Nationwide's buy-to-let lending arm, The Mortgage Works has announced it will not be lending to landlords whose tenants receive housing benefits. Many experts forecast that this will lead to many people finding themselves without a home.

Previously TMW had been lending to landlords whose tenants were receiving housing benefits but only on a case-by-case scenario. TMW 20 per cent of the BTL market.

A TMW spokeswoman says: “Previously, lending to landlords with local authority tenants was not explicitly referenced in TMW’s lending criteria. Our re-issued terms and conditions make it explicit that local authority tenants are not acceptable.”

The TMW spokeswomen did  re-assure that landlords who were considering remortgaging and had tenants on benefits should not be affected. The reason is that their decision to lend will be based  on rental cover rather than the nature of the tenancies.

It is estimated that 26 per cent of the 3.8 million households renting privately are receiving benefits which accounts for 982,000 households, according to government figures.

A private rented sector consultant David Lawrenson believes that TMW's decision is solely down to the new benefits system, Universal Credit, coming in April. Within the one monthly payment to recipients is the monthly rent and tenants are to be made responsible for paying this to their landlords.

Under the new system of payments the only way that landlords will be paid direct is if the rent goes into arrears.

Lawrenson says: “Under the Universal Credits system, not only will payments be capped but there is also less chance of landlords being paid direct, making it less attractive to lend on this basis.”

Richard Merrick of PIMS says: " I do understand the thinking behind the one monthly payment to people on benefits.

"The question must be asked is if a tenant receiving benefits goes into arrears and the council agrees to pay the rent directly to the landlords, will the council agree to pay the arrears or will they say that is not our responsibility as the rent has already in effect been paid ? "