Consent to Lease

Jet8

Please help me someone. 3 years ago I got a consent to lease on my residential property as I got a new job in a different area. The Halifax hiked my fixed rate up to 6.99% and charged me £500 for the pleasure. This consent is just about to run out and they now tell me I have to 'buy a new product' - either a fixed at 5.94% with a fee of £1249 or a variable at over 6% with a fee of £599.

The original mortgage description giving the consent to lease told me I would revert to the SVR at the end of the three years - in fact, an advisor even told me as much in August when I rang.

My rental income comes nowhere near the mortgage (thanks to Halifax) and I have a flawless repayment record. Now they want ANOTHER fee of £1249 and say they have changed the policy of switching me back to the SVR.

A threatening letter tells me I must either buy a new product or be in breach of the terms and conditions of my mortgage. If I do nothing, they will charge me 5% (1.5% above base) but I am frightened by what the implications of this are. Advisors on the phone seem to hint that the Halifax can't do anything else and that maybe this is a cheaper option but I'm unsure. Is there a loophole here?

I am clearly not using this as a money-making scheme, but want to keep the house as my parents live 3 miles away and may wish to live in the house at some point. OR my husband and I may want to move back there.

Is anybody in this position? Can anyone advise. Thank you.

opinions4u

Basically there is little that you can do.

Pay the 5% (no other implications other than it's variable nature). take a product or take out a buy-to-let mortgage elsewhere.

You took out a residential mortgage and then chose not to reside. Personally I'd sell.

My rental income comes nowhere near the mortgage (thanks to Halifax)

Why is it always the lender's fault?

GMS

It is not the fault of Halifax that the rent does not cover the mortgage. Halifax granted a residential rate on teh understandong you were to live there. When you choose to rent it becomes commercial and they are within their rights to load the interest rate to reflect the extra risk.

What is your property worth?
What do you owe on the mortgage?
How much is the rental income per month?

Jet8

opinions4u wrote: »

Basically there is little that you can do.

Pay the 5% (no other implications other than it's variable nature). take a product or take out a buy-to-let mortgage elsewhere.

Thanks for reply but is this the case? ie no implications? Can I leave this 'deal' at any time?

Why is it always the lender's fault?

Because lender changed my original rate (5.4%) to 6.99% and charged me to do this! If it's 'more of a risk' once you start to let a property, why make it even harder for me to meet payments?! Illogical. Halifax seem determined to make it harder.

dimbo61

Have you looked at the rates for a BTL mortgage ? and the fees on top 2/2.5%.
Did you put down a good deposit ? the more you pay off the mortgage then the better the BTL rent works out.
By the way most BTL mortgage now require a 25/40% deposit think Bradford and Bingley!

opinions4u

Jet8 wrote: »

Because lender changed my original rate (5.4%) to 6.99% and charged me to do this! If it's 'more of a risk' once you start to let a property, why make it even harder for me to meet payments?! Illogical. Halifax seem determined to make it harder.

It's harder to repossess a property with a tenant in it. Arrears levels are higher on properties where the owner does live in them. You are a higher risk.

Higher risk lending requires the lender to set aside more capital to comply with regulatory and accounting requirements in order to cope with the increased risk of making losses.

It isn't the lender's fault that you chose to let your property out, and it seems right that you (rather than a cross-subsidy from other borrowers complying with their original mortgage terms and conditions) should pay a higher rate to reflect their increased risk of losing money.

Jet8

dimbo61 wrote: »

Have you looked at the rates for a BTL mortgage ? and the fees on top 2/2.5%.
Did you put down a good deposit ? the more you pay off the mortgage then the better the BTL rent works out.
By the way most BTL mortgage now require a 25/40% deposit think Bradford and Bingley!

Thanks Dimbo61. Will have a look at Buy to Lets and rates. Appreciate your reply.

Jet8

opinions4u wrote: »

It's harder to repossess a property with a tenant in it.

I appreciate you taking the time to reply. I can see why you think a higher lending rate is justified. I still can't understand however why a new product such as this requires such a massive fee (£1249) - according to the FSA, fees charged are supposed to be comparable with other lenders; the Halifax are way more expensive than anyone else.

GMS

Jet8 wrote: »

opinions4u wrote: »

It's harder to repossess a property with a tenant in it.

I appreciate you taking the time to reply. I can see why you think a higher lending rate is justified. I still can't understand however why a new product such as this requires such a massive fee (£1249) - according to the FSA, fees charged are supposed to be comparable with other lenders; the Halifax are way more expensive than anyone else.

Some Buy to Let lenders have arrangement fees of 3% of the loan so can become huge.

Arrangement fees vary so much it is hard for any fee to be classed as non comparable.

Zero fees mean higher rates and vice versa in general.

opinions4u

Jet8 wrote: »

I appreciate you taking the time to reply. I can see why you think a higher lending rate is justified. I still can't understand however why a new product such as this requires such a massive fee (£1249) - according to the FSA, fees charged are supposed to be comparable with other lenders; the Halifax are way more expensive than anyone else.

There is a difference between arrangement fees and product fees though, and in this case the £1,249 is a product fee.

The FSA is not saying that lenders should charge the same rate and product fee as that would be anti-competitive.

Although I haven't noticed a debt or LTV, comparing the Halifax numbers to a typical BTL deal and you are there or thereabouts.

I'd still sell up in your circumstances.

(Sorry it's not what you'd like to hear)

dimbo61

Another thing to take into consideration is Capital gains tax ?
If you rent out for more than 3 years you may well have to pay it for any profit you make on the property since you bought it!
BTL mortgages are not regulated by the FSA