Lenders threaten to call in loans after HMO shake-up

Buy to let mortgage brokers have revealed lenders are threatening to call in loans against private rented homes that have recently been dragged in to an HMO licensing net.

When shared house rules changed on 1 October, landlords had to licence around 170,000 properties in England and Wales which were redesignated as houses in multiple occupation from standard buy to lets.

David Whittaker, chief executive of buy to let and HMO lender Keystone Property Finance, explained that some banks and building societies have written to some landlords already, demanding they convert their properties to a single buy to let tenancy or repay the borrowings.

The move was also confirmed by Adrian Moloney, sales director for buy to let lender OneSavings Bank.

The letters say lenders would not have agreed the loans if the rented homes needed an HMO licence at the time the mortgage application was filed and that to continue letting them as HMOs breaches the terms and conditions of the loan.

“Landlords are punch-drunk from the regulatory changes of the last few years,” said Whittaker.

“This is the law of unintended consequences in full effect and you would expect some common sense from lenders. Lenders should say that, as long as there are no changes to the property or that the landlord doesn’t want a further advance, that they can keep the loan.”

Whittaker is also urging mortgage advisers to offer more help to landlords who may be struggling to remortgage after receiving a letter from their current lender.

“Next year on the 23 January 2019 when landlords file their tax returns, it will be the first year of a four-year wake-up call,” he said.

“This is when they will need you; you have to help your landlords to the other side.”

Whittaker and Moloney were speaking at the recent Financial Services Expo in Coventry.

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