Suffolk BS enhances affordability criteria for expats and landlords

Suffolk Building Society is making two notable changes to its affordability criteria: introducing top slicing on its UK buy-to-let and expat buy-to-let mortgages, and changing the way it assesses affordability for expat residential applicants living in seven tax-free countries.

The Society sets its Interest Coverage Ratio (ICR) at 125% for basic tax payers and 145% for higher and additional rate tax payers. From today, it can now top slice when assessing affordability across its two-year products on UK and expat buy-to-let. Where the rental income falls short, the Society is able to use some of the borrower’s personal disposable income to provide a top-up, where the rental income meets a minimum ICR of 125% at product rate.

A maximum of two applicants is allowed with a minimum £40,000 income requirement for one applicant or a combined income of £65,000 per application. Top slicing is not available for the Society’s holiday let mortgages. 

The Society has also changed the way it assesses affordability for expat residential cases involving UK nationals living in selected countries where they do not pay tax: Saudi Arabia, United Arab Emirates, Qatar, Kuwait, Bahrain, Bermuda, and Brunei.

Previously, affordability was calculated on their status as UK taxpayers. From today, the Society will take into account the fact that no tax is deducted in some countries or territories, meaning applicants have more disposable income available and, in turn, could afford to borrow more.

Charlotte Grimshaw, head of intermediaries at Suffolk Building Society, said: "The buy-to-let market has evolved significantly, and many landlords now have diverse income streams in addition to rental. Our new top slicing proposition recognises this reality by allowing surplus personal income to be considered in affordability assessments. This provides greater flexibility for landlords who may otherwise be constrained by rental stress testing alone, whilst maintaining our responsible approach to lending. Ultimately, it's about giving brokers more options and helping landlords continue to invest in the private rented sector at a time when demand for rental homes remains strong.

“By taking into account the tax arrangements of individual countries when we're assessing affordability, we will be able to make a significant difference to expats' borrowing capacity. Many workers move to regions such as the UAE specifically because of the opportunity to earn tax-free, so it’s important that this is reflected in our affordability assessments.

“Expat remains an important lending area for us, and we’re keen to give brokers more options when supporting UK nationals living abroad. That’s why we continue to review our criteria and make improvements wherever possible.”