Is this interest rate rise legal?

melissadasilva

I've got a commercial mortgage with Nat West for a shop which I bought 4 years ago for my SIPP. In my initial agreement with NatWest, my interest rate was 2% above base rate, so I currently pay 2.5%. Last month they wrote to me, offering me the chance to fix for five years at 4.5%, as they said they thought interest rates would soon rise. However, they also said if I didn't decide to fix, I'd have to start paying an extra 1% interest, as the cost of borrowing has gone up. I rang them to challenge this and they said I'd find it in the small print of my agreement with them. I haven't had a chance to check this yet, but can they suddenly do this? It seems ridiculous to agree to an interest rate for the term of a mortgage when they can change it when they want. Is it worth challenging?

Thrugelmir

Read the small print of your contract as you have a commercial loan which is different to to a residential mortgage. You are not protected by consumer legislation as this is a business transaction. The FSA does not regulate commercial loans either.

You still have a very competitive interest rate for the borrowing. So grounds for appeal are very limited. As a 1% interest rate rise is not excessive.

Pincher

melissadasilva wrote: »

Last month they wrote to me, offering me the chance to fix for five years at 4.5%, as they said they thought interest rates would soon rise.

Tell them there is no need to change the deal, because the interest rate will rise very soon, based on a very reliable source: their own letter. :rotfl:

They are obviously wriggling because they expect interest rate to stay low for the long term.

melissadasilva wrote: »

However, they also said if I didn't decide to fix, I'd have to start paying an extra 1% interest, as the cost of borrowing has gone up.

If this argument holds, then the next letter will say, sorry to increase your rate, our office rent just went up, followed by we just had a 3% pay rise for our employees, etc.


Doesn't mean you can win, of course.