Skipton International has enhanced its mortgage criteria for overseas residents investing in buy-to-let in the UK, offering them higher borrowing levels.
Investors are being offered a reduced interest ratio of 110%, compared to the standard 125%, meaning they can potentially achieve greater levels of borrowing against their rental yields.
For example, an investor, resident in the Middle East, with an annual income of £120,000 wants to remortgage his existing UK buy-to-let property currently valued at £1,000,000. The rental income on the property is £2,400 per month. He opts for Skipton’s 5-year fixed rate product at 3.74% (4.7% APR). Previously he could have only borrowed £616,000, but with the new interest coverage ratio he can borrow an extra £84,000, taking his total available level to £700,000.
Making UK buy-to-let more attractive
Roger Hughes, Skipton International’s business development manager, said: “We are always looking at opportunities to develop our mortgage proposition and make it more attractive.
“This change will allow high-net-worth individuals to borrow more funds to either purchase a new property or remortgage an existing one.”
The reduced interest ratio is available to British expats and foreign nationals with residential buy-to-let property in England, Wales and the Scottish mainland. Customers must earn over £100,000 pa (sole income or main earner if joint application) and seek borrowing in excess of £500,000.
Overseas demand for buy-to-let has increased over the past few months, with Skipton reporting a 43% annual increase in enquiries through its mortgage calculator in the year to the end of August. One of the reasons for this could be the devaluation of the pound since the EU referendum, which has reduced the upfront cost of purchasing property in the UK for foreign investors.
Virgin Money expanding offering
Another lender competing in the buy-to-let space is Virgin Money, which has also announced changes in its buy-to-let range. It has reduced its interest stress test rate to 4.5%, down from 5%, on five-year or longer fixed rate products, while keeping the required rental cover at 145% of the mortgage.
On a remortgage, the new rates are now 5%, down from 5.5%, with a 125% rental cover.
Sarah Green, director of intermediary mortgages at Virgin Money, commented: “In line with the market we are offering reduced stress test rates across several of our products which demonstrates our ongoing commitment to supporting our intermediary partners and the buy-to-let market.”
