NatWest ends buy-to-let mortgage lending block on benefits tenants
The policy change will apply from today to new and existing customers and cover all UK brands within the Royal Bank of Scotland (RBS) group, including RBS and Ulster Bank.
The block on tenants receiving benefits was highlighted by McAleer who was told by NatWest to either remortgage with another lender or evict her vulnerable tenant claiming benefits.
The national outcry, which included protests at branches, caused NatWest to undertake “an extensive review” of its buy-to-let policies “to better understand the market and challenges that landlords and their tenants face.”
And the lender has now formally backed-down after completing the three-month long review.
The changes will affect new and existing landlords with fewer than ten properties, bringing the policy in line with the one for commercial buy-to-let customers who have more than 10 properties.
The bank has also decided to extend the maximum length of time of assured shorthold tenancy from 12 months to 36 months, which allows landlords to offer tenants the security of longer tenancies.
NatWest said it will be communicating with existing customers to update them on the amendments, as well as updating websites and other customer-facing channels.
Other lenders take action
Minister for housing and homelessness Heather Wheeler said the announcement by NatWest would help open up the private rented sector to people who need it most and she encouraged other mortgage providers to take similar action.
“I want everyone to have the security, dignity and opportunities they need to build a better life – at the heart of which is ensuring everyone can find a safe and secure home to call their own,” she said.
The government has also moved to tackle “No DSS” advertisements for tenants.
One in five receiving benefits
The Residential Landlords Association (RLA) assisted NatWest with its review and said it “warmly welcomed” the changes.
Policy manager John Stewart said: “Around 20 per cent of all private sector tenants are in receipt of benefits and we need to do all we can to support them to find the homes they need.
“NatWest’s decision will make it easier for landlords to rent to benefit claimants, and agree long term tenancies where suitable. We urge other lenders to follow this lead.”
NatWest managing director of home buying and ownership Ian McLaughlin, said: “I am pleased we are introducing these changes and extending our policy to support smaller landlords in this segment of the market.”
He thanked the RLA and Shelter who also supported the review.
Nationwide Building Society added its voice to those believing banning tenants on benefits was unfair and called for other lenders to join it.
Nationwide director of home proposition Paul Wootton said: “Everyone should be able to access a safe and secure home suitable for their needs.
“The continued presence of ‘no DSS’ restrictions in the private rented sector is unfair and denies this right to a significant group of people.
“Nationwide does not put this type of restriction in its buy to let mortgages and we urge others – lenders, agents and landlords – to act now to change this outdated practice.”
NatWest forced to shut branches by protests over landlord benefit policies
The lender currently does not accept buy-to-let applications where tenants are in receipt of benefits.
Mortgage Solutions last month revealed the case of NatWest landlord customer Helena McAleer, who was told find a new provider or evict her tenant on benefits when she went to the bank for a remortgage.
Campaign groups including the Londoners Renters Union and Living Rent, alongside community-based union Acorn organised protests against policies at NatWest branches across the country over the weekend.
One branch in Stratford, London, as well as another in Bristol were closed by the action, according to reports.
McAleer attended the protest in Bristol.
She has launched a petition calling for the government to ban buy-to-let lenders from discriminating against tenants on welfare.
NatWest promised to review its policies since the case came to light.
However, in correspondence with the work and pensions select committee (WPSC) bank chief Ross McEwan said the reflects “evidence that rental arrears are much greater in this segment of the market and we are satisfied that this restriction does not contravene equality legislation”.
The MP committee last week said regulation may be needed to force lenders to change their policies.
A spokesperson for the London Renters Union said: “We plan to keep the pressure on NatWest until it drops its ‘no DSS’ clause.
“The housing crisis is bad enough already for people on low incomes without the added pressure of benefit discrimination.
“Renters claiming housing benefit face huge difficulties finding housing because landlords and agents won’t rent to them.”
Lenders’ no DSS policy a ‘return to wicked days of housing discrimination’ – MPs
The work and pensions select committee (WPSC) published correspondence with NatWest chief executive Ross McEwan regarding the case of landlord Helena McAleer, first published by Mortgage Solutions.
She was refused a remortgage by the lender because her tenant was in receipt of welfare support.
The committee said it is “deeply concerned” about mortgage providers preventing landlords from renting to benefit claimants.
The situation is exacerbated by the “desperate shortage of affordable housing and the large numbers of claimants now dependant on the private rented sector”, the WPSC added.
Chair of the committee MP Frank Field said by operating ‘no DSS’ policies banks have returned to the “wicked old days of housing discrimination”.
He added that under these criteria claimants are effectively “blacklisted for housing and at risk of being senselessly evicted for no greater crime than receiving housing benefit”.
McEwan told the committee of the bank’s “extreme disappointment” with the way the case was handled, claiming it “did not reflect the values of [the] organisation”.
However, the bank chief added that the policy reflects “evidence that rental arrears are much greater in this segment of the market and we are satisfied that this restriction does not contravene equality legislation”.
NatWest has promised to review its policies.
Field added: “NatWest is now taking a look at its policy, and other mortgage lenders will no doubt follow suit.
“If the change we need to protect people is not forthcoming voluntarily, we may need to look to regulation.”
Following her experience with NatWest, McAleer started a petition calling on the government to ban buy-to-let lenders from discriminating against tenants on welfare.
Mortgage Solutions backs landlord’s campaign for action on lender discrimination against tenants on benefits
Helena McAleer was told by NatWest that she would have to either evict her tenant on benefits or pay thousands of pounds in early repayment charges and find a new lender.
She has since started a petition calling for the government to stop mortgage providers from discriminating against welfare recipients, which Mortgage Solutions is supporting.
The campaign has already received more than 1,500 signatures and we are calling on our readers to also put their name to the petition.
The Residential Landlords Association (RLA) has also backed the campaign.
Difficult to place
NatWest said McAleer breached her mortgage terms by hosting a tenant in receipt of benefits. Brokers have also said that placing these cases can be difficult.
McAleer told Mortgage Solutions: “I believe that when someone sees discrimination or something that is fundamentally wrong, and they have their ability to use their voice to call this out when others don’t, then they should use their voice – I only recently found mine.
“We are lucky to live in a world where determined individuals can make an impact on the world in ways that might not have been possible before.”
A NatWest spokeswoman said: “The bank has specific lending criteria and is not able to offer mortgages in certain circumstances, which are made clear on a customer’s terms and conditions.
“There are alternative providers who may be better suited for customers in these circumstances.”
‘FCA must investigate’
The Residential Landlords Association (RLA) is sending a letter to John Glen, the Treasury minister for banking, calling for change.
The trade association wants the government, as one of NatWest’s biggest shareholders in parent company RBS, to use influence to end discriminatory practices.
The Financial Conduct Authority and the Bank of England should investigate the extent of the problem and prepare plans to end it, as the practice breaches the Treating Customers Fairly principle, the RLA added.
Furthermore, the Equalities and Human Rights Commission should undertake a review of whether such practices breach equalities law, it added.
David Smith, policy director for the RLA said: “With growing numbers of benefit claimants now relying on the private rented sector, it is shameful that many lenders are preventing landlords renting property to some of the most vulnerable in society with little or no justification.
“The banks have had long enough to get their house in order. It is now time to take firm action to stop such unjust practices.”
NatWest tells landlord to evict tenant on benefits or pay £2.5k in ERCs
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.”