Leeds Building Society is set to limit mortgage lending on holiday homes in certain popular tourist areas in England. The society’s chief executive explained that holiday lets are limiting the number of homes available for locals in some places.
Leeds Building Society has teamed up with North Norfolk District Council and North Yorkshire Council for a 12-month trial where it will halt new loans for holiday let properties from the end of March. This includes short-term lets like Airbnb properties, as they fall under the society’s definition of holiday lets.
This move follows the society’s decision in 2022 to stop funding purchases of second homes, allowing it to focus more on first-time buyers. The two local authorities have identified areas where housing pressures are most severe.
The society will add these postcodes to its systems to prevent approval of holiday let mortgage applications in those areas. Existing holiday let borrowers won’t be affected. Areas in North Yorkshire including Scarborough, Whitby, Filey, Saltburn, Leyburn and Richmond will be impacted. The entire area of North Norfolk District Council, including Cromer, Wells-next-the-Sea and Sheringham, will also be included.
Richard Fearon, the boss of Leeds Building Society, said: “In some areas, holiday lets have grown to have a significant stranglehold on the pipeline of homes available for local people to live in and we want to play our part in removing it.”
He also mentioned: “We will learn through the trial how effective this measure can be in increasing supply of residential homes and gain greater insight on steps that can make a positive difference.”
Councillor Wendy Fredericks, who looks after housing at North Norfolk District Council, shared: “In North Norfolk we have a really severe shortage of homes that people on local wages can afford.”
She added: “Increasing numbers of holiday lets reduce the number of rental homes available for year-round use by local people. So I welcome the move by Leeds Building Society to stop new lending on holiday lets in key areas.”
Councillor Simon Myers from North Yorkshire Council said: “We are pleased to support this initiative by Leeds Building Society.”
He explained: “We welcome the fact that it is being specifically targeted at those locations where there are high concentrations of holiday lets.”
He also noted: “At the same time we feel it strikes a fair balance between the housing needs of local people and the importance of the wider tourism economy of North Yorkshire.”
Ben Twomey, the boss of Generation Rent, said: “Generation Rent is pleased that Leeds Building Society is acting on this issue and prioritising the necessity of homes over the luxury of holidays.”
“This trial to restrict mortgage lending on holiday lets is a forward-thinking step that will hopefully help to improve the situation for renters in North Norfolk and North Yorkshire.”
Earlier this week, Michael Gove, the Secretary of State for Levelling Up, Housing and Communities, proposed new rules requiring planning permission for short-term lets to prevent communities from becoming ghost towns.
The new law would mean people who want to let out their property as a short-term holiday home would need to get permission from the local council under a new “use” category.
The rules wouldn’t apply to people renting out their main home for 90 days or less in a year.
A national register would be set up so councils can keep track of short-term lets in their area.
Leeds Building Society announced its decision on lending to holiday lets at the same time as it released its financial results for 2023.
The amount of savings deposited with the building society reached a record high of more than £20 billion last year, which was a fifth higher than the previous year.
The company paid an average interest rate of 0.59% to savers, which it said was higher than the average rate on the market, adding up to a total of £110 million paid to savers during the year.
Mortgage lending came in lower than the previous year due to a slowdown in the overall housing market. Prospective buyers were faced with greater borrowing costs, which contributed to this decrease.
The building society also reported on a slight increase in situations where borrowers were unable to keep up with their mortgage repayments, referring to these cases as part of a “challenging financial environment”.
