Coventry Building Society is also reviewing its buy-to-let lending criteria after two of its rivals softened their stance on lending to landlords with tenants on housing benefits last week.
The review comes after The Mortgage Works and BM Solutions, buy-to-let lending subsidiaries of Nationwide and Lloyds Banking Group, respectively, removed exclusions from their lending criteria which meant they would not lend to landlords with tenants on housing benefits.
A Coventry spokeswoman confirmed to Mortgage Strategy that this element of its criteria is currently “under review”. The lender does not release details of its annual gross buy-to-let lending but it is widely believed among brokers that Coventry is the third biggest player in the buy-to-let sector.
Presently, Aldermore Commercial, Manchester Building Society, Paragon/Mortgage Trust, Abbey for Intermediaries and Woolwich will lend to these types of landlord.
Of the remaining big lenders in buy-to-let, Skipton Building Society, NatWest Intermediary Solutions and Yorkshire Building Society do not lend to these types of landlords.Skipton and NatWest say they have no immediate plans to amend their criteria, while Yorkshire Building Society could not confirm whether it planned to review their lending criteria at the time of going to press.
The Buy to Let managing director Ying Tan says: “It is a herd mentally. If the big boys get comfortable with it [lending to landlords with tenants on benefits] the rest start to follow. If it does not affect your risk then there is no reason why the others won’t follow.
“If you want volume, then this is a potential variable where you will not have to cut your margins and get a bit of increased business.”
Last week, Mortgage Strategy revealed the UK’s biggest buy-to-let lender by lending volumes, BM Solutions, had dropped its restriction on lending to landlords with tenants who are on housing benefits.
The news arrived less than two weeks after its biggest competitor in the buy-to-let market, Nationwide Building Society lending subsidiary The Mortgage Works, had U-turned on its decision to lend to these types of landlords.
Last month, Mortgage Strategy revealed TMW’s decision to stop lending to landlords with tenants on benefits. Prior to this the lender would lend on a case-by-case basis. However, TMW reversed its decision to stop lending to these borrowers within three days of Mortgage Strategy first breaking the news.
In January, Mortgage Strategy reported that Lloyds Banking Group has aggressive buy-to-let lending targets for 2013, with it rumoured to be planning to increase buy-to-let as a proportion of lending to around 21 per cent compared to 17 per cent in 2012.
At the halfway stage of 2012, Lloyds had lent around £12.3bn in total, with around £2bn of that being buy-to-let business, giving BM Solutions a 26.3 per cent of the buy-to-let market in the first half of last year.