by Mark Johnston
Buy to Let lenders Restricts Mortgages for those with Tenants on Housing Benefits.
According to recent government figures there are around 3.8 million households in private rented accommodation, 26 per cent of 982,000 households receive housing benefits.
The National landlords Association (NLA) head of policy, Chris Norris, says “there is a huge market for tenants in receipt of local housing allowance and if the private rented sector does not help to support housing provision, many tenants may be left homeless”.
Although now, as a direct result of the governments changes to the housing benefit systems letting to people on benefits seems more risky and therefore unattractive to lenders.
Therefore many experts believe that these changes will lead to more landlords being forced to remove their properties from this end of the market, a part of the market where tenants already have very few housing options.
Letting to people who are dependant on benefits has never been easy for landlords, but the recent changes to housing benefits look a step too far for lenders.
Due to these changes some lenders now think that the risks of landlords getting in to trouble, going in to arrears and ultimately being reposed are just too great.
Therefore in recent months some buy to let mortgage lenders have put in place restrictions to stop private landlords letting out their properties to those people in receipt of housing benefits.
The Mortgage Works, Nationwide’s buy to let subsidiary, is one such lender that has stopped lending to landlords who have tenants receiving benefits.
At the moment The Mortgage Works has a buy to let market share of around 20 per cent.
The lender issued a statement in relation to their stance on buy to let lending which stated that “The Mortgage Works does not currently lend on buy to let properties that are let to local authority tenants. The Mortgage Works mortgage terms and conditions were re-issued last year and this included greater detail on acceptable and unacceptable tenant types”.
BM Solutions, part of the state owned Lloyds banking group, has also actively restricted private landlords from letting to tenants who are dependant on housing benefits.
A spokesperson for the lender, said “we constantly review our policies, however, the current terms and conditions of our mortgage policy do not enable borrowers to let their properties to tenants claiming housing benefits”.
Accord, a mortgage brand of the Yorkshire building society, is yet another lender who has too the stance of not allowing lets to ‘DWP supported tenants’.
The Yorkshire building society, added “we entered the buy to let market with a specific profile in mind. We do not feel that DWP supported tenants would generally fit in with the profile of landlords or properties that we are looking to lend to”.
All this said, there is no statistical evidence to suggest that landlords who let to tenants on benefits are any more likely to default on their mortgages than landlords who avoid such tenants.
In conclusion, it is clear that some mortgage lenders have done their risk assessments and have already delivered their verdict on the governments changes to housing benefits.
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