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Lenders tighten ‘consent-to-let’ rules

Mortgage lenders are making it more difficult for borrowers moving home to keep an existing property and let it out. Many are charging higher rates and fees, with some lenders refusing their consent at all, brokers warn.

Consent-to-let differs from buy-to-let as it is used by borrowers who want to rent out their property on a short-term basis only.

Mortgage brokers have reported a recent increase in enquiries about consent-to-let as many borrowers who want to move home do not want, or cannot afford, to sell while property prices are depressed. It is also used by borrowers who are posted overseas for work or for those who want to go travelling for a short period of time but do not want to sell their home.

“Lenders rarely had an issue granting consent-to-let – as long as mortgage payments had been kept up to date – usually charging an admin fee of around £100,” said Nigel Bedford of largemortgageloans.com.

But lenders have started to insist that borrowers attend interviews, pay a higher interest rate or fee, or move on to a buy-to-let mortgage deal, he explained.

Intelligent Finance char-ges its borrowers a consensual lease fee of 0.5 per cent of the outstanding mortgage every six months.

Bedford said this was a “significant” extra cost for borrowers, which could be large enough to prevent them from getting a new mortgage to buy the new property they want. Most mortgage lenders used to allow borrowers to stay on their existing mortgage deals and pay the same interest rate.