Paragon has launched a five-year fixed rate mortgage for landlords with a reduced interest coverage ratio.

The mortgage is available at up to 70% of the property’s value (in England, Wales and Scotland) at an initial rate of 5.69%, fixed for five years.

It comes with a 2% product fee and a free mortgage valuation and is available to portfolio landlords – those with four or more mortgaged properties – purchasing or remortgaging houses in multiple occupation (HMO), multi-unit blocks (MUB) and single self-contained (SSC) properties.

Reduced reference rate

Paragon is offering the five-year fix with an Interest Coverage Ratio (ICR) calculation rate that has been reduced from 7.00% to 5.75%. This is the rate that the lender uses to stress test the landlord’s affordability, so a lower ICR rate makes the product more accessible.

Moray Hulme, director for mortgage sales at the lender, said: “With a level of stability returning to the market we’re pleased to be able to offer a five-year fixed rate product that features a market-leading initial rate. We feel this will really appeal to those landlords who seek the certainty provided by fixed rates and should sit well alongside our discounted variable products, giving investors some choice.

“We know that landlords have still been keen to stay active in the market, particularly as tenant demand remains strong, so to help facilitate this we have reduced the rate at which we calculate interest coverage ratios from 7.00% to 5.75%.”

The mortgage has early repayment charges of 5% payable in years one and two, 4% during years three and four and 3% in year five.