Affordability
ICR & stress tests, explained
Paul says
ICR is the single biggest driver of how much a lender will lend you. Not your salary — your rent.
ICR — Interest Coverage Ratio — is how lenders sanity-check that your rent covers the mortgage with margin to spare.
A typical lender wants your rent to be at least 125% of the monthly interest (for limited companies and basic-rate taxpayers) or 145% (for higher-rate personal-name borrowers).
They calculate that interest at a "stressed" rate, not your pay rate. Stress rates of 5–6%+ are common even when the actual product rate is much lower — this is how lenders protect themselves against future rate rises.
The combined effect: how much you can borrow is gated by rent, not by salary. Two identical properties with the same income can produce wildly different loan offers based on which lender and which stress rule you fall under.
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