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Two thirds of mortgage lenders bar benefits claimants

Sally Walmsley
Written by Sally Walmsley

Two thirds of the largest buy-to-let mortgage lenders do not allow landlords to rent property to tenants receiving housing benefit.

According to a survey carried out by the  RLA’s mortgage consultants, 66 per cent of lenders representing approximately 90 per cent of the buy-to-let market do not allow properties to be rented out to those in receipt of housing benefit. This includes TSB, Virgin and the Natwest.

The research was conducted by Doug Hall, Director of 3mc, an award-winning specialist mortgage distributor, who advises the RLA and its members.

He said: “Some of the reasons given for not lending to those renting to claimants include concerns about rent not being paid and historic data which calculates the risk of tenants falling into arrears or facing repossession.”

The RLA is calling on the next Government to undertake an urgent review of the extent of lenders preventing landlords from renting to benefit claimants and to take action accordingly.

It wants to see measures taken that would help provide security for landlords and lenders, especially giving tenants in receipt of benefits and universal credit the ability to choose to have payments made directly to their landlord to cover rents.

Out of 58 lenders contacted by 3mc with a a hypothetical enquiry about a two-bedroomed flat where the tenants were in receipt of housing benefits:

  • 38 (66%) said they do not allow properties to be rented out to those in receipt of housing benefit.
  • 10 (17%) do allow properties to be rented out to those receiving housing benefit, although one of these is with the caveat that properties cannot be rented to “vulnerable tenants.”
  • nine (16%) indicated that they are prepared to “consider” housing benefit claimants.
  • one (2%) indicated that it does not have a criteria related to housing benefit claimants.

RLA Chairman, Alan Ward, said: “This research shows that the current benefits system is not working for tenants or landlords.

“Discrimination against tenants receiving benefits is not driven by landlords but by the banking system. If the private rented sector is to house more people then barriers to landlords making fair decisions over who they rent to must be removed.

“We need a system which gives tenants, landlords and lenders the confidence they need that rent will be paid on time and in full. All political parties need to trust tenants to know what is best for them and give them the opportunity to choose, without having to get into arrears, to have Universal Credit and benefit payments made directly to their landlord.”

About the author

Sally Walmsley

Sally Walmsley

Sally Walmsley is the Magazine and Digital Editor for the NRLA. With 20 years’ experience writing for regional and national newspapers and magazines she is responsible for editing our members' magazine 'Property', producing our articles for our news site, the weekly and monthly bulletins and editorial content for our media partners.

1 Comment

  • When a recipient first applies for benefits, there can sometimes be a delay, however after that I would have thought HB payments would be the most reliable (if they are paid directly to the landlord). If you work full-time, you can’t be counted on to always spend you wages on your rent first, however if being paid by the government straight to the landlord, there is no choice??

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