Banks have been criticised by MPs for imposing restrictions on lending for buy to let mortgages, which has ultimately lead to discrimination against tenants receiving benefits. Some letting agents and landlords are therefore receiving accusations of indirect discrimination as they refuse tenants on benefits. Currently, landlords are unable to secure mortgages from the majority of lenders in the UK if their intention is to let a property to tenants in receipt of welfare housing payments. Many MPs were previously unaware of this common rule until the matter was brought to Parliament’s attention from recent controversy concerning landlords and letting agents who refuse to let property to tenants on benefits.
The Work and Pensions Committee has emphasised that the government has to address this problem amid the concerns that banks are forcefully blacklisting benefit tenants by restricting landlords that may be willing to let their properties to these tenants. The largely government-owned bank, NatWest, has recently come under fire as it was discovered it was refusing remortgages for properties to landlords if they were renting to tenants on housing benefits. In one example which highlighted the hypocrisy of their stance, one landlord was informed by NatWest that she must evict her elderly, vulnerable tenant, or cancel the mortgage and pay an early release fee to find another mortgage lender.
A government spokesperson from the DWP (Department of Work and Pensions) released a statement explaining that they are deeply concerned by the way in which lenders are restricting and preventing landlords from renting property to benefit claimants. The issue is further being highlighted by the desperate shortage of housing, with large numbers of benefit claimants now entirely dependent on the PRS (Private Rented Sector). Government reforms are meant to drive employment, however, by allowing banks to use a no DSS policy, it is a return to the old ways of housing discrimination, where benefit claimants are effectively blacklisted from renting housing and are at risk of being evicted for no valid reason.
NatWest is currently reviewing its policy, with other mortgage lenders likely to follow suit. If the changes are not voluntarily forthcoming, it is believed that there must be a change to regulation in order to protect renters. There is estimated to be approximately 4.2 million people across the UK currently receiving housing benefit, according to the RLA (Residential Landlords Association). Ninety percent of the buy to let market is covered by mortgage lenders, with 66 percent of these imposing restrictions on lending mortgages to those who rent to benefit claimants.
NatWest has responded to the criticism in a written response from chief executive Ross McEwan, claiming that the bank is extremely disappointed by the way the case has been handled and that it did not represent the values held by the organisation. Mr McEwan goes on to explain that NatWest’s mortgage policy is in line with a number of other mortgage lenders for landlords with small property portfolios. This includes restrictions on letting property to tenants who are claiming housing benefit. The bank states this is because there is evidence to prove that the risk of rental arrears is much higher in this sector of the market. NatWest will report on its policy review later this year.
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