Lenders fail to get to grips with Airbnb

Mortgage providers are still failing to get to grips with Airbnb despite the rising popularity of the holiday let site.

Mortgage Strategy last year investigated lender attitudes to the growing trend of homeowners renting out their homes and following our latest investigation, we find there has been little change since then.

House and Holiday Home Mortgages director Mark Stallard says: “Airbnb is growing in popularity. But it is not a concept that fits comfortably with most UK residential lenders as many deem it too commercial.”

The majority of lenders still refuse to allow homeowners to let their home on a short-term basis. Of 14 providers contacted, most say they will ‘not allow any subletting of a residential property.’

Some lenders take a particularly tough stance, with one saying: “We want nothing to do with Airbnb.” 

Another says: “[We] do not like Airbnb in any capacity”. Another adds: “We won’t touch properties linked with Airbnb”.

Another provider says it is “uncomfortable” with Airbnb lets and will not accept applications from borrowers looking to use the site.

Lenders are concerned that bookings under the website mean many people could have access to the property. It’s deemed to be a riskier arrangement than a formal long-term letting to one person.

Others say any letting is classed as commercial use of the property and therefore not eligible under a residential mortgage.

Another lender says that, because of this, it would allow Airbnb rentals on a holiday let property.

But lenders seem more relaxed when a homeowner is letting a single room rather than the entire property. One says: “We allow lodgers and we would effectively treat this scenario under the same category.”

Another says it allows one tenant under the Government’s rent a room scheme. But for renting the entire property, the same lender says a formal tenancy agreement needs to be in place.

Opportunities available

But there are options available to homeowners looking to rent their property.

Metro Bank last year revealed it would allow customers to rent their home for up to 90 days a year through AirBnb with no pre-approval. The bank says it has received positive feedback from borrowers on its stance and will continue to ‘eliminate more stupid bank rules’.

Metro Bank chief commercial officer Paul Riseborough says: “Allowing customers to rent out their property on Airbnb and similar sites without asking permission is common sense. Life is busy enough and we want to make things simple and straightforward for our customers.”

London & Country director David Hollingworth says there are other lenders which are flexible too. Nationwide, for example, may allow borrowers to rent up to two rooms in their home for on a bed and breakfast type arrangement. Other lenders may be comfortable with a long-term lodger, where the homeowner remains resident in the property.

He adds: “Where there is likely to be more consternation is where the homeowner wants to let the whole property out while they are away.”

Lender consent

Most lenders will expect the homeowners to seek consent for any rental of their home. But that isn’t practical where there are a number of very short-term lets, which might be at short notice.

Hollingworth says: “Homeowners increasingly want to use Airbnb to let their home on an occasional basis. Recognising this, some lenders have adapted criteria to allow it.”

As well as Metro Bank, Market Harborough Building Society can accommodate owners using Airbnb up to 24 weeks a year.  

Stallard adds: “Borrowers considering letting a room or property must check with their lender first. They should also check with their buildings and contents insurer. What could be seen as lucrative extra earner could prove a costly error.”

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