Landlord Lenders Block Tenants on Benefits

As economic conditions worsen and the country slips ever further into a triple dip recession, the number of tenants claiming benefits is likely to increase. Many landlords are reluctant to let properties to tenants claiming benefits because they view them as more likely to default on their rent payments (and with the government announcing a cap on benefits payments that will mean tenants are forced to make up the shortfall from their own pockets, this is not an unlikely prediction).

Why don’t mortgage lenders want landlords letting to benefits tenants?

As I have just pointed out, tenants in receipt of benefits are considered a high risk, which is why a large number of lenders include a restriction in their loan offer documents to prevent landlords letting a property to a benefits tenant.

The restriction on benefits tenants has been in place for a number of years, but as more and more tenants are forced into claiming Housing Benefit—or the new ‘Universal Credit’ as it will soon become—the block on this type of tenant is going to affect an awful lot of landlords whose properties are financed by a loan.

Will the restriction be lifted at any point in the future?

Unlikely, although lenders may have to be a bit more lenient if the percentage of tenants claiming benefits dramatically increases in the next few years. Mortgage lenders use a number of criteria to work out risk profiles and these are constantly evolving, but if lenders don’t change their policies, many landlords may struggle to fill their mortgaged properties.

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