nationwide adding 1.5% on mortgage for letting

chickens123

I took out a mortgage with Nationwide 10 years ago on a lifetime tracker mortgage. For the last 3 years I have let out this property (having obtained permission fron Nationwide first).Today I have received a letter from them saying if I want to continue letting I have to pay an additional 1.5% on the interest rate.This adds a considerable amount onto my monthly mortgage.
Has anyone else experienced this and are Nationwide within their rights to change the terms & conditions like this mid term of the mortgage?

angelsmomma

To be fair it was not Nationwide that changed the terms you did by letting it on a residential mortgage.

They can do this and most now load the rate as soon as you apply for consent to let. You have got away with 3 years so are fortunate.

If you have 25% equity you could change to a buy to let mortgage. It may be time to see a mortgage broker.

mrginge

Yes of course they are.
You're the one asking to change the terms and conditions of your residential mortgage.
Perhaps you would prefer it if they withdrew consent to let?

Imma_Number

http://www.nationwide.co.uk/mortgages/usefulinformation/letting.htm

For customers who have had a letting agreement in place before 1st September 2010 and are continuing to let their property more information can be found here.
Where a Nationwide agreed letting arrangement was in place before 1st September 2010 you will be contacted as follows:
If our records show you have been renting out the property for 3 years or more as at 1 January 2011 and you are outside of your current letting agreement with Nationwide, you will be contacted in December to renew your letting arrangement and this will include details of when the additional letting interest rate will be applied to your account(s).
Or
If our records show you have been renting out the property for less than 3 years as at 1 January 2011, you will be contacted shortly before your 3rd anniversary of letting to renew your letting arrangement and this will include details of when the additional letting interest rate will be applied to your account(s).
Letting application fee
The letting application fee referred to in the new Tariff of Charges PDF is only applicable to new rentals authorised and approved by Nationwide from 1 September 2010.

Caladan

Providing consent to let increases Nationwides risk with the Mortgage, as it is more difficult to repossess a property with legal tenants.

The additional loading on the Mortgage off-sets some of this risk.

It's reasonable to apply this cost in my opinion, as it is not Nationwides fault you rented the property out and therefore affected their security.

May sound harsh, but they could have simply said "Nope, you can't let it out."

_Andy_

chickens123 wrote: »

oday I have received a letter from them saying if I want to continue letting I have to pay an additional 1.5% on the interest rate.This adds a considerable amount onto my monthly mortgage.
Has anyone else experienced this and are Nationwide within their rights to change the terms & conditions like this mid term of the mortgage?

1) Yes I'm sure many people have
2) Yes they are.

Thrugelmir

chickens123 wrote: »

Has anyone else experienced this and are Nationwide within their rights to change the terms & conditions like this mid term of the mortgage?

Consent to let is only ever granted on a temporary basis, the terms of which are at the discretion of the lender. Has been the case for decades.

Disgruntled_Landlord

Hi Chickens 123. Sorry for the delay in picking this up, I just found your query. I, like you have a Lifetime Tracker with Nationwide (NW) and they are charging me the 1.5% Additional Letting Interest Rate (ALIR). I’ve been fighting NW since 2010 when they first announced it. I’m not a lawyer. However I have lots of information gathered from my dispute with NW. Perhaps if someone trained in contract law could offer advice we might have a chance against NW. There may be many others like us.

I do not disagree about the extra costs NW might incur in a let property but that is a separate discussion. It is whether it is lawful for them to introduce the new charge part way through an existing contract that is at issue.


It is in the Terms and Conditions (Clause 12.3) that the crucial wording that allows NW to charge the ALIR is contained. It is a few words “may introduce conditions or be subject to a fee” within a sentence within a subparagraph within a clause (about applying for consent to let, not extra charges) in a 20+ page booklet. To me this is not at all transparent, but NW says it is "clear provision" to charge the ALIR.
However, if NW did not send you the full T&C, you may not have been pre-warned of the charge. My 2008 Key Facts Illustration (KFI) did not mention the ALIR.
According to the Financial Services Authority customers must be issued with full T&C (not just the KFI) whenever they take out a new loan or remortgage because at that point a new contract is formed and customers must know what they are signing up to.


When I remortgaged in 2008 (my 4th NW loan since 2003); NW did not issue the T&C with the remortgage correspondence (nor were they issued in 2003 or 2005). I therefore argued that I was not pre-warned about the ALIR before the new contract was concluded (see Thornton v Shoe Lane Parking). NW replied saying that there was no new contract because they consider my remortgage to be a “Product Conversion” and say that a “Product Conversion” does not count as a remortgage. I asked NW to tell me the legal differences between the two; they offered none and talked only about common practice in the industry.


Back to your question, “are Nationwide within their rights to change the terms & conditions like this mid term of the mortgage?” Well, I think the answer is "No", because the contract is what both sides signed up to; but if they pre-warned you about extra charges before you signed up to the new loan they can enforce the ALIR. So, some questions for you:


1. Did you have a mortgage with NW before the current Lifetime Tracker?


2. Were you issued with the terms and conditions booklet when you took out your Lifetime Tracker?


3. Did NW term your loan a “Product Conversion”?


4. Did NW explain the difference between the two terms?
Please reply, I would like to compare experiences. Also, if anyone else is in this situation or has useful knowledge, please contribute.

marathonic

Yes, they can change the conditions and, if it came to it, can probably force you to pay off your mortgage in it's entirety. You signed up for a residential mortgage. There will be a clause in it about it either being unsuitable for letting or an additional fee/condition if it were let.

Some people may feel that this should be highlighted in capital letters on page 1 as opposed to within a clause on page 'X' of a 'Y' page document. Why should it? The fact that additional charges may apply if a property is let is not a key fact of a residential mortgage.

holly_hobby

Once you're under consent to let all bets are off, as you are essentially operating outside of the residential mge T&Cs with the lenders tacit consent, as BTL lending is unregulated.

Consent to let is essentially for accidental landlords (which is why you typically have a 3yr shelf life), after which you are classed as BTL business with commerical rate (ie the loading) reflecting the unintended exposure with the lender now having a mge on a commercially let unit - indeed some lenders add a loading from outset, so if they've left you on residential rates for any period you've done well.

If you're unhappy with the rate, and you have a suitable LTV, you could look to remortgage onto a BTL arrangement with an alternative lender (subject to you being happy with the fees and meeting their criteria).

Don't forget that mortage interest is a permitted deduction from gross rental receipts.

Hope this helps explain Nwides actions.

Holly x

Disgruntled_Landlord

Marathonic
Hi
I don’t think it’s a question of “some people feel” it’s the law. I did mention Thornton v Shoe Lane Parking. In his judgement Lord Denning held that “the more onerous the clause, the better notice of it needed to be given.” As it massively increased my mortgage repayments, to me it was extremely onerous.
Additionally, I think that such clauses are covered by Office of Fair Trading guidance in their 1999 Unfair Terms in Consumer Contracts guidance. Specifically
“Binding consumers to hidden terms…
Schedule 2, paragraph 1, states that terms may be unfair if they have the object or effect of… irrevocably binding the consumer to terms with which he had no real opportunity of becoming acquainted before the conclusion of the contract…”
And
“Terms which have the effect of making consumers agree to accept obligations of which they can have no knowledge at the time of contracting are open to serious objection. It is a fundamental requirement of contractual fairness that consumers should always have an opportunity to read and understand terms before becoming bound by them.”
Nationwide justifies the ALIR by a non-specific catch-all statement, deep in a lengthy document. A statement that was not brought to my attention when the loan was taken.

Holly Hobby
Thanks for your contribution.
Is it your view that the issuing of consent to let amends or replaces the original contract?