"By reducing our Interest Coverage Ratios, we are able to provide them with the opportunity to generate greater leverage, if required, despite industry-wide high rates."
Redwood Bank has introduced a series of changes to its buy-to-let affordability criteria.
The lender has reduced the ICR coverage for its residential buy-to-let proposition and has reduced the existing 2.50% stress rate that is applied to all variable and two and three-year fixed rate mortgages to 2.00%.
In addition, Redwood has expanded its lifetime interest-only proposition, which is now available for most HMO categories.
The Bank introduced two and three-year fixed rate mortgages last year, and has recently added a limited edition five-year fixed rate product that doesn't require any additional stress testing.
Leon Marklew, director of business development, said: “The past few years have created an unprecedented situation for residential landlords and left many of them struggling. We want to take away some of their stress to allow them to continue making a success of their businesses.
“We have enhanced our products to provide residential property investors with the opportunity to generate more leverage in a high-interest rate environment. Higher interest rates mean that property income is increasingly unable to drive the required quantum of debt available to landlords, so by reducing our Interest Coverage Ratios, we are able to provide them with the opportunity to generate greater leverage, if required, despite industry-wide high rates.
“Redwood has always been popular with brokers from an HMO perspective – and by further enhancing our HMO propositions with lifetime interest-only, we are making a statement that we have an appetite for the more complex deal types that HMOs usually fall under.
“We have always prided ourselves on supporting British businesses, and right now with the current high Bank of England base rate and inflationary pressures causing significant uncertainty, these changes will help to remove some of the stress and anxiety for our customers.”
