In the first quarter of 2016, HMOs returned the highest yields for landlords than any other area of the buy-to-let sector, prompting calls from Shawbrook Bank for further guidance in the market.
Calls for clarity in the area have been backed by Richard Sexton, director of business development at e.surv Chartered Surveyors.
“As lender appetite to increase new business grows, many are looking at what would previously be considered niche areas to do so – for some, HMOs are one of these niches”, said Sexton.
“The default position for most lenders is that they will not consider HMOs for lending purposes, but there is a degree of variation in how to identify a HMO and some lenders ask valuers to consider whether a property ‘could be’ a HMO, not its current status.
“There is certainly scope for a standardised approach in this area to assist valuers in reporting correctly – something perhaps the CML (Council of Mortgage Lenders) and RICS (Royal Institution of Chartered Surveyors) could consider jointly.”
The CML said the HMO market is difficult to standardise because there are so many variations in the properties assessed for this purpose, but said it would be ready to work with the RICS on any issues in the area affecting lenders.
“Lending to HMOs is a niche part of the buy-to-let market, and those lenders who operate in this area will oversee their own standards for valuation”, said a CML spokesperson.”