Beware of The Mortgage Works if getting a Buy-to-Let mortgage they charge "Loyalty Penalties"

ceivegz

I had a BTL mortgage with The Mortgage Works (part of the Nationwide) for a number of years and went to renew last month, before our fixed rate came to an end -- I found that rates for existing borrowers aren't published online so you have to log into a "Mortgage Switcher" to then find out that rates offered to existing borrowers are around 1%-point higher than those offered to new borrowers!

I asked over the phone if they would put me on the same product offered to new borrowers but they refused -- nice way of rewarding loyalty!

Normally this wouldn't be much of a problem beyond the cost of being stuck at the SVR for a few more weeks while you find an alternative elsewhere. However, in our case we had a mortgage advance (a separate loan) a couple of years ago which was still fixed for another 3 years and we hadn't been warned when taking this out that it is virtually impossible to have two loans on a single property with two different lenders so had to swallow the bullet and pay over £2K in early repayment fees to be able to transfer this with our original borrowing.

In short: TMW has a policy of enforcing "loyalty penalties" (i.e. charging existing customers more than new customers, a practice that's just been outlawed in the insurance industry), and also failed to advise us at the time of securing a further advance on our mortgage that this would essentially make it more difficult and/or more expensive for us to move all of our borrowing to another lender. Complaint to the Financial Ombudsman has just been sent.

Thrugelmir

BTL is deemed to be business not consumer lending and as such is unregulated.  Unfortunately you are wasting your time. 

Commercially pricing a given tranche of money at a lower rate for a fixed term priduct. Is very different to offering the same rate to all customers. 

ceivegz

Thrugelmir said:

BTL is deemed to be business not consumer lending and as such is unregulated.  Unfortunately you are wasting your time. 

Commercially pricing a given tranche of money at a lower rate for a fixed term priduct. Is very different to offering the same rate to all customers. 

But my BTL isn't in a company name and BTL mortgages are regulated by the FCA just like residential mortgages. Do you simply mean that landlords are seen as "fair game" for practices that wouldn't be tolerated in the Resi mortgage market? That I believe. Doesn't make it acceptable though. 

housebuyer143

ceivegz said:

Thrugelmir said:

BTL is deemed to be business not consumer lending and as such is unregulated.  Unfortunately you are wasting your time. 

Commercially pricing a given tranche of money at a lower rate for a fixed term priduct. Is very different to offering the same rate to all customers. 

But my BTL isn't in a company name and BTL mortgages are regulated by the FCA just like residential mortgages. Do you simply mean that landlords are seen as "fair game" for practices that wouldn't be tolerated in the Resi mortgage market? That I believe. Doesn't make it acceptable though. 

No, almost all BTL mortgages are unregulated by the FCA. It's not like a residential mortgage. 

ACG

TMW do not do regulated BTLs. They might have done in the past, but it looks unlikely yours is regulated. 

However what you describe is fairly common, they did not advise you that in the future they would charge you more than new customers because:
1) They do not have to.
2) It is business lending, you are deemed to be a big girl/boy and if something is important to you, then you would do your due diligence.
3) Their stance may change back and forth depending on how much they want the business. 

It is not uncommon, pretty much all lenders do this. So if you are switching lenders, there is a good chance you will be back here in a few years writing the same post about your next lender. 

https://www.themortgageworks.co.uk/lending-criteria/general 

• Regulated Buy to Lets (where the property will be occupied by the borrower or a member of the borrower's immediate family, now or in the future) are not accepted

MWT

ceivegz said:

Thrugelmir said:

BTL is deemed to be business not consumer lending and as such is unregulated.  Unfortunately you are wasting your time. 

Commercially pricing a given tranche of money at a lower rate for a fixed term priduct. Is very different to offering the same rate to all customers. 

But my BTL isn't in a company name and BTL mortgages are regulated by the FCA just like residential mortgages.

You don't have to be a company to be considered as a business, and yes, there are regulated BTL products, often used when you are planning to rent to family members, was this the case for you?

Generally though as stated above, BTL mortgages for normal purposes of letting to people you are not related to will be an unregulated product.

It doesn't mean you are 'fair game' but it does mean as someone engaged in commercial activity you are held to a higher standard and are expected to inform yourself about the products you take and ask questions to make sure you understand them, there is no duty of care on the lender to make sure they have told you everything that you didn't bother to ask about...

ceivegz

Thanks -- looking into the difference between regulated (or "Consumer") and unregulated BTL mortgages I came across the following requirements for a mortgage to be considered as a Consumer Mortgage. I'd qualify under 2 or 3 of the Criteria, but I suppose the key factor is that the actual product I'd signed up to wasn't classed as "regulated". Bum!

"If any of the following circumstances apply, the application would qualify as a consumer buy-to-let mortgage contract:

 

• Either the borrower or a relative has lived in the property since it was purchased; or
• At the time of purchase, the intention was not for the property to be let out; or
• The property was inherited, rather than purchased"

[Deleted User]

dual pricing is perfectly legal and accepted in the resi market anyway so the distinction between regulated and unregulated is a moot point (other than not having access to FOS)
This is their business model and has been for a long long time. Plenty mainstream lenders do it for BTL and Resi

 

amnblog

Few Lenders offer the same rates to new and existing borrowers. Nor do they have a regulatory requirement to do so.

TMW will have offered you an initial rate and quoted the revert rate when that initial rate ends. They will have given you no promise or indication of future rate switch options.

When you took the further advance you will have been made aware of the differing product end dates (and therefore differing redemption penalty end dates) for the two tranches of borrowing. Again this is standard practice across the industry.

I imagine your FOS referral will go nowhere.

steampowered

I don't have any sympathy. 

Why is it their problem that you didn't line up your fixes properly?

You are running a business here. You can hardly complain about The Mortgage Works running themselves as a business too. You agreed to their terms. 

By the way, loyalty penalties are perfectly legal in the insurance industry. They are only banned for consumers. You are not a consumer - you are a business. 

How would you like it if your tenants complained that you are charging them a "loyalty penalty" on your rent, and complain to a Housing Ombudsman to see if they can get a discount?