‘Generation rent’ demands mortgage lenders take account of rent payments

considering a mortgage application, but that it could only be one of several factors.

It also made clear that mortgage criteria were a commercial decision for lenders and that the Government would not interfere.

But mortgage experts told Telegraph Money that regulations were to blame for lenders’ reluctance to consider buyers’ rental history.

Ray Boulger of John Charcol, the broker, said new regulations from the Financial Conduct Authority and the Prudential Regulation Authority made rental payment histories largely irrelevant.

He said rental payments could be used to show reliability and helped improve a borrower’s credit file. But successful payments of rents – even well in excess of likely mortgage costs – would not enable a lender to advance a bigger loan.

“I think FCA rules actually do stop lenders from assessing affordability on the basis of rent,” he said. “If you have been renting for a long time and can demonstrate you have been paying regularly and on time, that’s a tick.

“Certain landlords do supply information to the credit agencies, so it contributes to your credit score, but many don’t.” There are also several schemes, including one run by Experian, which can facilitate this service. Mr Boulger said that even when lenders wanted to use rental payments as a measure of affordability, rules around “stress testing” would prove to be a stumbling block.

Banks and building societies are now obliged to prove that their customers could afford a loan at three percentage points above the standard variable rate (SVR).

This test used to be based on the bank’s prevailing rate, which was likely to be lower than the SVR.

The rules mean that some customers will be stress tested at 7pc, meaning it would be difficult for rental payments to be used as a reliable guide.

Jeremy Duncombe of the Legal & General Mortgage Club said he understood why tenants would find the rules frustrating.

“If you imagine a first-time buyer who has been paying £1,000 a month in rent and never missed a payment being told you can only afford mortgage payments of £700 a month, that will be hugely frustrating,” he said.

But he agreed with Mr Boulger that the current regulations meant rental payments could not be used as a reliable guide of affordability.

Mr Boulger said there was one area where the stress testing rules didn’t apply. “If lenders offer a fixed rate for at least five years they don’t have to stress test, so using rental payments to measure affordability would be possible on this basis,” he said.