It was great to hear on Friday the late-breaking news that Nationwide had U-turned on its decision to stop providing buy-to-let loans to landlords with tenants on housing benefits.
On Wednesday last week when it was first revealed that Nationwide had changed its terms to exclude landlords with tenants on benefits, the lender was tight-lipped about why it had made the decision.
Speculation was the move has been prompted by the Government’s new benefits system as under the new rules there will be a cap of £500 a week for couples and £350 for a single person, including housing benefit. This will mean fewer benefits are paid directly to the landlord.
Thankfully other buy-to-let lenders told Mortgage Strategy they had no intention of following suit, and Nationwide reversing its decision is a clear sign that internally this was viewed as a bridge too far.
There had been sympathy for Nationwide’s predicament from some quarters. With lenders constantly being encouraged to assess the market for potential threats from a regulatory perspective the argument was that with fewer benefits being paid direct, more landlords faced rental arrears as a result.
But if the UK’s second biggest buy-to-let lender had stood firm in its decision to red-flag landlords with tenants claiming benefits, then the Government would have had a major problem on its hands. Private residential lettings have filled the gap left by three decades of sustained depletion of the UK’s social housing. If rented properties ever cease to be a viable alternative, then the Prime Minister David Cameron will need to come up with a solution, and fast.
Sadly there was no U-turn from Bank of Ireland. And, unsurprisingly, little sympathy from within the industry for its decision to up the differential on its tracker borrowers last week.
Rate hikes of 100 per cent do little to boost the image of an industry widely seen by consumers to have let them down over the last five years.