B2L income requirements still key

Kent Reliance and Birmingham Midshires have already moved away from a minimum income requirement and others in the market, such as Complete FS’s Tony Salentino, have called for a “wholesale change of heart” saying the most important calculation is affordability based on rental income.

However Whittaker believes lenders should learn from the recession and keep assessing income requirements carefully.

He said: “The propensity to produce rent is part of a lenders’ underwriting decision. Yet the second and equally important component is understanding the outside income and obligations of the borrower.

“To suggest that lenders should ignore the second part is not only foolhardy but sowing the seeds of disaster when interest rates rise as they inevitably will in the years ahead.”

But Salentino said: “With all lenders applying a stress rate of typically 5% and 125% rental coverage this does allow for rate increases and in most cases the applicants will have plenty of excess income to put money aside for void periods.”

He cited HMO’s and student lets where rental yields are substantial to justify his argument that they should take precedence.

He added: “Financial advisers do a great job of advising applicants of the potential downsides of investing in properties and once again I feel that we should respect the professionalism and accuracy of the help they give to these clients.”