The Council of Mortgage Lenders (CML) has responded to Labour leader Ed Milibands recent call for longer tenancy agreements and warns that such agreements could lead to a rise in tenant rent arrears and that this short-term loss could also affect the landlords ability to pay their mortgage.

Mr Miliband has argued that longer tenancies afford tenants greater security in their accommodation however the CML have said that such proposed agreements makes making lenders nervous because of the increased potential for arrears.

Lenders prefer to allow landlords to offer six or twelve month Assured Shorthold Tenancies within the terms and conditions of the mortgage. The benefit of this is the landlord is then able to regain possession of the property after six months with a two-month notice period needing to be given should the tenant fall into arrears.

The CML says that “were longer-term tenancies to lead to the build-up of higher mortgage arrears over time, they would become more difficult to manage, not least because a lenders ability to obtain vacant possession would be impeded. We favour a policy approach that delivers an adequate supply of affordable housing in a range of tenures that meets the needs of consumers."

CML also say that they accept that the implications of longer-term tenancies need to be explored, but any resulting changes must reflect the needs of landlords and the lenders who fund them, as well as those tenants who would opt for a longer-term tenancy.
Part of the solution may be provided by break clauses, over and above what is standard in an Assured Shorthold Tenancy of six or 12 months. There will also have to be different terms and conditions in these cases. For longer-term tenancies to be attractive to all parties, lenders, landlords and tenants would also need to investigate fair and transparent ways of reviewing rent while the agreement runs its course.