With the news that the UK’s two biggest buy-to-let lenders, BM Solutions and Nationwide/The Mortgage Works, have ditched restrictions on providing buy-to-let mortgages to landlords with tenants on housing benefits, it begs the question whether we could be on the verge of a trend.
With Coventry BS also reviewing its policy towards this sector of the market, it shows how quickly attitudes have changed.
Tenants receiving housing benefits are a small but still significant part of the private rented sector. According to the 2011/12 English Housing Survey, 3.843 million households rented privately that year – just above the 3.808 million in social rented homes. While 64 per cent – or 2.4 million – of households in the social rented sector received housing benefit, just 25 per cent of private renters did – but that still equates to 982,000 households. Should landlords providing accommodation to such a large number of households really be denied finance automatically?
Over the past five years, the percentage of private rental tenants receiving housing benefits has risen sharply. In 2008, 598,000 private tenants claimed benefit – 19 per cent of the market back then.
As CHL Mortgages managing director Bob Young says on p14, the subject of lending to landlords with tenants on benefits raises issues about discrimination and equality.
He argues that even if the level of arrears among that demographic may be higher, it is unfair to assume all social tenants will automatically default. And from a landlord and lender perspective, what actually matters is whether the rent is paid in full and on time each month and that it covers the mortgage.
Hopefully this is the start of wider change in the sector.