Nationwide increase monthly payments on fixed rate deal

brit1234

Harry_J wrote: »

We are 2 years into a 5 year fixed rate deal with Nationwide.

Nationwide have written today to say they are increasing the monthly payments by 1.5% as we will have rented the property out for 3 years.

How on earth is it justifiable to vary the monthly payments on a fixed rate deal?

Where is the problem?

Buy to let is a greater fiancial risk to the lender hence you should pay more.

If it was 5 years residential fix and you live their a price increase would of course be wrong.

stamper

"Where is the problem?"

I'm really shocked to see this comment, even more so on a consumer based website.

The 'problem' is that Nationwide appear to be unilaterally changing the contract half way through it. They are imposing a massive increase over the agreed rate because they want to. To suggest that breaking a contract is fair in some circumstances but not in others is indefensible. If you believe the principle that Nwide should be able to change fixed rate deals based on risk, I assume you accept it's fair if your own residential fixed rate goes up if your LTV ever goes above the original threshold?

The only relevant part of this discussion is whether Nwide have the legal right to change rates. Schadenfreude about landlords getting what's coming to them is irrelevant and unhelpful.

ILW

stamper wrote: »

"Where is the problem?"

I'm really shocked to see this comment, even more so on a consumer based website.

The 'problem' is that Nationwide appear to be unilaterally changing the contract half way through it. They are imposing a massive increase over the agreed rate because they want to. To suggest that breaking a contract is fair in some circumstances but not in others is indefensible. If you believe the principle that Nwide should be able to change fixed rate deals based on risk, I assume you accept it's fair if your own residential fixed rate goes up if your LTV ever goes above the original threshold?

The only relevant part of this discussion is whether Nwide have the legal right to change rates. Schadenfreude about landlords getting what's coming to them is irrelevant and unhelpful.

I would suggest that the borrower is also changing the contract. The original loan was for a residential mortgage, so not really unilateral on the part of the lender.

Gorgeous_George

Interesting thread.

I have some sympathy with both sides of the argument but, on balance, I think I'd settle on th OP's side.

I understand that BTL can be a greater risk and that this should be reflected in the premium charged. Perhaps an offer of insurance against this risk could be offered rather than a blanket 1.5% fee. BTL risks are partially offset by increased opportunities for example, if I lose my job I may struggle to pay my residential mortgage. However, if my tenant loses her job and falls behind with the rent, I could have her evicted and find myself a new tenant. She may avoid eviction if she qualified for LHA.

Nationwide, like many other financial institutions, have failed to anticipate the risks to their business. Had they foreseen the risks of unprecedented applications for CTl on their residential mortgages, they may have made the charge from the outset.

I think we may hear more from Nationwide before this year is out. I think they may well be in huge financial trouble and the ConDems might condemn them to the scrapheap.

GG

poppy10_2

stamper wrote: »

The 'problem' is that Nationwide appear to be unilaterally changing the contract half way through it.

The OP took out a contract for a residential mortgage, but has for three years been using it as a buy to let. Therefore it is is not Nationwide unilaterally changing the contract but the OP who is misusing the mortgage he was given to get a cheaper rate. Nationwide may well have stated in the T&Cs of the original mortgage that they reserve the right to charge for consent to let and to add an additional interest rate for this. Until someone posts the full terms and conditions of their mortgage here we don't know for sure.

Vincenzo

ILW wrote: »

I would suggest that the borrower is also changing the contract. The original loan was for a residential mortgage, so not really unilateral on the part of the lender.

The t&cs (2001) said that Nationwide would not unresonably withhold consent to letting so teh borrower has not made any change to the contract. They also stated that they would not change the interest rate within a fixed rate period. They are trying to disguise this interest rate rise as a charge to fit it in with the t&cs.

As I have said before (on another thread) I have no issue with extra charges for letting on a residential mortgage, provided they are not retrospective and punitive. They should reflect the extra admin costs and risk.

stamper

poppy10 wrote: »

The OP took out a contract for a residential mortgage, but has for three years been using it as a buy to let. Therefore it is is not Nationwide unilaterally changing the contract but the OP who is misusing the mortgage he was given to get a cheaper rate. Nationwide may well have stated in the T&Cs of the original mortgage that they reserve the right to charge for consent to let and to add an additional interest rate for this. Until someone posts the full terms and conditions of their mortgage here we don't know for sure.

I agree that if Nwide made clear in their T&Cs that they reserve the right to add a premium in this specific case, then it's completely above board. The problem is that it appears in many cases, my own included, there was never a reference to time limits or additional T&Cs. It was a simple agreement by Nwide to provide a residential mortgage in the full knowledge that the property was let. As Nwide agreed to this arrangement, there is no question of 'misusing' as all parties were aware of the situation.

The devil is certainly in the detail on this one, so we'll see how it turns out.

Vincenzo

stamper wrote: »

We seem to be clouding the issue, and it's an incredibly important one for all of us. Whether it is a BTL mortgage is irrelevant. Whether it's right that a BTL investor gets a residential mortgage is irrelevant. Whether BTL investors make money from this is irrelevant. The only relevant part is whether it is right that Nwide can introduce a large (1.5% on a 5% fix would be 30%) increase on the rate payable on a fixed rate mortgage to which both sides have agreed. Personally I suspect that this would fall foul of the Unfair Terms legislation. The FSA produced a useful document on this point you can find by searching for 'FSA statement of good practice' which seems to suggest that the term would be considered unfair. It is debatable as to whether the FSA actually covers this product as it is a residential/btl grey area, but it seems that the principal has at least been considered and found to be shaky.

Remember that Nwide state that this is due to the risk of default, so if you're feeling like BTL landlords are getting what they deserve here, it's a short step from here to Nwide doing exactly the same thing for your own mortgage if your LTV goes over a certain limit. We absolutely need to establish the principal and precedent in this case.

Great post - this sums up why we should ALL be concerned about this issue, whether you let a property or not and whether your mortgage is with Nationwide or not.

reg1000

We have had the letter too. The letting element is simply a holiday annexe (less than half of the property)for 19 weeks per year. We informed Nationwide as a matter of courtesy, were told by staff at branch and departmental level by phone at the time that there would be NO additional charges made. This is on a tracker mortgage.

I went to see the manager of local branch today. He told me that this has been the case for ten years and staff would never have known that matters could change. He agreed that the actions of the company are not those that are described on their literature open, up-front about charges , honest. I had been thinking of increasing borrowing to fund further improvements. Nationwide will no longer play a part in this.

brit1234

stamper wrote: »

"Where is the problem?"

I'm really shocked to see this comment, even more so on a consumer based website.

The 'problem' is that Nationwide appear to be unilaterally changing the contract half way through it. They are imposing a massive increase over the agreed rate because they want to. To suggest that breaking a contract is fair in some circumstances but not in others is indefensible. If you believe the principle that Nwide should be able to change fixed rate deals based on risk, I assume you accept it's fair if your own residential fixed rate goes up if your LTV ever goes above the original threshold?

The only relevant part of this discussion is whether Nwide have the legal right to change rates. Schadenfreude about landlords getting what's coming to them is irrelevant and unhelpful.

Its a residential mortgage, you have been given a generous 3 year period to consent to let. Buy to let is a far higher risk due to higher percentages of repossesions. So you either live in your property with a residential mortgage or you pay a higher rate for the higher risks with buy to let.

Where is the issue?

You can't have you cake and eat it.