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CML hits back at long-term lending allegations

by: Carmen Reichman
  • 19/01/2017
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CML hits back at long-term lending allegations
The Council of Mortgage Lenders (CML) has hit back at allegations made in the House of Commons that it acted as a “stumbling block” to longer tenancies.

The association vehemently opposed comments made by Conservative MP for Colchester, Will Quince, in a debate on the Homelessness Reduction Bill in December, who said CML had sought to prevent longer tenancies to help lenders recover losses in case of landlord defaults.

In a blog post on its website the CML said: “We are not opposed to longer tenancy agreements and, although it is for individual firms to determine their own lending policies, an increasing number of lenders are now willing to offer mortgages to landlords who want to provide extended tenancies.”

In contrast, the CML said, since the financial crisis lenders had continued to make funding more readily available for housing in all tenures, particularly to landlords wanting to offer longer tenancies in the private rented sector.

CML wrote a letter to MPs explaining lenders did not require a landlord to change their tenant when a tenancy agreement comes to an end. Therefore, in practice, lenders’ terms did not preclude tenants from occupying a rental property for many years.

More lenders offering finance

Quince had told MPs on 14 December: “I am a former property lawyer, and I know the Minister also has considerable experience in this field. He will know that 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 CML pointed to research carried out by homeless charity Shelter, which last year published a list of lenders prepared to lend to landlords offering longer tenancies. These included Aldermore, Barclays, Leeds Building Society and The Mortgage Works.

Lenders responsible for more than half of England’s buy-to-let loan book allowed landlords to offer contracts of at least 24 months, with most permitting up to three years, the charity found, while some had no maximum tenancy period at all.

Shelter said: “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 that wants one should be able to ask their landlord for one with the confidence that mortgage conditions aren’t going to be as barrier.”

In its own research, the CML found more than a third of landlords were prepared to offer leases of more than 12 months on at least some of their properties but found demand from tenants was weak.

Agent bias

The CML pointed out the real problem with short-term bias may lie elsewhere; almost half of landlords used agents to find their tenants, CML’s research found.

It may be in the interest of agents to encourage shorter leases with more frequent renewals, it suggested. “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,” the CML said.

It concluded: “The assertion that lenders are a barrier to longer tenancies is a myth. While it is for individual firms to determine their lending policies, our own survey and the list of lenders published by Shelter show 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.”

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