West One launched limited-edition range to help landlords hit by rising interest rates

West One Loans has introduced a range of limited-edition products with enhanced debt service coverage ratio criteria to help landlords hit by rising interest rates to borrow more.

The new range is aimed high-quality borrowers who are locked out of the market or cannot borrow as much as they could 12 months ago because  yields have failed to keep pace with rapidly rising mortgage rates.

Each of West One's four new 5-year fixed rates comes with a lower debt services coverage ratio (DSCR) of 100% rather than the usual 125.

Andrew Ferguson, Managing Director Buy-to-Let, West One Loans, said: "Meeting a lender's debt service coverage ratio requirements is the number one challenge facing landlords at the moment.

"Base rate rises coupled with market volatility have shifted rats upwards of 5.5%.

"However, in many parts of the country yields haven't yet caught up, leaving many high-quality borrowers with limited options upon product maturity other than to accept high reversion rates or inject personal cash into the transaction to facilitate the remortgage."

The launch of this limited-edition product means that landlords need only charge rent covering 100% of the mortgage repayments rather than 125%, therefore allowing them to borrow more. 

However, while West One has enhanced its DSCR criteria, landlords will still have to pass the lender's rigorous underwriting process.

Despite the new products having higher rates than some products available within West One's range, the lower DSCR requirements mean landlords can borrow much more. 

The increased leverage available is further enhanced for HMO/MUFB and Higher rate taxpayers where an increased rental stress ordinarily applies. 

For example, on a property yielding 3.5-4%, the maximum loan-to-value (LTV) a landlord could achieve at an interest rate of 5.5% at 125% DSCR would be around 50%.

However, on the new 100% DSCR range, the maximum LTV would be 57%, or potentially tens of thousands of pounds more depending on the value of the property. 

Separately, the specialist lender has launched a series of limited-edition fixed rates that have lower rates and higher fees to help borrowers who need to maximise loan size and affordability.

The new range of 2 and 5-year fixed rates are available on standard and specialist properties and start at 5.09%.

Ferguson added: "By launching our new limited edition enhanced DSCR range, we hope to help brokers' clients meet this challenge and to offer them the finance they need."

"However, this doesn't mean we are dropping our standard.

He concluded: "In order to protect borrowers and to maintain the quality of our lending book, landlords will still have to go through the same bespoke and rigorous underwriting process they always go." 

Publication in The Intermediary 26th January 2023. 

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