Lenders offering mortgages to buy-to-let landlords normally insist tenancy agreements are capped at a year. Photograph: Keith Leighton /AlamyNationwide building society has become the first mainstream mortgage lender to allow buy-to-let borrowers to offer their tenants three-year contracts, in a move designed to bring more stability to the rental market.
Lenders offering mortgages to landlords usually insist that tenancy agreements are capped at a year, meaning landlords are unable to get finance if they want to offer longer-term tenancies.
This means a lack of security for the UK's growing number of renters. According to the housing charity Shelter it can cause particularly acute problems for families of school-age children, who can find themselves forced to move with little notice.
Richard Napier, divisional director of mortgages at Nationwide Group, said: "The private rental sector has grown and changed phenomenally over the last few years, with rising numbers of families looking to rent. We want our buy-to-let customers to be in a position to be able to meet the changing needs of the market."
Nationwide will offer the deals through its The Mortgage Works arm, which does all of the society's buy-to-let lending.
It will allow landlords to offer contracts of any period up to three years in a change it said would support its pledge to help 750,000 people into a home of their own by 2017.
According to Shelter, one in five families now rents rather than owns, while the think tank the IPPR suggest that by 2016, 20% of all households will be in private rented accommodation.
Campbell Robb, chief executive of Shelter, said: "This news is welcome recognition, as six- or 12-month tenancies just aren't working for England's nine million renters."
He added: "With two-thirds of renters saying they would like the option of staying in their home long-term, it's encouraging that Nationwide is leading the mortgage industry to help make renting more stable. We look forward to other mortgage lenders following suit."
David Hollingworth, of mortgage brokers London & Country, said he believed shorter-term tenancy agreements were often one of the drivers behind the desire for home ownership.
"Once you start a family, particularly, you don't want to feel that you can be turfed out of your home," he said.
Hollingworth said that the majority of mortgage lenders stipulated contracts must be at least six months, and most had a maximum of 12 months, although some would allow longer agreements on corporate lets.
Thirty-nine year-old teaching assistant Karen Payne from Swindon and her partner Lee Quince and their two children aged 10 and 14 have rented all our adult life as they cannot afford to get on the property ladder.
"We would love to be able to have longer tenancy agreements so we would feel more secure as a family unit," she said.
"When each agreement is due to expire, we as a family worry whether we will have anywhere to live; and now our children are getting older they pick up on our worries and concerns and start to panic themselves, which has started to affect my daughter at school as she is starting to prepare for her GCSEs."
However, Hollingworth warned that even if landlords were able to offer longer tenancies they may not choose to do so.
Last year, the National Landlords Association (NLA) said it did not think longer tenancies were necessary, as its research showed 46% of UK tenants had lived in their current rental property for at least four years.
Chris Norris, head of Policy at the NLA, said on Wednesday: "The current assured shorthold tenancy (AST) provides for those who require both shorter-term and longer-term tenancies with the agreement changing to a rolling-month contract after the initial period has passed.
"According to the NLA's tenant research, almost half of tenancies last in excess of four years, which suggests that the current AST serves tenants' needs as well as providing the flexibility that many seek from the private rented sector."
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