With effect from today, Monday 1st November, we will be making the following changes to our lending policy.

 

Assessing variable income for employed customers

We have relaxed our current Income policy by removing the condition that the latest quarterly, half-yearly and annual variable income must have been received on or since 1st January 2021 and instead we are replacing it with the following conditions:

  • Quarterly – to have been paid within the last three months
  • Half yearly – to have been paid within the last six months
  • Annually – to have been paid within the last 12 months

We will continue to accept award letters as evidence of income however, they must clearly show the exact amount that will be paid within three months of the date on the award letter.

Escalating Ground Rent

We have enhanced our current policy to provide more detail on what HSBC UK considers to be an excessive or unreasonably escalating Ground Rent.

Lease terms such as Ground Rents must be reasonable at all times during the term of the lease and adhere to our requirements below:

  • Maximum Ground Rent p.a. must not exceed £250 (£1,000 in Greater London). If there is the potential (within the lease provisions) for the annual Ground Rent to exceed the applicable level, it should be reduced to within the required threshold. This would require a lease variation on the lines that under no circumstances could reviewed rent be increased so that it comes within the applicable Assured Shorthold Tenancy (AST) threshold in the Housing Act 1988 (as amended) or in any legislation amending or replacing it or in any subordinate legislation issued under it. If the lease cannot be varied, a suitable indemnity policy must be put in place to protect the risk to the Bank.
  • Ground Rent less than or equal to 0.2% of the current property value (New Builds restricted to 0.1%).
  • Grounds Rent review period greater than or equal to 10 years.
  • Ground Rent escalation less than or equal to Retail Price Index (RPI). Any RPI increase must not exceed the AST thresholds.
  • Ground Rent doubles every 20 years or any longer period and does not continue to double after 125 years. Any doubling of Ground Rent must not be capable of exceeding the AST thresholds.

 

Utilising rental income – background Buy to Lets (BTLs)

We have made a number of positive changes to our lending policy where there is rental income from BTL properties in the background:

  • We will allow rental income to be included towards meeting the minimum income criteria for international Residential applications.
  • For residential applications (UK and International), where rental income accounts for more than 50% of the total income we will no longer exclude this. We will apply a 1/12th cut to allow for void periods. These customers will no longer be classed as professional landlords. Please see the Rental income section for a definition of a professional/portfolio landlord.
  • We will apply a foreign currency haircut to existing rental income included on UK Residential, UK BTL and International Residential applications where any foreign currency income is present.

Our Broker website will be updated shortly to reflect the above changes.

Further information

 

Chat with us, call our Broker Support Team on 0345 600 5847 (Monday to Friday, 9am to 5pm) or contact your local BDM.