The rise in interest rates has not only impacted landlord’s incomes, it’s impacted how much they can borrow against rental income. Rental income and Interest rates are integral to a lender’s ‘stress-test’ calculation, which is one of the ways lenders restrict how much can be borrowed. 

For many landlords looking to remortgage, this has meant they have been unable to change lender or capital raise.  

Some lenders have responded to this by offering the option of lower rate products, but with higher fees. As fees are not part of a stress-test calculation, it means borrowers are able to achieve higher loan sizes and the reduced interest rate helps protect net monthly income. This comes at a price though, as the fees can be large and are often added to the mortgage, resulting in higher debt and potentially making it harder to remortgage next time. 

Recent changes in how buy to let income is taxed has led to more professional landlords operating through limited companies and a shift towards higher-yielding properties such as Houses in Multiple Occupation (HMO), Holiday Lets and properties converted into studio flats. This has led to an increase in the number of lenders specialising in these areas, but there remains some much less catered for areas of the market as lenders have very specific criteria when lending on these specialist properties.