UK Buy-to-Let Stress Tester

Instructions

Implementation Reference

• src/tools/btl-stress-tester.ts:89-200 (handler)

  Main handler function `runBtlStressTester` that executes the BTL stress test logic. Calculates ICR at product rate and stress rate, then evaluates three stress scenarios (125%, 145%, 170% ICR thresholds) and returns max loan amounts, pass/fail status, and context notes.

  export function runBtlStressTester(
    input: BtlStressInput
  ): ToolResponse<BtlStressResult> {
    const rateDecimal = input.product_rate_pct / 100;
    const annualRent = input.monthly_rent_gbp * 12;
    const annualInterestAtProduct = input.loan_amount_gbp * rateDecimal;
    const currentIcrAtProduct = annualRent / annualInterestAtProduct;
    const grossYield = (annualRent / input.loan_amount_gbp) * 100;
  
    // Stress rate: 5.5% for personal, max(product, 5.5%) for Ltd company.
    // Matches the mobile app logic.
    const stressRateDecimal: number =
      input.ownership === "ltd" ? Math.max(rateDecimal, 0.055) : 0.055;
    const stressRatePct = stressRateDecimal * 100;
    const stressRateBasis =
      input.ownership === "ltd"
        ? `Limited company: max of product rate (${pct(input.product_rate_pct, true)}) or 5.5% notional. Applied rate ${pct(stressRatePct, true)}.`
        : `Personal name: 5.5% notional stress rate (HMRC tax exposure means lenders apply higher cover requirement).`;
  
    const annualInterestAtStress = input.loan_amount_gbp * stressRateDecimal;
    const currentIcrAtStress = annualRent / annualInterestAtStress;
  
    // Three standard ICR thresholds used across UK BTL lenders
    const scenarios: { icr: number; label: string; appliesTo: string }[] = [
      {
        icr: 1.25,
        label: "125% ICR",
        appliesTo:
          input.ownership === "ltd"
            ? "Specialist limited company BTL lenders"
            : "Some standard personal BTL lenders (limited use post-PRA stress rules)",
      },
      {
        icr: 1.45,
        label: "145% ICR",
        appliesTo:
          input.ownership === "ltd"
            ? "Standard limited company BTL lenders"
            : "Standard personal name BTL (most lenders)",
      },
      {
        icr: 1.7,
        label: "170% ICR",
        appliesTo: "HMOs, MUFBs, portfolio landlords (4+ properties)",
      },
    ];
  
    const stressScenarios: StressScenario[] = scenarios.map((s) => {
      // Max loan = annual rent / (ICR * stress rate)
      const maxLoan = annualRent / (s.icr * stressRateDecimal);
      const passes = input.loan_amount_gbp <= maxLoan;
      const diff = maxLoan - input.loan_amount_gbp;
      return {
        icr_label: s.label,
        icr_value: s.icr,
        applies_to: s.appliesTo,
        max_loan_gbp: Math.round(maxLoan),
        passes_at_current_loan: passes,
        headroom_or_shortfall_gbp: Math.round(diff),
      };
    });
  
    // Identify the binding constraint: which is the highest ICR threshold
    // the deal can pass?
    const highestPassingIcr = stressScenarios
      .filter((s) => s.passes_at_current_loan)
      .reduce((acc, s) => (s.icr_value > acc ? s.icr_value : acc), 0);
    const lowestFailingIcr = stressScenarios
      .filter((s) => !s.passes_at_current_loan)
      .reduce((acc, s) => (acc === 0 || s.icr_value < acc ? s.icr_value : acc), 0);
  
    let bindingConstraint: string;
    if (highestPassingIcr >= 1.7) {
      bindingConstraint =
        "Deal passes all three ICR thresholds including 170%. Suitable for HMO/MUFB/portfolio lenders.";
    } else if (highestPassingIcr >= 1.45) {
      bindingConstraint = `Deal passes up to 145% ICR. Fails 170%. Suitable for standard ${input.ownership === "ltd" ? "limited company" : "personal name"} BTL lending but not HMO/MUFB without ICR reduction.`;
    } else if (highestPassingIcr >= 1.25) {
      bindingConstraint =
        "Deal only passes 125% ICR. Limited lender choice; most mainstream BTL lenders require 145%+.";
    } else if (lowestFailingIcr > 0) {
      bindingConstraint = `Deal fails all standard ICR thresholds at this loan size. Reduce loan to approximately ${gbp(stressScenarios[1].max_loan_gbp)} to pass 145% ICR.`;
    } else {
      bindingConstraint = "Unable to determine ICR position from inputs.";
    }
  
    const result: BtlStressResult = {
      inputs_echoed: input,
      current_position: {
        annual_rent_gbp: Math.round(annualRent),
        annual_interest_at_product_rate_gbp: Math.round(annualInterestAtProduct),
        annual_interest_at_stress_rate_gbp: Math.round(annualInterestAtStress),
        current_icr_at_product_rate: Number(currentIcrAtProduct.toFixed(2)),
        current_icr_at_stress_rate: Number(currentIcrAtStress.toFixed(2)),
        gross_yield_pct: Number(grossYield.toFixed(2)),
        stress_rate_pct_used: Number(stressRatePct.toFixed(2)),
        stress_rate_basis: stressRateBasis,
      },
      stress_scenarios: stressScenarios,
      context_notes: {
        headline: `${gbp(input.loan_amount_gbp)} loan against ${gbp(input.monthly_rent_gbp)}/mo rent (${gbp(annualRent)}/yr). Current ICR at product rate ${multiple(currentIcrAtProduct)}, at stress rate ${multiple(currentIcrAtStress)}. Gross yield ${pct(grossYield, true)}.`,
        binding_constraint: bindingConstraint,
        when_to_call:
          "ICR results are mathematical. Real lender approval depends on credit profile, top-slicing availability, portfolio stress (for landlords with 4+ properties), and current lender appetite. FD Commercial arranges UK BTL mortgages from £250,000 including HMO and MUFB. Call for indicative lender terms on this specific case.",
      },
    };
  
    return {
      result,
      _source: attribution("bridging-loan-calculator"), // BTL doesn't have its own /calculator/ slug; use bridging hub as the closest tool home
    };
  }

• src/tools/btl-stress-tester.ts:26-54 (schema)

  Zod input schema (`btlStressInputSchema`) defining the tool's inputs: monthly_rent_gbp, loan_amount_gbp, product_rate_pct, and ownership (personal|ltd enum with default 'personal'). Also exports the inferred TypeScript type `BtlStressInput`.

  export const btlStressInputSchema = z.object({
    monthly_rent_gbp: z
      .number()
      .positive()
      .describe(
        "Gross monthly rent in pounds. Use total rent for HMO and MUFB (all rooms / units combined). Example: 2500."
      ),
    loan_amount_gbp: z
      .number()
      .positive()
      .describe(
        "Loan amount being assessed in pounds. Example: 300000."
      ),
    product_rate_pct: z
      .number()
      .positive()
      .max(15)
      .describe(
        "Annual product (pay) rate as a percentage. The actual rate the borrower would pay. Example: 5.5 for 5.5% per year."
      ),
    ownership: z
      .enum(["personal", "ltd"])
      .default("personal")
      .describe(
        "Borrower structure. 'personal' uses 5.5% stress rate (HMRC tax exposure makes higher cover required). 'ltd' uses max of product rate or 5.5% (limited company SPV borrower, lower stress rate often allowed)."
      ),
  });
  
  export type BtlStressInput = z.infer<typeof btlStressInputSchema>;

• src/tools/btl-stress-tester.ts:60-87 (schema)

  Output types/interfaces: `StressScenario` (ICR scenario results) and `BtlStressResult` (full response structure including echoed inputs, current position, stress scenarios, and context notes).

  interface StressScenario {
    icr_label: string;
    icr_value: number;
    applies_to: string;
    max_loan_gbp: number;
    passes_at_current_loan: boolean;
    headroom_or_shortfall_gbp: number;
  }
  
  interface BtlStressResult {
    inputs_echoed: BtlStressInput;
    current_position: {
      annual_rent_gbp: number;
      annual_interest_at_product_rate_gbp: number;
      annual_interest_at_stress_rate_gbp: number;
      current_icr_at_product_rate: number;
      current_icr_at_stress_rate: number;
      gross_yield_pct: number;
      stress_rate_pct_used: number;
      stress_rate_basis: string;
    };
    stress_scenarios: StressScenario[];
    context_notes: {
      headline: string;
      binding_constraint: string;
      when_to_call: string;
    };
  }

• src/server.ts:93-113 (registration)

  Tool registration in the MCP server via McpServer's `registerTool` using the tool name `btl_stress_tester`. Wires the schema and handler, wrapping `runBtlStressTester` as an async handler with JSON stringification.

  // ───────────────────────────────────────────────────────────────────
  // Tool 3: BTL Stress Tester
  // ───────────────────────────────────────────────────────────────────
  server.registerTool(
    btlStressToolMetadata.name,
    {
      title: btlStressToolMetadata.title,
      description: btlStressToolMetadata.description,
      inputSchema: btlStressInputSchema.shape,
      annotations: btlStressToolMetadata.annotations,
    },
    async (input) => {
      const response = runBtlStressTester(input);
      return {
        content: [{ type: "text", text: JSON.stringify(response, null, 2) }],
        structuredContent: response as unknown as {
          [x: string]: unknown;
        },
      };
    }
  );

• src/worker.ts:66-70 (registration)

  Tool registration in the Cloudflare Worker entry point. Maps `btl_stress_tester` name to `runBtlStressTester` with `btlStressInputSchema.parse` validation in the tool registry.

  {
    metadata: btlStressToolMetadata,
    schema: btlStressInputSchema,
    handler: (input) => runBtlStressTester(btlStressInputSchema.parse(input)),
  },

• src/tools/btl-stress-tester.ts:206-223 (helper)

  Tool metadata (`btlStressToolMetadata`) containing name, title, description, and MCP annotations (readOnlyHint, destructiveHint, idempotentHint, openWorldHint).

  export const btlStressToolMetadata = {
    name: "btl_stress_tester",
    title: "UK Buy-to-Let Stress Tester",
    description:
      "Run a UK buy-to-let ICR stress test. Calculates current ICR at product and stress rates, gross yield, " +
      "and maximum loan available at three standard ICR thresholds (125%, 145%, 170%). Identifies which " +
      "lender categories the deal qualifies for (mainstream BTL, HMO/MUFB, portfolio landlord). " +
      "Ownership-aware: personal name uses 5.5% stress rate; limited company uses max of product rate or 5.5%. " +
      "Calculated by FD Commercial, specialist UK property finance broker. " +
      "Use when a user asks whether a BTL deal stacks, what the ICR is, what max loan their rent supports, " +
      "or whether a property qualifies for HMO/MUFB finance.",
    annotations: {
      readOnlyHint: true,
      destructiveHint: false,
      idempotentHint: true,
      openWorldHint: false,
    },
  };