Mortgage Lenders and Insurance Companies Refuse Lets to Housing Benefit Tenants

Just to make things extra difficult for people who are on housing benefit, there are still some mortgage lenders and insurance companies who actually do not allow private landlords to let to tenants who are dependent on housing benefit. So, if their landlord has a mortgage on the property, (and it is more than probable he has), he may not be allowed under the terms of his buy to let mortgage to let his property to them.

Mortgage Lenders and Insurance Companies Refuse Lets to Housing Benefit Tenants

In December 2012, at a London Assembly Housing & Regeneration Committee meeting on the private rented sector, where I was called in as an expert, I exposed this practice. (Sadly, it was news to the London Assembly members).

My comments added to the pressure which forced at least one lender to reverse their policy. But a few of the UK’s largest lenders, including some of the supposedly more cuddly building societies still have such restrictions in place.

At LettingFocus.com, we say it is outrageous that some mortgage lenders still do this.

These restrictions are, in our view, anyway wholly unjustified by any actual experience of mortgage arrears linked to landlords letting their properties to people on benefits.

It is also a ludicrous policy to enforce. After all, many people may be in work, then lose their jobs and have to go on benefits.

Are they supposed to then be evicted by their landlords?

The offending lenders never seem to have a clear answer to this question.

And many insurance companies impose higher insurance premiums on landlords who let to folk on housing benefit too. Here too, I have seen no statistical evidence to show that the claims experience is worse where the tenants are on housing benefit.

*Footnote:

Nationwide’s buy to let lending arm, the Mortgage Works was the largest lender to reverse their policies shortly after we spoke to the London Assembly. Lloyds Banking Group’s buy to let arm, BM Solutions was another that reversed its policy too.

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3 comments

  • Hi David,

    Interesting article.

    I agree, whilst many local authorities are actually lobbying Landlords to develop more HMO properties and accept tenants on Housing Benefit, the financial services industry doesn’t help itself.

    I have personally battled with insurers to ensure our Landlord clients are not selected against – it really shouldn’t be that hard!

  • I find these policies ludicrous and discriminatory .I have worked all my life and now retired I find myself with little money needing to move but on a pension need to claim housing benefit .I have the deposit and all monies for paperwork etc and my son acting as guarantor owns his own house and has a high paid job but estate agents in the area I want to move always tell me the landlord cannot rent to housing benefit .Its degrading and Victorian values shock me at a time when I should be enjoying my Autumn years with dignity and respect around my family (who live in a different area ) .I don’t know if England is moving forward or back !

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