The Smart Investor’s Guide to Beating Stress Tests
Lender stress tests can make or break your buy-to-let application. With stricter affordability models and higher coverage ratios, knowing how to structure your borrowing is key. Here’s how smart investors are navigating the rules to keep portfolios growing.
Understanding the Buy-to-Let Stress Test
Every lender needs to know that a property’s rental income comfortably covers its mortgage payments — even if rates rise. This is where the Interest Coverage Ratio (ICR) comes in.
Most lenders assess affordability using a “stress rate” higher than the actual pay rate.
For example, even if your mortgage rate is 5%, the lender might test it at 8.5% to ensure you can handle future increases.
Typical ICR requirements
Individual landlords: often 145% at 5.5–8%
Limited company SPVs: often 125–130% at the same rate
Higher-rate taxpayers: tested more harshly because of reduced tax relief
In short, stress tests have been the main barrier to portfolio expansion over the past few years.
Why It Matters in 2025
As interest rates begin to ease, some lenders are lowering their stress rates, allowing borrowers to release more capital or achieve larger loans.
However, differences between lenders are huge — so understanding how they calculate affordability is essential.
Example:
A £250,000 mortgage on a property renting for £1,200 per month might pass with one lender but fail with another, simply due to how each calculates the stress test. Speak to us as we can guide you through the complications.
The good news? There are ways to improve your position.
Practical Ways to Beat the Stress Test
1. Use a Limited Company (SPV) Structure
One of the biggest advantages of buying through a limited company is the lower ICR requirement (often 125% instead of 145%). That alone can increase your potential borrowing by 10–20%.
More on this in our Investor Hub.
2. Opt for a 5-Year Fixed Rate
Lenders apply different stress rates depending on the product term. Shorter 2-year deals are stress-tested at higher notional rates, while 5-year fixes can be tested at the pay rate itself. That means you can borrow more, sometimes tens of thousands more, simply by choosing a longer fix.
3. Consider “Top-Slicing”
Some lenders allow personal income to supplement the rental shortfall (known as top-slicing.)
For professional investors with surplus income, this can unlock deals that would otherwise fail affordability checks. It’s particularly useful for high-value, low-yield properties in areas like city centres.
4. Improve Rental Efficiency
If your property is close to failing the test, small changes can help:
Review your rental valuation - is it up to date?
Consider modest rent increases where market demand supports it.
Reduce personal or portfolio debt to strengthen overall affordability.
Improve the properties EPC score (some lenders offer a better interest rate for A-C properties)
5. Work with Specialist Lenders
Mainstream banks often apply blunt affordability rules.
Specialist buy-to-let lenders take a more pragmatic view — especially for SPVs and portfolio landlords.
They’ll often assess the entire portfolio, not just the subject property, which can make a big difference in outcome.
You can compare these lender options by contacting us.
A Quick Look at the Numbers
Here’s how different structures can affect maximum loan size on a £1,200 rental:
| Ownership Type | Typical ICR | Stress Rate | Max Loan (£) |
|---|---|---|---|
| Individual (40% taxpayer) | 145% | 8.0% | £180,000 |
| Limited Company (SPV) | 125% | 8.0% | £210,000 |
| 5-Year Fix (SPV) | 125% | 5.5% | £240,000 |
That’s a £60,000 difference — purely from structuring and product selection.
Our Take
For savvy investors, “beating” the stress test isn’t about bending rules — it’s about understanding lender logic and structuring your finances accordingly. Using a company vehicle, opting for longer-term fixes, and choosing the right lender can unlock far greater borrowing capacity.
If you’re planning to refinance, now’s the time to revisit your portfolio numbers.
With rates stabilising and lenders competing again, the window to act is widening.
Next Steps
Want to know how much more you could borrow under current stress-test rules?
👉 Book a free portfolio review with our team — we’ll calculate your ICR, explore top-slicing options, and help you identify the most efficient structure.
Manchester Independent Mortgages Ltd is authorised and regulated by the Financial Conduct Authority (FCA 431647).
The information above is for guidance only and does not constitute personal advice.Your home may be repossessed if you do not keep up repayments on your mortgage.