Stress testing on investment BTL mortgages

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presidenttttt

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I was a bit surprised to see the level of stress testing going on with BTL mortgages at the moment.

Essentially rent needs to be close to 1.4 times the mortgage, and LTVs in excess of 60% are going to be tricky.

Pretty high interests at the moment for the banks to be taking practically zero risk!!

Is this trending up or down? Are rent pressure zones likely an issue here - capping revenue while costs are exploding?
 
15% most likely, and around 76% of that was resolved overnight by restructuring to interest only repayments.

93, 000 houses were built in 2006. We now have a fraction of that. Rent is not going to stop anytime soon.

Of course there is always some element of risk, though banks here seem to be adding buffer beyond the 1.2 which i believe comes from central?
 
It probably doesn't matter what the multiple is if the tenant chooses not to pay the rent.

And when people lost their jobs, they used their rental income to pay their living expenses or even their home loan.

Lending to property investment is inherently risky.
 
presidenttttt said:
I was a bit surprised to see the level of stress testing going on with BTL mortgages at the moment.
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By whom? Individual lenders? Unilaterally or mandated by the Central Bank?
presidenttttt said:
Essentially rent needs to be close to 1.4 times the mortgage
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I presume you mean 1.4 times the annual mortgage repayment amount?
presidenttttt said:
Pretty high interests at the moment for the banks to be taking practically zero risk!!
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Haven't BTL rates always been higher than PPR rates reflecting the higher risk involved (certainly not practically zero!)?
 
If the trend is the landlord stops repaying mortgage and uses the trend in hard times then a normal approach to risk would be to examine the landlords personal setup, which they don't do. They used to do this perhaps?

As Brendan says, if people elect to stop paying rent the multiple is irrelevant.

They state between 1.2 and 1.4, though appear to be operating at 1.4. Interested in others experience.
 
So from recent experience of the BTL mortgage process, here’s the details for 2 of the main Irish banks:

PTSB
- stress test is +2% interest and then a 1.4 times multiplier for the rental income to mortgage threshold.
- 30% deposit.
- best fixed rate for 5 years is 5.85%.
- despite all details being within parameters, it took over a month just to get mortgage approval as PTSB doesn’t really want BTL business at the moment and are still absorbing the Ulster Bank portfolio.

Bank of Ireland
- stress test is +2% and then a 1.25 multiplier for the rental income to mortgage threshold.
- 30% deposit
- best fixed rate for 5 years is 5.9% (some variance on BER)
- very fast on mortgage approval. Ended up going variable on the likelihood that ECB rates would drop over the coming year.
 
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