NatWest unveils rental cover changes

A tiered approach is being taken to rental cover that will mean a reduction in the percentage of cover for higher earners. In addition, the interest rate used for the calculations is being cut by 4bps from the Bank of England (BoE) rate +0.79 per cent, to the BoE rate +0.75 per cent.

Three rental cover tiers are being introduced:

  • For applicants with household income above £75,000, rental cover required will be 100 per cent at the BoE rate +0.75 per cent.
  • For applicants with household income between £30,000-£75,000, rental cover required will be 110 per cent at the BoE rate +0.75 per cent.
  • For all other cases, rental cover required will be 125 per cent at the BoE rate +0.75 per cent.
Chris Pearson, director of intermediary mortgages at RBS Intermediary Partners, commented: “Recognising the growth and changing nature of the buy-to-let market, we wanted to reflect a more realistic approach to judging applicants’ affordability. For higher earners, we are happy to take into consideration surplus personal income to cover any rental income shortfalls because they are better placed to cover small periods of rental voids. Data released recently from the Association of Residential Letting Agents (ARLA) backs this view as the average void period had fallen to just 25 days by Q4 of last year.

“I am keen that NatWest makes a bigger impact in the buy-to-let market this year. We have already made a number of improvements this year to the buy-to-let range not least the groundbreaking ‘five for two’ arrangement fees deal for remortgaging. The change in required rental cover combined with the 4bps cut in the interest rate calculation puts NatWest in a very competitive position in comparison to the other major buy-to-let lenders and demonstrate that we are serious about the buy-to-let sector and are committed to working with brokers to grow their buy-to-let business.”

For those applicants that achieve rental cover of 125 per cent no supporting documentation in regard to affordability is required.