Homeowners with a NatWest mortgage will be able to let their home for up to 90 days a year without the need to request permission.
The bank has changed its mortgage rules to make it easier for customers to earn income from their home at a time when high mortgage rates are having a significant impact on affordability.
Read on to find out more about how NatWest’s new ‘Airbnb-friendly’ policy will work, and for advice on the rules around letting your home.
NatWest changes policy on short-term letting
NatWest’s new policy will allow new and existing mortgage customers to let a room or their entire property for up to 90 days a year on an ‘approved letting platform’ without first needing to obtain consent.
Previously, borrowers would have been required to apply and pay for formal ‘consent to let’ from the lender.
NatWest says the changes will enable more people to ‘take up the benefits of homesharing’.
- Find out more: do you need to pay tax on Airbnb income?
Who might the new policy help?
Natwest’s new rules could help homeowners make money from their home in a range of scenarios. These might include:
- If you’re struggling with the cost of your mortgage and want to let out a room to make some additional income.
- If you’re taking a longer holiday abroad.
- If you’re going to be working away.
- If you own a rental property that has a gap between tenancies.
How do lending rules work on short-term lettings?
Short-term lettings have grown significantly in popularity over the past decade, with online platforms making it easier to let rooms or properties on a night-by-night basis.
However, most homeowners who have a standard mortgage are likely to be breaching the terms of their loan if they do this without first asking for consent from their lender.
Are you allowed to rent out your home?
If you’re looking to move out entirely and let your property for the long term, you’ll need to contact your lender about switching to a buy-to-let mortgage.
In other scenarios, the rules will vary depending on why you’re letting the property, for how long, and the terms of your mortgage.
We asked David Hollingworth of the mortgage broker L&C Mortgages about how lenders view different types of letting. He provided the following advice:
Letting out your property for a fixed period
‘You will need to request “consent to let” from your lender. Your bank may be more likely to accept the request if it’s for a specific reason and time period – for example, if you’re going to work away for a set amount of time.
‘There is usually a cost attached to this, whether a fee, a higher interest rate, or both.’
Taking in a lodger for your spare room
‘Lenders are usually relatively relaxed about a lodger being in a property, as long as the owner continues living in the property.
‘Banks would like the lodger to sign a “consent to mortgage” form, which acknowledges the lodger’s understanding of the lender’s rights.’
Short-term lettings, such as Airbnb
‘The use of Airbnb and other platforms doesn’t fit with the above scenarios, as it’s not practical to seek consent for a number of different lets, some of which might only last a night or two.
‘NatWest is the latest lender to build some leeway into its rules to allow this. Giving clear parameters by limiting letting to 90 days and requiring suitable home insurance be in place helps reduce paperwork for the lender and provide reassurance that you are acting within the guidelines.’
Which other lenders offer similar criteria?
NatWest isn’t the first lender to make it easier for homeowners to let their homes on a short-term basis, but many banks don’t have this kind of policy in place.
Ray Boulger of the mortgage broker John Charcol believes most lenders will introduce similar policies on short-term lets over the next five years.
He says: ‘Metro Bank was one of the first lenders to allow this, and NatWest is joining a small group which also includes Barclays and Nationwide.
‘As one would expect, there is some variation in terms of the maximum number of days a year and whether only a room or two can be let or the whole home.
‘From a lender’s perspective, allowing the borrower to let the property to supplement their income can be a good way of supporting a customer who is struggling financially or has experienced a change in circumstances.’
How much could you make from short-term letting?
Airbnb says its UK hosts make an average of just under £5,500 a year from using the platform.
Its research found that nearly half of homeowners (47%) were open to listing on a short-term lettings platform.
Before letting your property online, make sure you do your research into the costs and regulations, which may vary between areas.
You may also need to take out a new insurance policy, as your existing one may not cover other people staying in your home.
If the lettings platform you choose offers a guarantee to cover you against damages, make sure you read the small print, as there may be significant exceptions or limitations to the cover.
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Rent-a-room scheme: tax on short-term lets
If you let property, you’ll need to pay tax on your rental income (after taking into account allowable deductions).
However, if you’re only letting one room in your home, you could benefit from a significant tax break.
The rent-a-room scheme allows you to receive up to £7,500 from letting a room without needing to pay tax, and earnings from platforms such as Airbnb are allowed.
If you receive more than £7,500 in a tax year, you can either just pay income tax on the money you make above this amount, or instead pay tax on your overall profits after expenses, as with standard buy-to-let income.
- Find out more: Rent-a-room scheme
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