BRADFORD & Bingley has launched the first formalised mortgage solution for those who rent a room in their property.

The Government currently allows homeowners to earn up to £4,250 a year tax-free from letting a single room in their residential home. However, until now, lenders have not taken this rental income into account when applying income multiples and assessing what a borrower can afford.

David Bitner, technical manager at The MarketPlace, said: "This product is a simple solution that recognises this very common practice by simply adding the tax-free rental income to the borrower's own income. Many lenders are not comfortable with allowing borrowers to rent a room and this is a practice which is often done without the lenderÕs knowledge."

The "Rent-a-Room" mortgage is offered with a choice of competitive rates including a two-year fixed rate at 4.64 per cent and a two-year discount tracker with an initial rate of 3.99 per cent.