Mortgage lender bans local authority tenants

Nationwide’s buy-to-let arm, The Mortgage Works, announced this week that it was exiting the LHA market. The move was thought be a result of concerns about the impact of the government’s welfare reforms.

The mortgage provider, which dominates a third of the UK’s buy-to-let market, said that instead of lending on a case by case basis to landlords with LHA tenants, its terms and conditions now made it ‘explicit that local authority tenants are not acceptable’.

The news will be a blow to councils across the country that have growing waiting lists and are increasingly looking to the private rented sector to house tenants who are having their housing benefits capped under the government’s welfare reforms.

Responding to the move, the National Landlords Association warned private landlords would struggle to house tenants receiving local housing allowance - which could lead to an increase in homelessness.

In addition, the NLA said that if a tenant’s circumstances change meaning they have to claim LHA then their landlord would be breaking the terms of their mortgage.

Richard Lambert, chief executive of the NLA, said: ‘There is a great deal of demand from tenants in receipt of housing allowance and if the private-rented sector doesn’t help to support housing provision, many tenants will be left homeless.

‘With this in mind, it is essential that mortgage providers look to lend to landlords of all tenants, irrespective of where they derive their income.

‘Moves such as this will obstruct landlords from investing in much needed affordable housing… There is widespread concern amongst landlords over the introduction of universal credit and this will only add to it.’

NLA research shows that the incidence of landlords letting to LHA claimants has fallen six per cent from the third quarter of last year to 28 per cent in the fourth quarter.

After this story was published Nationwide reversed its decision following pressure from landlords. See the story below for details.