Urgent action is needed to tackle discrimination against benefit claimants by mortgage providers, according to the Residential Landlords Association (RLA), which has found lenders representing 90% of the buy-to-let market refuse a loan where a tenant is on housing benefit.

On Saturday, the Guardian revealed how NatWest told one landlord that she would either have to evict her tenant of two years, or take her mortgage business elsewhere, after a blanket ban by the bank on benefit claimants.

The bank’s stance came to light after Helena McAleer, who lets out a home in Northern Ireland, approached NatWest to remortgage her loan.

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She refused to evict her tenant, a vulnerable older woman who always paid the £400-a-month rent on time for more than two years, and instead moved her loan to another provider. She has since launched a petition calling for an end to such discrimination.

Research carried out by the RLA’s mortgage consultants found that two-thirds of lenders representing 90% of the buy-to-let market did not allow properties to be rented out to those in receipt of housing benefit. About 4.2 million people in the UK claim housing benefit.

The RLA has called on the government to use the influence it has in banks in which it has shares to end these discriminatory practices. It said they could breach the Financial Conduct Authority’s “treating customers fairly” agenda and may contravene equalities law.

David Smith, the 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.”

A UK Finance spokesman claimed most lenders did not place restrictions on landlords letting to benefit claimants. “Any landlord wanting to let to tenants in receipt of benefits should be able to find a lender that will allow this,” he said.