From today, Wednesday 14 December, we are simplifying our affordability assessment and minimum gross income requirements on all applications for new Buy to Let (BTL) lending.

We are making the following changes:

  • Separate rental coverage requirement removed;
  • Minimum gross income requirement simplified to be £25,000 per annum (for joint applications, at least one applicant must earn £25,000).

Barclays considers both personal and rental income within our affordability calculation, and already undertakes a full affordability assessment of the borrower(s).

Since our income affordability test includes all relevant landlord costs, such as those associated with renting out BTL properties, applicant level tax liability (including mortgage interest tax relief changes being phased in from April 2017) and assumes a minimum borrower interest rate of 5.5% for existing and applied for BTLs, we no longer need a separate rental coverage ratio test.

 

Why are we introducing these changes?

The Prudential Regulation Authority (PRA) recently announced new minimum underwriting requirements, which lenders must comply with by 1 January 2017.  Whilst Barclays already complies with these new standards, we have taken the opportunity to tailor our assessment so that it is based on a borrower’s individual circumstances.

What do you need to do?

The good news is that our quick and easy to use online BTL affordability calculator allows you to check that your client meets our affordability requirements before submitting a case to us.  You do not need to do anything different – simply complete all requested fields.

We have added functionality so that you can now save, as a PDF, the inputs and results of the calculator. The calculator will also provide an indicative maximum borrowing amount (based on inputs), where the borrower(s) passes the personal solvency review, but their calculated net disposable income not sufficient to meet the requested borrowing amount in full.  References to a minimum rental cover ratio requirement will also no longer apply on sourcing engines, but may still show as 100% RCR.

All applications submitted from 13 December will be assessed using these new criteria.  Applications submitted before this date will continue to be assessed under previous criteria, unless there is a material change (e.g. change of property), in which case a new application will be required.

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