A significant, silent shift has taken place in the buy-to-let mortgage market. It’s one that both lenders and the government deserve some credit for and it should make it easier for tenants to ask for a longer term tenancy like our Stable Rental Contract.
For a few years, restrictions in the T&Cs of buy-to-let loans have been pointed to as one of the big barriers to increasing the availability of longer, family friendly tenancies.
Until recently, most buy-to-let lenders required a standard Assured Shorthold Tenancy of 6 or 12 months. If a landlord offered longer contracts they would have been breaching the conditions of their mortgage.
With the majority (50-55%) of landlords relying on a mortgage, for many families who had to privately rent the prospect of getting a longer tenancy was a non-starter.
But all of that has now changed. The Council of Mortgage Lenders recently surveyed their members and have confirmed to us that lenders responsible for more than half of England’s buy-to-let loan book now allow contracts of at least 24 months. Most of these allow for up to three years; some have no maximum tenancy period at all.
This is a non-exhaustive list of lenders that the Council of Mortgage Lenders shared with us: [1]
- Aldermore
- Barclays
- Cambridge Building Society
- Darlington
- Leeds Building Society
- Lloyds Banking Group
- Landbay
- The Mortgage Works (Nationwide)
- OneSavings Bank (including Kent Reliance)
- Paragon
- Precise Mortgages
- Shawbrook
- Yorkshire Building Society (planning to introduce later in the year)
So any landlord that wants to offer a longer tenancy should now be in a position to find a lender that will let them. And any renter who wants one should be able to ask their landlord for one with the confidence that mortgage conditions aren’t going to be a barrier.
Which is all good news. How did it happen?
Well, this is a good news story with three essential elements: a trailblazer, government pressure and a body of lenders willing to act responsively.
First: the trailblazer. In 2013, The Mortgage Works, the buy-to-let arm of Nationwide – who for full-disclosure are one of our long-term partners – responded to our calls for mortgage lenders to remove restrictions on longer tenancies and actively started promoting longer tenancies. It was something of a leap into the dark, because it was not usual practice at the time. They deserve credit for doing it.
Second: government pressure. The last government started promoting family friendly tenancies after recognising that there is an increasing need for longer tenancies now that a quarter of all families with children live in a private rented home. They put together a model tenancy agreement suitable for longer tenancies and set to work behind the scenes to put pressure on lenders to change their T&Cs.
Third: responsive lenders. Despite the government pressure, lenders were well within their rights to ignore it. It’s a testament to them that they responded to the arguments when presented with them.
Of course, just because a major barrier has been removed, far more work is needed to increase the number of individual landlords actually offering longer term tenancies. The only way to make sure that all tenants are given much more stability and security in their home is to change the law, like they have recently in Scotland.
But that doesn’t change the fact that this small but significant step is good news – and deserves to be celebrated.
UPDATE: This article was updated on 11/08/2016 to reflect the fact that Leeds Building Society changed the terms & conditions of its buy-to-let mortgage to allow for indefinite tenancies.
[1] Not all lenders responded to the survey and at the time of writing others were reviewing their terms, so a lender not appearing on the list doesn’t mean they proscribe longer tenancies in the T&Cs