Nationwide, the UK’s biggest mortgage lender, announced last week that it had decided to stop lending to landlords who planned to let their properties to tenants receiving the Local Housing Allowance. The lender’s buy-to-let arm, The Mortgage Works, accounts for around a third of buy-to-let lending.
It is thought that the lender decided to pull out of the LHA market because of concerns about the impact that government benefit reforms will have. Reductions in the levels of housing benefit, including the much-talked about ‘bedroom tax’ are due to come in this April, and are widely thought to be likely to lead to increased arrears. Many other lenders have long refused to lend to landlords with LHA tenants.
This week, the company decided to reverse its decision, after facing public criticism. The National Landlords Association, among others, had asked the lender to reconsider its decision, fearing it would lead to an even greater shortage of affordable housing and problems for landlords whose tenants started claiming benefits after they had signed a rental contract. Landlords would have no choice but to evict or break the terms of their mortgage in that situation. With Nationwide accounting for such a large proportion of the buy-to-let market the effect on both landlords and tenants would be significant.
Richard Napier, Director of Mortgages at Nationwide, said “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.”
That is good news for both landlords and tenants in the short term. Longer term, concerns will remain around how the private rented sector can adequately provide accommodation for the UK’s many households claiming benefits. One in four households in privately rented accommodation relies on benefits to pay the rent. While Nationwide has changed its mind, many other lenders take a different view and do ban landlords from letting to LHA tenants. This makes it hard for landlords who want to help LHA tenants find a home, and damages the perception tenants have of the lettings industry. Perhaps it is time for government, lenders, landlord insurance providers and landlords to start working together to make sure landlords can let their properties to those in need.