Homeowners, increasingly frustrated at the lack of sales opportunities, are becoming accidental landlords as they opt to let their home and move on, rather than wait for a buyer to materialise.
A survey by the Royal Institute of Chartered Surveyors claims that as sales have dried up, so the rental market has boomed, with new instructions to let increasing at the fastest pace in the survey's history. However while rents have continued to rise as house prices fall, some surveyors expect over-supply to push rents down in the next quarter.
Letting your home can make the onward move possible, but homeowners need to ensure they understand the implications and cost of becoming a landlord and their legal duties.
Borrowers should seek consent to let from their lender as the first step. If granted, the lender will make a charge, but will also allow you to keep the same deal. Without consent borrowers could be in breach of their mortgage terms.
Once consent to let is obtained other things such as tenancy deposit protection, gas, electricity and fire safety requirements are further hurdles to be overcome.
If the mortgage lender will not give consent to let, then borrowers could consider switching to a buy to let mortgage, but should first check whether their existing loan carries early repayment charges.
Buy to let mortgages are available to 85% of the property value, with interest rates and arrangement fees higher than for owner occupier mortgages. Most lenders require the rental income to be at least 125% of the mortgage payments, and this can be tricky, especially if the mortgage is being increased to provide a deposit on the new home.
Borrowers should also think carefully about taking on additional debts at a time when credit is not as affordable as it has been, as they may be better off in the long term if they sell, even at a discounted price. The mortgage still needs to be paid whether there are tenants or not, and coupling this to any mortgage commitment for the new home could make it a stretch too far.