Lenders Finally Crack Down on 'Accidental' Landlords

Thousands who let their property without telling their mortgage company face 'serious risk'.
Mortgage lenders are launching a tough new crackdown on thousands of so-called 'accidental landlords' who let out their own homes without notifying their bank.

Lenders have become suspicious that vast numbers are keeping quiet about their arrangements to avoid being forced on to a higher interest rate or to switch to a more expensive buy-to-let loan.

In a concerted drive to catch those abusing the system, lenders are trawling the electoral register, social media websites and online letting agencies for signs that a property has been put up for rent.

Despite strong signs of a recovery in the housing market, thousands of people are still stuck in negative equity and are unable or unwilling to sell their property. Many become so-called accidental landlords as a result: some estimates suggest they make up as much as 30% of the landlord market.

Lenders have tended to capitalise on this by increasing rates or requiring these borrowers to switch from a residential to a more expensive buy-to-let loan - significantly pushing up monthly repayments.

It is widely accepted that a large number of borrowers have tried to avoid this by not telling their mortgage company, but lenders now appear to be actively pursuing those breaking the rules.

Borrowers have a contractual obligation to inform their lender if they want to let a property.

Many will face a rate rise of between 1 and 2 percentage points, plus an administration fee on top.

This is because lenders view buy-to-let properties as more risky because of the possibility of void periods - where the property is empty - or tenants falling into arrears.