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Important changes to our BTL criteria

Buy to Let lending criteria – important changes to ICR

We’ve made some changes to our BTL Interest Coverage Ratio (ICR) policy and our reference rate on 5+ Yr Fixed rate mortgages. We’re also now including Scottish tax bands to make it easier for Scottish tax payers to know which ICR band would apply to them.

It may mean some of your clients are able to borrow more and recognises that one size doesn’t fit all:

  • If each applicant's individual gross* income is less than £42.5k, and all applicants declare themselves to be a non-taxpayer or basic rate tax payer (starter or intermediate rate in Scotland), the ICR is 125%.
  • If any applicant’s individual gross* income is £42.5k or more, or if any applicant declares themselves to be a higher rate or additional rate tax payer (top rate in Scotland) the ICR is 145%.

* Gross annual income includes the total gross monthly rental income from the property to be mortgaged and all other investments.

We’ll apply a reference rate of 5.5% (5% for porting or remortgaging with no additional borrowing) or 4.5% if a fixed rate product of five years or longer is chosen (see table below).

Product Customer Type
(inc. additional borrowing)
(no change)^^
Remortgage (no additional
Reference rate
2 Yr BBR Tracker 5.5% 5.0%
Flexx for Term
2 Yr Fixed
3 Yr Fixed
5+ Yr Fixed 4.5%*

For example, the table below shows how the 125% and 145% ICR would apply to a loan of £150k

Reference rate 125% ICR 145% ICR
5.5% £859.38 £996.88
5.0% £781.25 £906.25
4.5% £703.13 £815.63

We’ll continue to validate applications to make sure the correct ICR is being applied.