For most of the last decade, affordability to buy-to-let (BTL) has been framed as a simple equation: rent divided by the fixed interest rate, multiplied by the interest rate (ICR).
If the numbers work, the deal is on. If they didn’t, the answer was no.
In today’s markets, that framework still exists. However, for many customers, where subprime mortgages have been used before or have failed to match market rents, affordability can be a major challenge.
Rising interest rates over the past month have brought this back into the spotlight for many homeowners and advisors, especially in low-yield properties in the South.
It’s no longer about the cheapest LTV for a client
Many long-time landlords also have rental properties that lag the market, especially where tenants have been retained for years. In these cases, the passing rent (currently received rent) can significantly reduce the actual rent.
So, what can we do to help these clients?
Although many lenders offer conveyances that do not include an affordability test, there are still others that do not offer conveyances or rent checks as a new offense. For older borrowers it may also be that they are reaching the end of their term with a high street lender, so a product transfer is ruled out for that reason.
Some lenders are now willing to assess affordability through market rent instead of paying rent, as long as this figure is supported by an appraiser. Others take a hard line, measuring affordability at existing rents regardless of market conditions.
This area presents both a challenge and an opportunity for buyers and lenders
This creates a noticeable difference in results. A property that is unaffordable to one lender may pass comfortably to another simply because of differing views on proof of tenancy.
The seller’s role here is not to raise the rent but to ensure that the lender’s appraisal will reflect the open market value rather than historical confusion.
Portfolio level thinking
The next tool to consider after rent is whether a reduced stress test can be used as a ‘base of similarity’. Although this has become a less common offer from lenders in recent years, it can be a useful tool to allow for shorter fixed rates or to maintain a higher rate.
Shifting from structural level to portfolio level thinking can also be helpful. By balancing existing loans across portfolios and resetting loan sizes and ICRs across properties to meet current stress tests, it is possible to future proof the portfolio to some degree.
Some professional lenders are able to collateralize and take several properties into one loan account. Although this also has its drawbacks, it provides the client with a simple and guaranteed method. Rather than predicting that every asset will outperform on its own, they assess whether the portfolio remains sustainable once it is stressed.
Many long-time landlords have rental properties that are lagging on the market
For consumers, taking a completely different approach – presenting the portfolio as a business, not a collection of individual loans – can really set you apart in the eyes of the customer.
BTL advice is no longer about finding the cheapest price to match the client’s LTV. Including:
- interpreting portfolio cash flows under different lender assumptions;
- determining which properties should remain with common creditors and which require special treatment;
- using product and design choices to manage affordability rather than increase capacity; again
- in some cases, it advises clients not to refinance until a comprehensive restructuring plan is in place.
This marks a shift away from proactive problem solving and towards proactive risk management.
BTL is often said to be ‘on the road to extinction’. A more accurate description might be that it has grown.
Pressure testing remains a key factor in underwriting but is no longer the only decision. In complex portfolios, the outcome increasingly depends on how satisfactorily the overall risk picture is presented, and which lender’s philosophy best suits the client’s situation.
A shift from structural level to portfolio level thinking can be helpful
This area presents both a challenge and an opportunity for buyers and lenders.
Buyers with a broader toolkit can support more customers over the next few years, positioning them for a future where rising rents and falling interest rates may ease affordability pressures.
For lenders, using multiple portfolio assessment methods opens up more avenues for lending – without compromising risk appetite.
Ben Tyler is a mortgage consultant at Dynamo
This article appeared in the May 2026 issue of Mortgage Strategy.
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