Buy to let mortgage lenders are stopping landlords renting private homes to tenants claiming state benefits.
The list of lenders includes BM Solutions, the specialist property investment arm of state-owned Lloyds Banking Group.
Other lenders with a no-go rule for tenants on benefits include Accord, a subsidiary of the Yorkshire Building Society.
The bar is not new – mortgage lenders have had the rule in place for several years and the terms are written in to landlord loan offers.
The issue is coming to the fore as more prospective tenants look to rent because they cannot raise a deposit to buy a home of their own.
Also, more family breadwinners are losing their jobs and make up their rents from benefits.
BM Solutions spokesman said: “Through our buy-to-let criteria, we are actively managing the risk profile of this type of lending.
“Historically, this type of tenant has been of a higher risk, and this is reflected in our criteria. We are currently reviewing this aspect of our lending criteria, and will communicate the outcome of this review when appropriate.”
In his autumn statement, Chancellor George Osborne announced universal credit would replace a range of benefits from April next year – and that housing allowances would be capped at 30% of the local median.
That means tenants will have to dig in to their own pockets to top up housing benefits.
Chris Maggs, Accord’s national account manager for buy-to-let, said: “We do not lend to landlords renting to tenants receiving state benefits or local council housing benefit.
“We are a relatively new entrant into the buy-to-let market, and as a responsible lender have taken a cautious approach, with a focus on financially sound borrowers who already have some buy-to-let experience.
“Our range of mortgages and lending policy is continually evolving and we would not rule out changes in the future to satisfy requirements of the private rental sector, provided applicants meet our fundamental requirements of being experienced buy-to-let borrowers with a good financial track record.”