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NatWest tells landlord to evict tenant on benefits or pay £2.5k in ERCs

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  • 10/10/2018
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NatWest tells landlord to evict tenant on benefits or pay £2.5k in ERCs
State-backed lender NatWest told one of its landlord customers to throw out a vulnerable tenant claiming housing benefits or stump up thousands of pounds in early repayment charges and find another lender – after digital broker Habito admitted incorrectly advising the customer.

 

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.”

There are 12 Comment(s)

12 responses to “NatWest tells landlord to evict tenant on benefits or pay £2.5k in ERCs”

  1. John Azopardi says:

    I realise that some lenders do not allow DSS tenants. But if this situation comes to light subsequent to the purchase or remortgage – isn’t there a more deisrable way of dealing with it? Perhaps a higher interest loading to reflect what the lender perceives as a greater risk (although I am not sure there is a higher risk). The proposal in the headline of this story seems excessive to the risk. I mean, what do lenders do if tenants start to claim benefits part way through a tenancy because of a change in work circumstances?

  2. Lisa Peach-Hill says:

    Its hugely discriminatory towards people who claim benefits, and the practice of mortgage lenders restricting lettings to only working people should be banned outright. There are so many reasons people end up on benefits, often its not by choice. The days of benefits being a “lifestyle” choice are well and truly over given recent changes in support to unemployed and disabled people.

    Many working families receive housing benefit and other benefits to supplement their income.

    I don’t think the interest rates should be loaded at all – Tenants have a tough time as it is, with lack of security, inability to save deposits because of high rents, and substandard property conditions.

    WE ARE IN A HOUSING CRISIS, WHY MAKE THINGS ANY HARDER THAN IT ALREADY IS FOR THOSE UNABLE TO BUY A HOME?

    Its difficult enough for a tenant to get a private rented property whilst on benefits, without lenders making the situation worse by having restrictions on who is able to reside in a buy to let property.

    Lenders have a social responsibility in working directly with the housing sector. There are plenty of safeguards in place for borrowers with mortgages who face financial difficulty. Why insist a vulnerable tenant is evicted for a mistake someone else made?

    We talk about discrimination on grounds of race, sex, religion, disability and its a big deal. Discrimination against people on benefits seems swept under the carpet in my view. This should be a legal form of discrimination also.

    • Jini Mittal Coroneo says:

      I never rent to people on benefits, they may not be any more inclined to cause damage but they are 100% more likely to not pay rent. It is perfectly reasonable to not rent to those on benefits, landlords aren’t providing charity they are running a business just like anybody else.

  3. They should know better says:

    There is no such thing as the Department of Social Security or DSS tenants. If that’s actually what the policy says, carry on, as they are clearly 17 years out of touch.

  4. Designer Devices says:

    I don’t really see how NatWest is made out to be the enemy here. They clearly publish their lending criteria and it was never a suitable product for this customer. They can afterall choose who they want to lend their money to…

    The real blame lies with the broker who recommended this product.

    • Maffi Oxford says:

      Because it is a stupid, discriminatory, biased rule to have. The bank have nothing to lose, all of the risk is with the borrower.

      • Designer Devices says:

        There is little point in explaining contract law to you. If you engage in a contract regardless of how you view the rules, you are obliged to stick to that agreement. Simple.

        • Maffi Oxford says:

          Well let me explain some thing to you. A contract has to be beneficial to both parties the only reason these bastards get away with this crap is because they’ve the money to fight little people who don’t have the smarts or the money to fight back.
          Buy to let mortgages are more expensive than buy to own. It is thus because banks want a share of the profit while you take the risk. This is not beneficial to the borrower. The contract is then a bad contract.

  5. Paul Barrett says:

    It matters not what the tenant type is.
    The dysfunctional eviction process applies to any tenant.
    A HB tenant can stop passing on rent the same as any other non-HB tenant.
    The idea that a HB tenant would damage a rental property anymore than a non-HB tenant is for the birds.
    HB is coin of the realm just like the non-HB tenant’s rent payment.
    There are many other reasons not to take on HB tenants.
    Lenders should not be discriminating against HB tenants.
    That is for the LL to do who make a business decision on who to take on as a tenant.
    The lender bases a lender decision on the figures stacking up to meet the lender criteria.
    That is all that is required of the lender.
    How the LL chooses to meet the monthly mortgage payment is up to the LL.

    LL have many more BUSINESS decisions to make when considering DSS tenants.
    It is none of the lender’s business who a LL takes on as a tenant providing the tenant has the Right To Rent.

  6. Jini Mittal Coroneo says:

    As they should have. If you have no marketable skills or are too lazy to get a job then live within your means, just like the rest of us do.

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