Lenders are being called upon by landlords to support longer term tenancies, following a refute from the Council of Mortgage Lenders regarding political criticism over tenancy length.
In December, Conservative MP and former property lawyer Will Quince had argued that the CML contributed towards blocking tenancies of over a year long. He 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.’
This was supported by local government under-secretary of state Marcus Jones, who added: ‘That is one of the challenges for residential landlords, particularly buy-to-let landlords, who are restricted by the terms of a particular mortgage product they take.’
However, the CML fired back, claiming that housing charity Shelter had conducted research which found that lenders responsible for the majority England’s buy-to-let loan book had allowed landlords to offer tenancies of up to three years, whilst many offered no limit whatsoever. CML communication manager Bernard Clarke also asserted that the CML had been in contact with MPs from the debate in order to explain that many of its members are happy to provide finance for longer tenancies.
The CML commented: ‘Meanwhile, we have supported measures to make longer tenancies work more effectively. As Shelter has said, any landlord wanting to offer a longer tenancy should be able to find a suitable lender. And anyone renting should be able to ask their landlord for a longer term, confident that lending conditions aren’t going to be a barrier.;
CML communications manager Bernard Clarke says the CML has written to the MPs involved in the debate to explain that many of its members are happy to lend to landlords who want to offer longer tenancies.
However, National Landlords Association head of policy Chris Norris argues that CML members need to contribute more. He says: ‘The truth is somewhere in the middle. Five or six years ago it was a lot more restrictive and almost all lenders had a one-year limit on ASTs. In the past few years, partly because of the efforts of the CML, these restrictions have been eased. Now most lenders set the maximum at 24 months, but they could go further.’
He continued: ‘You will have a lot of landlords still sitting on mortgages that were issued pre-credit crunch and have very low rates –such as lifetime trackers at 1 or 1.5 percentage points above base rate. They won’t give those up easily. Most lenders would love to see landlords move off those preferential rates.’