Important residential lending criteria changes

Residential: retained properties

Mortgaged let properties (already let/to be let)

We’ll apply a simpler calculation to work out if the property is self-financing. The rent needs to cover the higher of:
o 145% of the declared mortgage payment; or
o 145% of our stressed mortgage payment at the 5.00% affordability rate.

If the rent covers this amount, then the surplus can be used as secondary income, as long as the property is already let and the rent isn’t received in a foreign currency.

If the rent doesn’t cover this amount, then we’ll continue to consider the shortfall in our affordability assessment.

Mortgage-free properties (already let)

We’ll take 15% off the monthly rent to cover the cost of running the property. We can consider the surplus rent as secondary income if the property is already let and the rent isn’t received in a foreign currency.

Retained properties (not let)

For second homes, holiday homes and properties occupied by a dependent relative, we’re reducing the affordability rate we use to 5.00%.

We’ll still ask for details of the monthly running costs for these properties.

How are we supporting the change?

o Updates to Introducer Internet, the SFI website affordability calculator, additional property form, lending criteria and other supporting documents.

Pipeline rules

If a retained property has been added to an FMA, whether the FMA has been submitted or not before 9pm on Saturday 23 November, we’ll continue to apply the old calculations when the FMA is submitted to us. If a retained property is added or subsequently updated from 6am on Monday 25 November, the new calculations will apply.

Introducer Internet improvements for Buy to Let

We’re also making an improvement to Introducer Internet for Buy to Let applications.

Monthly rent

We’ll capture rental income as a monthly figure instead of annual.