Lenders restrict tenant choice to reduce risk of rent arrears
Lenders are prohibiting landlords from letting property to tenants on benefits in an attempt to prevent rent arrears and potential property repossessions.
These restrictions are believed to be a direct reaction to the government’s recent changes to the benefit system.
The new system sees an estimated cap of £350 per week for a single adult with no children and £500 per week for a couple or lone parent, regardless of the number of children they have. As a result, households will lose, on average, £93 a week (approximately £400 a month) a deficit which some lenders believe could have a significant impact on their ability to pay their rent or mortgage.
The new system will also see housing benefit paid directly to the tenants rather than the landlord.
The Mortgage Works (TMW), the buy to let arm of Nationwide Building Society, is the latest lender to stop landlords letting property to tenants on benefits, issuing the following statement to the media:
“TMW does not currently lend on buy to let properties (that are) let to local authority tenants. TMW mortgage terms and conditions were re-issued last year and this included greater detail on acceptable and unacceptable tenant types.”
There is now a belief that other lenders will follow suit.
GW LET lawyer, John Jones, comments:
“Rent arrears are one of the most common problems faced by landlords. With the recent cuts in benefits it is understandable why lenders are now sharing these fears.
“When a tenant is in arrears, a landlord does not have the legal right to automatically remove them from the property. There are certain legal procedures you must adopt to regain your property. Failure to do so could actually give the tenant an opportunity to claim compensation from you.
Content correct at time of publication