Suffolk BS introduces lower 125% ICR tier

Suffolk Building Society is introducing a new tiered approach to its Interest Cover Ratio (ICR) assessment for buy-to-let and holiday let mortgages.

A new 125% ICR on the stress rate is being introduced for basic or nil-rate UK taxpayers. The current 145% ICR on the stress rate will remain in place for higher-rate or additional-rate UK taxpayers.

The new lower ICR tier will effectively increase the amount that basic or nil-rate UK taxpayer landlords can borrow, subject to remaining within the Society’s 80% LTV criteria.

The changes may appeal to those in the lower tax bands, including expats, and those in areas where property prices are higher than average.

In the case of joint applications, if one applicant is a basic rate taxpayer and the other a higher rate taxpayer, both parties will be treated as if in the higher rate band, requiring 145% ICR.

Suffolk Building Society’s head of mortgages, Charlotte Grimshaw, said: “By providing landlords with greater flexibility in terms of affordability and the ability to borrow more, we are helping them continue to provide good quality properties for tenants. Although the mandate to make energy-efficient changes has been removed, we know that responsible landlords still want to make upgrades that result in better, safer and greener homes for the private rental sector. These ICR changes complement our buy-to-let light refurb mortgage product which bases the rental calculation on a property’s estimated rental income after refurbishment work has been completed, and not on its current rental value.

“We’re also not yet home and dry in terms of inflation and interest rates, so by reducing our ICR demands, we’re giving brokers another option for their landlord clients in the lower tax brackets.”