Brits turn to lodgers to bridge mortgage gap
18 September 2008 / by Rebecca Sargent
Brits are realising the money making potential of their spare rooms as mortgage lending constricts and mortgage rates are rumoured to rise again.
New research from SpareRoom.co.uk shows that 27,000 more homeowners have taken a lodger in the last twelve months, an increase of 8.3 per cent. The lodger population now stands at 477,000 and the number of live in landlords has shot from 324,000 to 351,000.
In fact, the lodging market now sees an income of £2.3 billion a year, the equivalent to £6,617 per lodger household, an amount that could make a dent in rising mortgages.
SpareRoom.co.uk has worked out that the average lodger’s rent is £406 per month, which would cover more than half of the monthly mortgage payment on a £120,000 mortgage.
Commenting on the findings, director of research at SpareRoom.co.uk, Matt Hutchinson said: “Tenant demand is booming as tens of thousands delay buying their first home and immigration continues to rise. It’s a really good option for shorter term renters and they are providing a lifeline to homeowners.
“Just over 70 per cent of live-in landlords are single. Without a partner to share the huge jumps in mortgage payments and other living expenses, and to provide a cushion in the event of unemployment, taking in a lodger is an obvious way to survive the looming recession.”
Figures released today from the Council of Mortgage Lenders (CML) show that gross lending declined further in August and is now 36 per cent lower than August 2007. However, it is not just those trying to get a mortgage that have been hit by the latest financial disasters, those who do not have a fixed rate mortgage could soon see their rate rise as HBOS and Lloyds look set to merge and limit competition in the market.
Commenting on the CML’s figures, director general at the CML, Michael Coogan said: “Lenders are uncertain about the future sources of funding and the cost of funding, while consumers are unsure about how much further and for how long house prices will continue to decline.”
However, the Bank of England has announced yesterday that it will extend the drawdown period for its Special Liquidity Scheme to give banks more time to get support in the ‘current disorderly market conditions.’
Using a spare room as an extra income can combat the adverse effects of the credit crunch, Mr Hutchinson added, concluding that: “More people would already be behind with their mortgage payments if they had not capitalised on the earning power of their spare room.”
© Fair Investment Company Ltd