Bath Building Society has launched a Rent a Room mortgage, allowing buyers to borrow more by letting out a room and using the rent towards the mortgage payments.

For example a single, childless applicant earning £26,000 who wants to buy a two bedroom property for £200,000, would need a mortgage of £160,000 if they had a 20% deposit. Most lenders wouldn’t offer that size of mortgage based on their income. However, by teaming up with a friend who wants to rent the room, the applicant could boost their borrowing power.

By letting out the spare bedroom to a friend at £400 a month, the rent would cover £58,500 of the loan, allowing the buyer to cover £101,500 from their own income.

Up to 50% of the loan amount can be covered by the rental income with the deal from Bath BS.

The mortgages are available at the same rates and terms as the society’s standard residential mortgages and its 95% parent assisted mortgages, starting at 2.99% for a three-year variable deal.

Dick Jenkins, chief executive of Bath Building Society, said: “Increasingly people are starting to realise that rent is more expensive than having a mortgage in the current climate.

“Many young people are happy with sharing their home with a friend and here we have created an opportunity to use the rent of a friend sharing the property to contribute to the affordability of the mortgage. Better still, some can use this arrangement to qualify for tax relief from the Government.”