Helena McAleer was reduced to tears after NatWest said she had breached her mortgage terms by letting her two-bedroom property in Belfast to a tenant in receipt of support from the state.
The 35-year-old was given the stark ultimatum of making her tenant homeless or footing a £2,500 bill to leave the NatWest deal, after asking for a further advance from the lender.
The tenant is an older woman, who suffers from mental health problems and would likely struggle with the moving process, according to McAleer.
She told Mortgage Solutions: “I was angry at the fact that another human being could ask me to kick out another human being.
“It was very black and white… they don’t think about that person, you’re just an anonymised piece of data… that’s what hurt me, that’s not fair.”
She added: “[The tenant] is a vulnerable older lady, she has mental health issues; I’m not putting her out on the street.”
Couldn’t ask for a better tenant
The marketing innovation manager remortgaged to NatWest in January through broker Habito, providing information about her tenant’s situation to the digital adviser.
But when she approached NatWest about taking money out of the property to buy in London in September, the lender said it had not been disclosed that the tenant was in receipt of government support.
McAleer refused to remove the tenant and asked NatWest to reconsider.
The tenant has been in place since 2016 and is set to stay for the foreseeable future.
McAleer said: “I have no doubt the tenant will be there for many years which, as a landlord, is great to know.
“Long-term security and payments, I couldn’t ask for a better tenant.”
But NatWest said it would not change its stance.
A spokeswoman for the lender said: “The bank has specific lending criteria and is not able to offer mortgages in certain circumstances, including where the applicant or broker has advised they want to let the accommodation to Department of Social Security tenants.
“There are specialist providers who are better suited for customers in this circumstance.”
Habito admitted that it should not have advised McAleer to take out a deal with NatWest.
The digital broker is to pay any early repayment charges, as well as additional costs including new mortgage fees and charges.
A spokeswoman for Habito said: “We are aware of this issue and have been working with Ms McAleer to resolve it.
“We fully acknowledge that the buy-to-let mortgage product we initially advised her on was not appropriate, in light of Natwest’s policy on DSS tenants.
“With that, however, we are currently advising Ms McAleer on a remortgage and we will be bearing all the costs associated with it.
“Ms McAleer will not be financially impacted by this, nor will she need to make any changes relating to her current tenants.
“Great customer service is of the utmost importance to us at Habito and we look forward to resolving this matter swiftly and to Ms McAleer’s complete satisfaction.”
McAleer has now started a petition to ban lenders from discriminating against welfare recipients.
Lenders have outdated attitudes
Only last month, Theresa May said too many people in society “look down on” social housing and called for a change in attitudes.
A number of brokers told Mortgage Solutions it is difficult to find deals for landlords with tenants on benefits.
Too many lenders have “draconian criteria” based on particular views of tenants on benefits, according to Steve Olejnik, managing director of Mortgages for Business.
He said: “It’s a very outdated view of the type of property that attracts people on benefits… that they’re not going to look after the property properly and therefore going to potentially damage the security.
“I just think it’s wrong.”
Whether a tenant is on benefits shouldn’t affect the risk of the mortgage, so in theory there is no reason why banks or building societies will not lend, Olejnik added.
He said: “Lenders are underwriting the landlord. A decision to lend should be based on the borrower’s credit profile and ability to pay along with the quality of the security provided.
“It is irrelevant whether the tenant is in receipt of benefits and should not add any bearing to the risk decision.”
Olejnik has called for legislation to stop lenders discriminating against tenants.
Paragon is one lender that accepts landlords with tenants on benefits and has found no connection with arrears.
John Heron, managing director of mortgages at the lender, said: “We’ve always supported landlords letting to tenants in receipt of benefits, in part because we believe it’s a responsible business approach, but also because we haven’t seen any link whatsoever between mortgage arrears and the form of tenancy.”
UK Finance insisted that many lenders are willing to lend in these circumstances.
A spokesman for the trade body said: “Most lenders do not place restrictions on landlords letting to benefit claimants, with each lender’s policy varying according to their commercial business model.
“Any landlord wanting to let to benefit claimants should be able to find a lender that will allow this.”
Accord, BM Solutions, HSBC, Keystone and the Mortgage Works (TMW), owned by Nationwide, are among lenders that told Mortgage Solutions they will consider these landlords.
Simon Nunn, executive director of member services at the National Housing Federation, said: “While there are still a handful of lenders that operate these kinds of outdated policies, the majority have abandoned these restrictions.
“Rightly, they recognise that banning tenants on housing benefit is both unfair and unenforceable, based on false assumptions and stigma attached to people who receive welfare support.
“We’d encourage all lenders to follow suit by scrapping these restrictions – there needs to be a step-change across the sector to get away from the view that tenants on housing benefit are unwelcome.
“This needs to be matched by renewed commitments from letting agents, insurers, landlords themselves and the government that they will not allow people on housing benefit to be excluded from the rental market.”