Mortgage lenders under fire

An article published by the Guardian this morning criticized some buy-to-let mortgage lenders for worsening the conditions of the UK’s housing crisis. It claimed that some lenders refuse to allow landlords to let to social tenants or those requiring housing support, considering them to be a risk factor too far. Where do landlords stand on this issue?

Explicit Difficulties

If you’re someone who has considered, or is currently, letting to tenants who receive housing benefits then it is worth making sure your lending contract does not contain a clause which prevents you from doing this. However, all lenders should have made this condition explicitly clear when the contract was taken out and you may wish to contact the Financial Services Authority (FSA) or your landlord insurance provider if you think you’re affected.

Costs of Lending

It is true that the mortgage lender bears some risk of the let failing and social tenants do impact upon that risk. However, by refusing to let to social landlords at all, this does impact upon the way risk is spread in the market. As choice for social landlords becomes restricted, prices can be driven upwards which makes letting to social tenants considerably harder. For landlords that can see a profit in social letting, it’s certainly being affected by this kind of lending practice.

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Government Intervention

At least one of the banks named by the Guardian was part owned by the taxpayer and this will only put pressure on lenders to make their conditions much clearer and to start promoting flows of capital into social housing. For a government which is faced with ever growing housing problems, this sort of news isn’t good news and we could well see the government making their presence felt in the lending market.

This news only has a limited effect on a few landlords, but it is of general interest of those who were thinking of moving into social letting. This is a story worth watching, particularly if you are involved, and if you have any questions about lending, you should speak to your bank or the Financial Services Authority.

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