MSE News: Buy-to-let borrowers hit by West Brom mortgage hike

AGBAGB

But I should point I'm not down in London and not raising rents has been possible because of the reduced financing cost. With other landlords with similar rates, competition has seen rents here only rise by a few percent. (well below any measure of inflation)

Don't be mislead by headline figures you read in the papers (they are the ones prone to scaremongering)

AGBAGB

duplicated can't delete

kingstreet

AGBAGB wrote: »

These lenders have targeted Landlords first because they think public prejudice will dampen support

I suspect landlords have been targeted because BTL lending is not regulated, has less consumer protection as a consequence and the landlord is deemed a "professional" investor and expected to be more aware than your average borrower.

Not to suggest this should be permitted, but just a clarification of the likely lender reasoning.

AGBAGB

kingstreet wrote: »

I suspect landlords have been targeted because BTL lending is not regulated, has less consumer protection as a consequence and the landlord is deemed a "professional" investor and expected to be more aware than your average borrower.

Not to suggest this should be permitted, but just a clarification of the likely lender reasoning.

They come up with a unilateral decision that Landords with at least three properties are "professional" investors. Despite the fact that the mortgages aren't classed as commercial mortgages and the properties can not be classed as business assets.
A Landlord would be doing very well indeed if he/she could make a living income off 3 properties, most at this level will have a job as a main source of income or be retired.

Thanks for agreeing that lenders shouldn't miss-lead, solicitors and mortgage advisers and therefore customers in to believing one thing and then doing another.

holly_hobby

AGBAGB wrote: »

Despite the fact that the mortgages aren't classed as commercial mortgages and the properties can not be classed as business assets.
.

But BTL mortgages are commercial finance, albeit technically semi-commercial, and as the mortgagor is considered to have obtained independent advice/be a prof client, they aren't regulated - Kings has explained what unregulated lending equates to for the borrower.

However on the flip side, because they are unregulated, this also means that lenders remain permitted to market and offer standalone interest only (ie no independent repayment vehicle) mortgages, where for the residential market many providers have withdrawn from this type of business and/or have strict requirements and verification regarding suitable repayment vehicles following FSA (now FCA) requirements - this is again down to the fact that the mortgagor is considered to be a sophisticated (eg experienced/understands risk) investor.

In fact, before the term BTL and market opened up following ARLAs initiative, such mortgages were called, marketed and sourced under their true title of semi-commerical borrowing, and pre BTL which opened such finance to all and changed the assessment (introduced late 90s from memory), were really only available to professional landlords or the self employed with SE books.

Moreover, as seen with the recent BOI tracker hike, a lender can implement rate changes, which may seem and in are some cases, excessive to the end user, under the special circs rule and generally instigated to keep the business profitable.

I can appreciate it must be incredibly frustrating, especially if you run the property's self sufficency and yield, on a tight margin to attract long term tenants etc, but in reality if you can't or don't wish to pass on some or all of the cost to the tenant, you need to look at the remortgage market (if status and rental margins meet criteria), as no matter how many of you stamp your feet, try class actions or whatever (even if morally it may be understandible), you must recognise that a lender is permitted to run and manage their business, in a way that whilst adhering to regulation, also maintains its profitability (and with unregulated borrowing its rather a kangaroo court as to what they can do) and manage risk exposure ...... which is where the hike is coming from IMHO they want to reduce their (traditionally risky) BTL book and exposure.

Perhaps an hour with a WOM broker will give you some options ?

Hope this helps .... even if not music to your ears ..

Wish you well

Holly xx

Thrugelmir

AGBAGB wrote: »

They come up with a unilateral decision that Landords with at least three properties are "professional" investors. Despite the fact that the mortgages aren't classed as commercial mortgages and the properties can not be classed as business assets.

Property letting is a business not investing. With 3 properties the risks are magnified. Even more so if the original underwriting was lax ,and the empire was build entirely on borrowed money , i.e. released equity.

AGBAGB

Thanks Holly,
Some interesting points and background to issue.

I totally agree, lenders can alter things if its legal under the contract. That's the crux of the matter, we believe it's not so it could be for the courts to decide.

I'm meeting my broker today to explore various alternatives.

Theugelmir, You are right in that property letting is treated as a business and taxed in a similar way but the actual property is not part of the business and is treated as an investment. It's different for holiday letting where the property is classed as a business asset.

Cheers

holly_hobby

AGBAGB wrote: »

I totally agree, lenders can alter things if its legal under the contract. That's the crux of the matter, we believe it's not so it could be for the courts to decide.

I'm meeting my broker today to explore various alternatives.

It would be highly unusual for the mge contract not to contain a special circumstance rule, however you'll know more when you have thoroughly examined (in the small print) of your own contractal terms.

Your mortgage broker can of course give you details of alternative providers, but regarding any court action you wish to pursue, please discuss this with a contact law solicitor, and only take forward on a "no win no fee" basis ... as I am sceptical of success and don't want you to end up with a hefty legal bill (inc the lenders costs) if your claim should be rejected -at least on a NWNF arrangement the Solicitor will only accept the business if they are confident of a successful court action (rather than on a fee set up, simply stringing you along with a "well lets have a go and see where we get" attitude.

Wish you well whatever you decide.

Hope this helps

Holly

AGBAGB

Thanks again Holly,
My current broker has advised on alternatives, so I've a plan B in place. He's also offered to support the fight against this and will be talking to other advisors / brokers so I don't think many will end up recommending West Brom Mortgages to their clients.

I've joined the group action being organised via the the property118 site. If it gets as far as going to court, the funding of the action and possible cost against will be covered. This kind of collective looks to be the way forward but it does need enough affected people to step forward.

Cheers

Brandy4

Richard_Watters wrote: »

There is a class action being organised to fight this on the basis that this is illegal. I don't think I'm allowed to post links on here but if you click my name my website is on my profile. Read the blog on my home page and it tells you how to sign up for this.

They must not be allowed to get away with this!

I have written a letter of complaint for what it's worth but would like to find out more about the class action. We need to fight this together