The Mortgage Works, Nationwide’s buy-to-let lending subsidiary, has stopped new lending to landlords who have tenants receiving housing benefits, a move experts warn could leave many people struggling to find a place to live.
TMW, which has a BTL market share of around 20 per cent, previously lent on a case-by-case basis to landlords with tenants receiving housing benefits. It was the biggest lender offering such mortgages.
A TMW spokeswoman says: “Previously, lending to landlords with local authority tenants was not explicitly referenced in TMW’s lending criteria. Our re-issued terms and conditions make it explicit that local authority tenants are not acceptable.”
Remortgaging decisions for landlords with tenants on housing benefit using TMW should be unaffected as they will be based on rental cover rather than the nature of the tenancies, according to the spokeswoman.
There are around 3.8 million households in private rented accommodation, 26 per cent of which – 982,000 households – receive housing benefits, according to Government figures.
National Landlords Association 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.”
LettingFocus.com private rented sector consultant David Lawrenson believes the move is a reaction to the Government’s new benefits system, Universal Credits, which comes into effect in April.
It will cap benefits at £500 a week for couples and £350 for a single person, including housing benefit, and will mean fewer benefits are paid directly to the landlord.
At present, 39 per cent of housing benefit payments are made direct to landlords, according to the NLA, but the new system will only permit payment direct to landlords in specific circumstances, such as a pattern of arrears.
Lawrenson says: “Under the Universal Credits system, not only will payments be capped but there is also less chance of landlords being paid direct, making it less attractive to lend on this basis.”
Lenders still offering mortgages to landlords with tenants receiving housing benefits include Keystone, Manchester Building Society and Paragon and Mortgage Trust.
The Buy to Let Business managing director Ying Tan says: “It is disappointing because it is an area where there are few lenders willing to lend.”