Santander slammed for last-minute anti Buy To Let mor...

Santander has been sharply criticised for increasing its Interest Coverage Ratio just as other lenders have been making it easier to borrow.

The ICR is the ratio of gross rental income to mortgage interest repayments, and Santander’s move was announced just before the end of Friday.

From tomorrow, Wednesday, the lender will increase its BTL standard rate from 7.59 to 8.52 per cent while its five year fixed will leap from 6.09 to 7.02 per cent.

One broker described the move as “an absolute hammer blow to the buy to let market ahead of the Bank Holiday weekend".

Broker views gathered by the agency Newspage echoed that condemnation of the lender.

Lewis Shaw, owner and mortgage expert at Shaw Financial Services, says: “This is a disaster for the buy to let sector and represents over an 11 per cent increase in rents required to achieve the self-financing ICR calculations on five year deals.

“We already know tenants are suffering eye-watering rents and spending more of their income on housing costs, making it even worse for those trapped in the private rental sector.

“It’s time the Government stepped in. Otherwise, we are looking at a housing crisis in the making. We can’t allow Santander, or any other lender for that matter, to destroy the buy to let market with an affordability blunderbuss. But that’s what’s happening.”

Ashley Thomas, director at Magni Finance, adds: “This is an absolute hammer blow to the buy to let market ahead of the Bank Holiday weekend.

“Landlords have already had a tough time with rising rates, and this will make it more challenging, especially for those with lower yields in London. For many landlords, the walls really are closing in.”

Meanwhile Riz Malik, founder and director at R3 Mortgages, comments: “Santander might as well hang a sign on the door that reads ‘Closed for buy to let Business in London and the South’.

“This move reduces the already limited options available and curtails market competition, which isn’t promising for landlords and tenants.”

And Justin Moy, managing director at EHF Mortgages, states: “Any increase in ICR calculations makes it far more challenging for landlords to borrow, so the move from Santander is a little ‘out of the blue’ given recent fixed rate reductions.

“It looks more like an opportunity to price themselves out of buy to let for a while, similar to what NatWest did in June, and given there is little purchase or remortgage business in this sector it’s not a market meltdown by any stretch.

“If this means that Santander can improve its offering for residential products, this might be some brilliant news. It’s just news that has been wrapped up the wrong way.”

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