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Question

Investing in a Property (England)

What towns does the 5.5% stress test at 145% of mortgage payment at 5.5% stack up in?

14 Jun 2020 | 2 comments

Hi, I am sure you are already aware of this but I went for a BTL mortgage on an new BTL today and was rejected as they wanted the rent to be 145% of the monthly payment, calculated on what the monthly payment would be at 5.5%, not what it actually is. This wipes out any properties in my own area (South Coast) as the rents just aren’t high enough to reach that compared to the house prices. I had previously been looking in the Middlesborough area but although found some with good returns the actual properties were under £50k so no one apart from Together would lend and they wanted to add so many fees it made it not worthwhile. Bearing in mind others are still investing I am curious to know if this formula works elsewhere. I have spent days on Rightmove on the buy and sell options in most counties but can’t get it to work. Any polite suggestions or any lenders who aren’t applying this test?

Answer

2 Comments

  1. Imported

    04/09/2018 5:00 pm
    It’s always the case now that they will assume a higher interest rate to what it is currently to ensure affordability remains if interest rates go up (as they are now albeit slowly).

    Perhaps have a word with our mortgage advisor on the website. They will know more.

    As a side note, the Middlesborough type properties may look attractive on a simple return basis but the reality is you don’t get paid any rent often and the damage caused by each tenant would negate any profit. Stick to an area you know is the best advice.

    We haven’t purchased anything in many years because there’s just no money in it in our area.

    guildy

  2. Imported

    Thanks guildy. I agree. There is no money in our area and nothing that would stack up with this formula. Maybe a house share but our local council is trying to crack down on them.

    I have saved up some money (about 100k) to invest in lieu of a pension but can’t find anything. I did think about buying abroad as I rent a house in Spain every year that is £975 a week and they sell at around £220k. I know there are fees and it would only rent for maybe half a year but still maybe a better return and I could also stay there myself! Just a bit dubious pre Brexit.

    By AnnabelWillilams 04/09/2018 5:06 pm

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