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Lenders must axe unfair restrictions for tenants on benefits – Heron

by: John Heron, managing director of mortgages at Paragon Bank
  • 15/10/2018
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Lenders must axe unfair restrictions for tenants on benefits – Heron
The UK’s Private Rented Sector (PRS) has come a long way over the last 25 years.


Now home to one in five UK households, the sector has demonstrated an unparalleled flexibility to provide short and long term accommodation to single people, couples and families on different incomes and at different stages in their lives.

Buy-to-let finance helps to fund an estimated 30-40% of PRS homes and many of these homes include tenants in receipt of benefits.

While as lenders we can’t dictate who a landlord lets their property to, we can encourage an inclusive PRS by making sure that our mortgage conditions don’t unnecessarily or unfairly prevent landlords from letting to any particular group of tenants.

As a seasoned buy-to-let lender, at Paragon we have extensive data stretching back over two decades and we can categorically state we have seen no evidence whatsoever to link any particular group of tenants – including tenants on benefits – with a trend in higher mortgage arrears or losses.


Should not take regulation

Our approach has always been to focus on the sustainability of the rental value of each individual property with due regard to its condition, location and local competition.

This involves careful and often time-consuming valuation work from our expert surveyor team.

It’s this careful underwriting and valuation work that provides us, as a lender, with the central assurance that we need: the assurance that a competent landlord will be able to achieve a rent to meet their costs.

This is irrespective of whether some of the income used to pay that rent comes from government or local authority benefits.

At Paragon we have campaigned for some years within the industry for lenders to do away with unfair and unreasonable restrictions on lending to landlords who let to tenants in receipt of benefits.

We would favour an industry-wide agreement to get rid of these type of restrictions and have championed this through UK Finance.

It should not take regulation or legislation to get lenders to do the right thing.


Mortgage Solutions last week reported on a case where NatWest asked a landlord letting to a tenant on benefits to choose between finding a new tenant or paying thousands of pounds in early repayment charges to find a new lender

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