes brought into action by the Autumn Statement for buy to let lending, the lender’s rental cover ratio will now increase from 125% to 135% for all new applications.
As it is now expected that landlords may incur higher costs as a result of tax changes, lenders are amending affordability calculations to reflect this. Increasing rental covers is with the view to protect new customers looking to invest in buy to let and that landlords can afford the increase in tax liability once it comes into force.
Despite this, the current affordability rate remains at 5.79% for calculations, with existing customers looking to switch rates being unaffected by these changes. Existing background buy to let and permission to let mortgages will also continue to be assessed at 125%.
Criteria has also changed so that applicants can now use personal disposable income (including bonuses) to make up any shortfalls in the rental cover calculation.