Lloyds Banking Group is set to buy its first property under radical plans to become a private landlord
Lloyds Banking Group is set to buy its first property under radical plans to become a private landlord.
City sources said the bank is close to securing a block of flats in Nene Wharf, Peterborough, and could start renting them out as soon as next month. It is understood there are nearly 50 flats in the block.
New direction: Entering the private rental market could pave the way for Lloyds to sell other products to prospective tenants
The dramatic move by Britain’s largest high street lender is the first time a major UK retail bank has moved into the private rental market. Lloyds is expected to manage its new-build property through a subsidiary called Citra Living, which was set up this year, according to filings at Companies House.
The plan, codenamed Project Generation, is aimed at bringing in another source of income for Lloyds. Banks are coming under pressure from record-low interest rates, which are crushing profits from lending, as mortgage rates have been pushed down.
Entering the private rental market could pave the way for Lloyds to sell other products to prospective tenants, such as insurance or loans for deposits.
It will pit the bank against property developers and institutional investors such as pension funds that have been piling into real estate assets recently for higher returns. Meanwhile, there are now fewer amateur landlords with just one or two properties after tax breaks were scaled back.
Demand for homes is on the rise. The Office for National Statistics forecasts that there will be more than four million new households by 2041, an increase of 17 per cent.
Concerns are also mounting that more first-time buyers are being squeezed out of the market and forced to rent.
House prices increased by 10 per cent over the year to March, according to Land Registry data. A report last week by estate agent Hamptons found a typical first-time buyer will now find it cheaper to rent than buy on a monthly basis, even though rents across the country have increased by 7.1 per cent over the past year.
Rental income is expected to continue rising. Upmarket estate agent Savills forecasts that rental values will grow by 17 per cent over five years to the end of 2025.
Lloyds is the biggest mortgage lender in the UK, with nearly a fifth of the market. The group owns the Halifax, Scottish Widows and Bank of Scotland brands. The bank has also been pushing further into wealth management and insurance.
Lloyds said: ‘As we stated in our full-year results in February, we are committed to broadening access to home ownership and exploring opportunities to increase our support to the UK rental sector.’