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The Council of Mortgage Lenders (CML) has hit back at claims that it is a “stumbling block” to longer tenancies in the rental sector.
Speaking during a debate on the homelessness reduction bill in 2016, Conservative MP Will Quince said: “The stumbling block here is in fact the Council of Mortgage Lenders and insurers, which say that a tenancy of more than one year is not permissible in case the mortgage holder defaults and they need therefore to sell the property as quickly as possible to recover their losses.
“It is actually those two different groups that prohibit leases or assured shorthold tenancies of more than one year.”
But the trade body has written to MPs to highlight research showing more than a third of landlords are now prepared to offer leases of more than 12 months on at least some of their properties.
The CML said it was a myth that lenders are a barrier to longer tenancies, adding: “While it is for individual firms to determine their lending policies, our own survey shows that there is a significant number of lenders that are prepared to advance mortgages to landlords who want to offer tenancies for two or three years – or even longer.”
A statement from the CML did however suggest agents may have to take some blame, based on findings of a recent landlord survey.
The CML said: “The survey found that landlords without mortgages were a little more likely to offer longer tenancies than those whose properties were funded with a buy-to-let loan. Among those not offering longer leases, most landlords said there was no demand for them.
“The report also pointed out that almost half of landlords use agents to find their tenants, and that it may be in the interest of agents to encourage shorter leases with more frequent renewals.
“It is possible that landlords’ perceptions of whether longer leases are offered – and of tenant demand for them – may be affected by the way some lettings agents operate.”
Not sure the CML has got this right- it’s easy to blame agents as usual! The length of tenancy often depends upon the requirements of the applicant. There aren’t vast numbers of applicants who want long tenancies- in fact the majority want no more than 12 months to allow some flexibility, particularly if they have an eye towards owning or are renting for the first time.
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In my limited private portfolio BTL experience none of our tenants have ever wanted more than 12 months. Quite the opposite in fact – maybe 10% actually would like 6 months, or a break clause <12 months. This is to give them flexibility in case of job or other personal changes, and they don’t want to be tied in for a long period. Our policy is 12 months AST minimum (for admin economy) but we always ask if they would like longer – subject to Lender appro. We don’t use agents btw.
This is yet another instance of naive market interference by the State. In a Free Market, Mortgage Companies can set their own terms and compete. If they are forced to change, we can predict what will happen to interest rates, thus rents, thus worsen affordability for tenants. Just like a Fees Ban will.
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