In the last few years, more homeowners have taken out landlord insurance and become first-time landlords because they have been unable to sell their property in a depressed market. However, an increasing number of accidental landlords are being hit with higher mortgage costs because their lender is making it difficult to let out their homes temporarily.
Figures from the Association of Residential Lettings Agents (ARLA) show that between January and April, 40% of their members have reported an increase in the number of rental properties coming on to the market because the owners cannot find a buyer. While most banks and building societies allow people to let out properties on a short-term basis, some lenders’ terms and conditions have become stricter since the economic downturn started and many now charge higher rates and fees, with some lenders refusing consent altogether. Some banks and building societies are also getting strict on borrowers who have rented out their property without seeking permission. During 2011 both Clydesdale Bank and Lloyds Banking Group wrote to hundreds of customers who they suspected were letting their homes. The letters warned them that they were in breach of their mortgage terms.
Nationwide will allow borrowers to rent out their home for six months without charge, but when the letting period is longer, there is a £30 fee along with an extra 1.5% of mortgage interest. Customers who agree to this can then rent their home for up to three years. Previously, Nationwide did not make any extra charges for letting out a property. Clydesdale Bank will not give consent unless the customer is in the armed forces.
Other lenders are reluctant to give consent. A spokesman for ING Direct said: “Letting is not something the bank encourages, although it will allow it in certain circumstances – such as a sudden job move or overseas posting. In these cases, a borrower can stay on the existing mortgage rate and there are no additional charges.”