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HMO lending options open up due to landlord demand

It’s no secret that complexity, additional layers of regulation and taxation changes have seen more landlords move away from standard single-family dwellings and become increasingly attracted to higher yielding options such as HMOs and multi-units.

It’s no secret that complexity, additional layers of regulation and taxation changes have seen more landlords move away from standard single-family dwellings and become increasingly attracted to higher yielding options such as HMOs and multi-units.

Lenders are also switching onto this fact as we are seeing a wider range of offerings within this area, and this is not only through specialist providers. Leeds Building Society recently announced that it is now including five-year products in its bespoke HMO mortgage range. This move came on the back of intermediary feedback that landlord clients were looking for additional five-year options for small and large HMOs, as growing numbers sought to diversify their portfolios and move into this sector.

Houses in multiple occupation are nothing new, but with affordability issues continuing to impact first-time buyers and rents sitting at high levels, it’s evident that more people are staying in accommodation such as house shares for longer, well beyond their student years. Research from flatmate matching website Ideal Flatmate recently highlighted that demand for room rentals in London is so high that average charges have already risen by two per cent in 2019. It claimed that this comes on top of a 13 per cent rise over 2018.

A study into the rental sector by broadband and utilities provider Glide looked further into house shares, highlighting that London remained the best location in terms of the variety of house share opportunities, with over 19,000 rooms available. However, with the average monthly rent six times higher than the most affordable city to live in (average rent in London was suggested to be £3,278 pcm, compared to £499 in Bradford), the capital ranked 17th overall as the best city for house sharers.

Ranking the biggest UK cities on a range of measures – including the number of house shares in the city, number of job opportunities advertised, the cost of rent, university rankings and broadband speed – Bristol came out on top. The rest of the top 10 consisted of: Nottingham, Birmingham, Manchester, Liverpool, Derby, Southampton, Brighton and Hove, Leicester, and Portsmouth.

This is interesting information for landlords looking to either diversify into the HMO space or extend their portfolio into different city locations. Of course, landlords need to be fully aware of wider legislation changes as well as local licencing requirements when operating within this space. But, with increasing numbers of lending options becoming available, this is certainly an area worth considering provided due diligence is undertaken, and the right levels of professional advice are sought when it comes to meeting individual landlord’s borrowing requirements.

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