ASEW · Assessment of Mortgage Advice Knowledge
Specialist-lending cases test whether you can classify the loan before you advise on it. Is it a regulated mortgage contract, consumer buy-to-let, or an unregulated business loan? That one decision tells you which rules apply. Then come the numbers: rental cover at a stressed rate, SDLT at the higher rates, the Section 24 tax credit, rolled-up bridging interest, stage releases and loan-to-value. Expect letting-law points that changed recently: the Renters’ Rights Act 2025 from 1 May 2026 and the EPC band E minimum. Most wrong answers use an old figure (the 3% surcharge, section 21) or apply MCOB to a loan it does not cover.
10 min read6 sections
Checked against: Walbrook (formerly LIBF) CeMAP specification v14, ASEW LO2 (AC2.1-2.7) and LO4 (AC4.4-4.5); Regulated Activities Order arts 61 and 61A; Mortgage Credit Directive Order 2015 art 4, art 26 and Sch 2; PRA SS13/16; MCOB 11.6.41R-11.6.58R; gov.uk SDLT, CGT, Section 24, MEES, VAT self-build and Renters' Rights Act guidance; checked 11 Oct 2026. Independent prep, not endorsed by Walbrook (formerly LIBF).
A loan to an individual, secured on land of which at least 40% is used or intended to be used as a dwelling, meets the basic test for a regulated mortgage contract (Regulated Activities Order art 61(3)(a)). Two exclusions in art 61A then take most buy-to-let out of MCOB. An investment property loan is one where less than 40% is occupied by the borrower or a related person and the loan is for business. An exempt consumer buy-to-let contract is governed by the Mortgage Credit Directive Order 2015 instead of MCOB.
| Client situation | Classification | Rules that apply |
|---|---|---|
| Buys a flat to let to strangers, never lives there | Business buy-to-let (investment property loan) | Outside MCOB; lender’s own criteria and PRA SS13/16 |
| Lets a former home after moving, owns no other let property | Consumer buy-to-let | MCD Order 2015: creditworthiness check, Ombudsman access |
| Lets to a brother, parent or child | Regulated mortgage contract | MCOB in full, including MCOB 11.6 affordability |
| Second home used by the borrowers themselves | Regulated mortgage contract | MCOB in full |
| Bridging to buy a house to refurbish and let | Unregulated business bridging |
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| Lender’s criteria; credible exit expected |
| Bridging to buy a home for the borrower or a parent | Regulated bridging | MCOB 11.6, including 11.6.53E-11.6.55R |
The business presumption in MCD Order art 4(4) treats a borrower as acting for business if they bought to let without ever occupying, or own other let or buy-to-let mortgaged property. So an accidental landlord who already owns another buy-to-let is a business borrower.
Trap: Calling every buy-to-let loan unregulated. A family let is a regulated mortgage contract, and an accidental landlord is usually consumer buy-to-let.
Takeaway: Ask who will live there, whether they are related, and whether the borrower is in business. Then pick MCOB, the MCD Order or neither.
The PRA expects buy-to-let lenders to test whether rent covers interest at a stressed rate (the interest coverage ratio, ICR), or to add personal income in an income affordability test (PRA SS13/16 paras 2.1-2.8). For a fix under five years, lenders consider rates over five years with at least a 2 percentage-point rise; in every case they assume at least 5.5% (paras 2.13-2.14). The industry minimum ICR is 125%, and lenders often ask higher-rate taxpayers for more because Section 24 leaves them less of each pound of rent (paras 2.6-2.7).
Worked example: rent £1,150 a month, 145% cover at 5.5%. £13,800 ÷ 1.45 ÷ 0.055 = maximum loan £173,040. Cap it again by the lender’s maximum LTV and use the lower figure.
Trap: Using the pay rate instead of the stressed rate, or treating 145% as a PRA rule. The PRA sets 5.5% and the 2-point rise; the cover ratio is the lender’s choice.
Takeaway: Maximum loan equals annual rent divided by the cover ratio, then by the stress rate. Take the lower of that and the LTV limit.
