According to the trade magazine Mortgage Solutions, lenders are increasingly unlikely to offer a mortgage to landlords whose tenants are on benefits. With the economic climate as it is this may not be surprising, as tenants on benefits run the risk of not being able to keep up with rent payments on buy to let mortgages UK wide.
One issue is that payment of housing benefits are made directly to tenants, and this has caused some frustration among professional landlords, as they fear they may not receive their rent in a timely fashion. Another issue is that government proposals to cap housing benefits may result in some tenants being unable to keep up with their agreed rent payments. Moreover, if a tenant is unable to keep up with their rent for whatever reason, this in turn affects their landlord’s income, who may struggle with their own mortgage repayments.
Signs show that landlords recognise the affect non paying tenants might have on them; a survey by Rightmove suggests 61% of current landlords are planning a rent freeze for 2013. This indicates that landlords will be generally taking a softer approach to the rise in rent in 2013.
The research also found that around a fifth of tenants are already spending 50% or more of their take-home salary on their rent and landlords are generally recognising that some tenants are approaching their maximum rent affordability. It may make financial sense by the landlord to avoid squeezing tenants too much. In the event a tenant gets into cash-flow trouble, this will affect the landlords themselves as they may get into repayment difficulty with their buy to let lender.
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YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
Capital Fortune Ltd is an Appointed Representative of HL Partnership Limited which is authorised and regulated by the Financial Conduct Authority.
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