The problem with buy-to-let
Samantha Cordon is a reporter for Mortgage Introducer
Are buy-to-let lenders supporting the growing trend towards long-term renting?
It would seem they do not – given the number of lenders which restrict tenancies to a maximum of 12 months.
We all know that that the barrier to most people getting onto the property ladder is the huge deposit required to secure a home but industry experts are now telling us there is an emerging trend of people choosing to rent rather than having to.
But this new demographic, who are looking to settle down in rented accommodation for the medium to long-term, don’t have the security of a tenancy agreement greater than 12 months to give them the peace of mind that they will not be booted out at the end of the term.
Or, more likely, that the landlord will not hike up the rent as soon as the tenancy is up for renewal.
This common restriction states the maximum term for a tenancy is 12 months and it is obvious why this is included in the lender’s small print.
If a tenant stops paying it may affect an amateur landlord’s ability to continue paying the mortgage.
The eviction process, so I am told by several letting agents, is long and drawn out so waiting until the tenancy expires is an easier option to getting the tenant out particularly if there are only a few months left to run.
Not so easy if the tenant is on a more uncommon two or three year agreement.
But where does that leave renters? Academics talk of the importance of changing the British public’s attitudes towards tenure and they want us all to get over this “Englishman’s home is his castle” mind set.
But what would induce a family with children in school age to settle down in a rented home if every 12 months they face the nail biting news that there tenancy would not be renewed or their rent is going up?
Just because the rental market is booming and there are six tenants for every rental property it does not follow that landlords should squeeze tenants at the first available opportunity. Was it not greed that got us into this mess in the first place?
While it is unlikely that a landlord would refuse to a renew a tenancy for good tenants the fact remains that there is still uncertainty in the mind of the tenant.
So I am left with a lot of questions. Does the buy-to-let lending market intend to change its policies to accommodate the so called continental movement of long term renters? And what’s to stop a landlord issuing a new tenancy agreement, after the initial AST has expired, for five years without telling the lender?
If landlords and lenders are prepared to take the risk on a longer tenancy, which frankly as former underwriter I feel is fairly risky, then I think the government should support them by doing something about the eviction process. If the tenant refuses to pay then why should then everyone tip toe around them?
So what is the solution?
Perhaps less academic discussion on how the housing market is changing and more action from those involved in the housing market to actually make the change.