Tenants seeking mortgage references

PUBLISHED : Wednesday, 25 March, 2009, 12:00am
UPDATED : Wednesday, 25 March, 2009, 12:00am

British tenants, fearing their rented homes may be repossessed before the end of a lease, are demanding landlords give references to show they can make mortgage payments.

Falling rents and sales prices have hit Britain's landlords hard and many are having properties seized by mortgage lenders.

Lucy Morton, the managing partner and head of lettings at WA Ellis, said growing numbers of tenants who paid rent one or two years in advance wanted landlord references.

'I have been in the market for 25 years and find that it is something that tenants are now asking, because they want to be reassured that the property won't be repossessed,' Ms Morton said.

Statistics show 46,750 homes were repossessed last year, a 68 per cent increase on 2007, when 27,900 properties were seized.

Ms Morton's revelations coincide with new figures that show the rental market is suffering its biggest downturn since the 1970s.

According to the Royal Institution of Chartered Surveyors' residential lettings survey for the fourth quarter, the net balance of surveyors reporting rises, rather than falls, in rents fell from minus 12 per cent to minus 48 per cent, the lowest level in the survey's history. London is worst hit.

Estate agency Knight Frank's London lettings index for the first quarter shows rents dipped 7.4 per cent in prime central London, the second-biggest fall on record. They have dropped 18.2 per cent over the past 12 months.

Benham and Reeves Residential Lettings says rents have fallen 25 to 30 per cent for large family houses in London.

Seema Shah, an economist at Capital Economics, said rents would drop further across Britain by the end of the year.

Property Portfolio Rescue, a firm that specialises in buying up homes from struggling landlords, forecasts 20 per cent of repossessed properties will be from the buy-to-let sector by the end of the year.