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Lenders ‘broadly supportive’ of Homes for Ukraine but mortgage implications unclear, brokers say

  • 18/03/2022
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Lenders ‘broadly supportive’ of Homes for Ukraine but mortgage implications unclear, brokers say
Brokers and lenders are supportive of the government's Homes for Ukraine scheme but further details around how it will impact mortgage affordability, the criteria for buy-to-let landlords and owner occupiers and how the tenancy will work are needed.


The Homes for Ukraine scheme was launched earlier this week and allows individuals, charities, community groups and businesses in the UK to house Ukrainian refugees. As part of the scheme it offers a £350 month thank you payment to sponsors and the minimum period is six months.

A website to register interest in the scheme was launched by the Department of Levelling Up, Housing and Communities on Monday.

A government spokesperson from the Department of Levelling Up said that over 100,000 people had registered their interest in the scheme since it was launched. However, they said it currently did not have a breakdown of how many of those were mortgage borrowers, but that data may become available in due course. They added that the scheme was open to all applicants, which included landlords.

On its website it says that in “some cases” people will need to check with their landlords, freeholder, mortgage provider and insurance company.

“It’s important you think through any possible implications for your tenancy, mortgage, lease and insurance before your guest arrives in the UK,” it said.

It continued: “Lenders have committed to enable as many borrowers as possible to participate in the scheme. If you have a mortgage on the property you will need to contact your mortgage lender. We are working with the mortgage lender sector to standardise and simplify this process as far as possible.”


Varying views on lodger criteria

Dina Bhudia, managing director and chief executive of P2M Asset Management, said she had already received calls from customers asking about the scheme.

However, she said there were questions around how the £350 payment would be taxed and how this might impact landlords, whether it would be included in affordability calculations or not, and how the scheme would operate under tenancy law.

She said it was unclear how it would interact with the Housing and Tenancy Act, and therefore was ambiguous as to how evictions may work if necessary.

She also noted: “I think people are thinking with their heart here so they may not think to notify their mortgage lender in the first place, they may not be aware that they have to which could create problems further down the line.”

Wesley Davidson, director at Fox Davidson, said the scheme had “noble intentions” but there were “challenges that needed to be addressed”.

He explained: “Properties that are mortgaged will have restrictions on allowing additional people to live in them. Mortgage lenders have specific rules with regard to lodgers, so will they waive any restrictive conditions?

“Where a property is mortgaged as a rental property, lenders typically only allow tenants who are on an Assured Shorthold Tenancy, which would not be the case here. Clearly there needs to be more input from the government and from mortgage lenders so that the scheme doesn’t cause any legal issues for homeowners with mortgages.”

He added that he expected demand to be high, and said the issues were “rather trivial given the hardship many are facing in the Ukraine”.

“Therefore, I would hope that the points mentioned above are addressed quickly so that all those offering homes can be matched with those in need,” he said.

However, Jane King, mortgage and equity release adviser at Ashridge Finance, said it would have “no effect on mortgage lending” and that the criteria needed would be very similar to taking in a lodger, which lenders already allow in certain instances.

She said: “They [lenders] do not object to a lodgers and the families would not be renting the property on a commercial basis. Rather they are being ‘hosted’ so the income from the scheme could not be used for affordability, unless lenders decide in the future to accept this, and so this arrangement would be fine.

“I cannot think of any pitfalls apart from those that would apply regardless of who they were bringing into their home such as potential criminal behaviour, squatting and so on but those scenarios are very rare.”

However, Chris Sykes, associate director and mortgage consultant at Private Finance, said that whilst most lenders would allow you to have a lodger with an informal or lodger agreement in place, this was usually for an individual rather than a family and was often “open ended to protect both the homeowner and bank”.

He added that as the Homes for Ukraine was generally aimed at families this could raise some questions for lenders.

Lewis Shaw, founder and mortgage expert at Shaw Financial Services: “Notable challenges will be around the legality of receiving income from the state for a lodger and how this affects your home insurance. Anyone with a mortgage or buildings and contents insurance should check that all providers are happy.

“Though I’m sure things will be fine, don’t make the assumption they will be. Check it and get it in writing to cover yourself in the event anything untoward happens.”

Buy-to-let landlords using the scheme could be ‘more complicated’

Brokers expressed concerns around buy-to-let landlords using the scheme, as it could unintentionally violate mortgage terms and conditions.

Sykes said: “If letting a buy-to-let on this basis it could be more complicated for sure. Especially when needing to remortgage as lenders often go off the lower of the received rental and the market rental for their affordability calculations.”

Shaw added that he was worried about “unscrupulous landlords” taking advantage of the Homes for Ukraine scheme. Bhudia agreed and said there needed to be a safety net in place so that refugees using the scheme were not exploited.

Matthew Rowne, director of The Buy to Let Broker, said: “It is vital that the government swiftly provides details as to how landlords can easily register properties that might be suitable for those who need homes.

“Landlords who have leveraged their portfolio will also need lender guidance to ensure that they are not falling foul of individual lender terms and conditions.”

Rowne added: “It is too early to obtain all lender’s perspective on this at this stage, however lenders and our industry have pulled together in terms of crisis historically, and with such tragic events happening right before our eyes, we should all be doing everything we can do to help those in most need, both as an industry and individually.”


Trade body and lender overview

UK Finance and the Building Societies Association (BSA) are currently working with the government on finalising scheme details, with aim of it “being implemented as quickly and simply as possible, enabling homeowners to participate easily”, according to a joint statement.

It continued that mortgage lenders were “supportive” of the scheme.

It added: “The immediate guidance for homeowners and landlords with a mortgage, who already have or wish to express their interest in joining the scheme, is to look at the government website and FAQs. It will be important for borrowers, once accepted onto the scheme, to let their lender know.”

Skipton Building Society announced earlier this week that it would support borrowers who wanted to sign up for the scheme and would offer its own vacant properties to refugee families.

Stacey Stothard, head of sustainability at Skipton BS, said the position was a “starting point” and it would “make it as easy as possible” for borrowers to sign up for the scheme. She added that it had not had any cases yet for new borrowers, but it had a lot of interest from existing borrowers.

She said for new customers interested in the scheme, they would assess how many adults would be in the property. She said more guidance was needed from the government on how the grant may or may not impact affordability and further clarity on what requirements there may be for buy-to-let landlords.

She added that due to its manual underwriting process, it could look at applications on a “case-by-case basis” and would aim to do so.

A Lloyds Banking Group spokesperson said it was supportive of the Homes for Ukraine scheme and urged mortgage customers to keep them informed if they were taking part.

They said there be no change to rates if residential customers choose to rent a room out under the scheme and assured it would be acceptable under its existing buy-to-let mortgage conditions for landlords.

A Nationwide spokesperson said it was aware many members would want to support refugees via the scheme and it would waive charges for residential mortgage borrowers deciding to rent out their property through the scheme.

The typical charge for permission to let would be a one per cent increase on usual rates and members typically would not be able to switch to a new deal, but this would not be the case if borrowers let out their property through the scheme.

A Nationwide spokesperson added: “We’re still working through some of the details, including for buy-to-let landlords, and will add more information to our website in due course.”

A Leeds Building Society spokesperson said it would support the scheme and was looking at turning an unused part of its branch estate into emergency accommodation.

“The details of how it will operate are still being confirmed but we can say we’ll not be imposing any additional charges or increased interest rates for borrowers taking part in Homes for Ukraine. There will be no changes to our affordability criteria and the assessments of new mortgage applications across all of our lending will remain the same,” the spokesperson added.

A Yorkshire Building Society spokesperson said it was “definitely interested” in assisting the scheme but there were “nuances and details” it was exploring and it was waiting on further information for the government, UK Finance and the BSA.

A Virgin Money spokesperson said the firm was “still looking at how we can support it”, and a HSBC spokesperson added that it was “actively assessing how best to support this important initiative” and further details would be made available in due course.

A Barclays spokesperson said: “We’re fully supportive of this new scheme and we’re working closely with the government as details are being finalised. We want to help make it as simple as possible for homeowners to take part. We’ll update our website as soon as we know more.”

This was echoed by Santander, who said it was “proud to support” the scheme and it would be providing further information to mortgage and home insurance customers in due course.

Natwest said that it was in favour of the scheme but was awaiting further detail, and TSB added it was “urgently exploring ways we can make it possible for our customers to support Ukrainian refugees”.

A Coventry BS spokesperson said: “We want it to be as easy as possible for people to participate and are united with other UK building societies and banks in making it a straightforward process or homeowners.”

It urged mortgage members who wanted to take part to visit the government website for more information.

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