Interest Coverage Ratio (ICR)

Definition

ICR stands for Interest Coverage Ratio. In buy-to-let affordability testing, it’s a coverage percentage applied to stressed interest.

The basic idea

Lenders often:

1. calculate interest-only interest at a stress rate
2. multiply it by an ICR percentage
3. require rent to meet or exceed that number

Why it matters

ICR can be the binding constraint that determines how much you can borrow, even if you have a large deposit.

Practical tip

Model conservative assumptions rather than a single “best case” number, because lender criteria can vary and change over time.