Buy to let landlords 'defaulting on mortgages'

17 December 2009

Written by Steve Olejnik

Buy to let property owners are defaulting on mortgages because of failures in the local housing allowance scheme, the National Landlords Association (NLA) has said.

At present, local housing allowance (LHA) is paid to tenants who must then pass the rent on to landlords.

But many of the claimants are failing to do this and some buy to let property owners are struggling to keep up mortgage payments, the NLA reports.

Shelter recently revealed that 95 per cent of LHA recipients struggle to manage their finances.

Claimants used to be able to choose whether the benefit was paid directly to landlords or to themselves, but now there is no such choice.

A spokesperson for the NLA said that a reform is being called for by every organisation in the private rented sector and housing market.

He stated: "In a financial climate such as we have now, that has been putting significant financial pressure on landlords and so directly contributes towards landlords potentially defaulting on mortgages and accruing large amounts of rent arrears."

The average landlord has had some £4,400 in rental arrears since the LHA was introduced, according to the association.

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