The Mortgage Works, Nationwide’s buy-to-let lending subsidiary, U-turned on its decision to stop lending to landlords who have tenants on housing benefits late on Friday afternoon last week.
On Wednesday last week, Mortgage Strategy revealed TMW had altered its criteria and had stopped new lending to landlords who have tenants receiving housing benefits, except in remortgage cases.
Prior to the decision to exclude landlords with tenants on housing benefits, the lender, which has a buy-to-let market share of around 20 per cent, would judge each application on a case-by-case basis.
The lender says the decision was made to U-turn on the exclusion after customers had approached it with concerns.
Nationwide divisional director of mortgages Richard Napier says: “The buy-to-Let sector is very important to us. We have listened to concerns that have been expressed by some of our customers, over the last few days, and believe this is the right way forward for The Mortgage Works, for landlords and for their tenants.”
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.
Other lenders which will consider tenants on housing benefits include Aldermore, Manchester Building Society and Paragon and Mortgage Trust and all had confirmed last week that they had no immediate plans to follow The Mortgage Works’ lead by pulling out of lending to these borrowers.
While Nationwide confirmed last week that it had made the change, it refused to disclose why it took the decision.
Experts suggested the move was a reaction to the Government’s new benefit system, Universal Credits, which comes into effect this year.
The new system 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, meaning the potential for some tenants to avoid paying their rent could increase.
When the news broke, many thought the move could be a disaster for these borrowers and their tenants, with the National Landlords Association warning it could leave many people homeless.
Paragon Mortgages director of mortgages John Heron says: “Lenders have a degree of responsibility and unless there is material evidence that tenants claiming housing benefit give rise to a higher risk of loss or default it is hard to explain why a lender would seek to exclude lending to landlords who were willing to work with tenants that encounter such difficulties.”
Its probably a simple bit of analysis that tells the lender that these deals are more likely to go into arrears hence they dont want to do them.
Then because of an outcry by the liberalati they buckle.
The problem is that the provision of social housing has been passed off to the private sector where decisions are made on a commercial not social basis.
“Most housing benefit claimants will fall into at least one of these groups”
I don’t get what you mean? They will be male or female? Will have an age? They may have religious beliefs?
Are you suggesting if you statistically profile a segment of the population and there is slight bias to one area you cannot treat it differently due to indirect discrimination?
Whether you agree with it or not, clearly Nationwide could see that housing benefit is being cut by the government, this means landlords that rely on tenants that recieve this may have a reduced income and therefore are more vunerable. This is clearly a credible risk, whether its one that is acceptable is up to their management.
The Eqaulity Act(2010) makes it clear that it is illegal to discrimminate against groups of people with protected characteristics either directly or indirectly. These characteristics include disability,age,sex, religion amongst others. Most housing benefit claimants will fall into at least one of these groups. It would therefore be wrong of Nationwide to draw up policies which indirectly discriminate against these groups of people.By refusing to accept housing benefit claimants as tenants the landlord will in most cases be in direct breach of the equality act too.