ICR Stress Testing: Why Your Rental Income Might Not Be Enough
Buy-to-let lenders don't lend based on rent alone. They stress-test the Interest Coverage Ratio (ICR) — typically requiring rental income to be 125–145% of the mortgage payment at a notional rate of 5.5–6.5%. Many deals fail this test invisibly.
A property generating £1,200/month rent might appear to comfortably service a £700/month mortgage. But a lender stress-testing at 145% ICR on a notional rate of 5.5% might calculate the required rental coverage as £1,400/month — meaning the property technically fails the stress test. Portfolio landlords with multiple properties often use lenders that assess the entire portfolio's aggregate ICR rather than each property individually, unlocking more borrowing capacity. Knowing which lender uses which method is where specialist broker knowledge directly translates into deal viability.