Buy-to-let borrowers face fees hike
Thousands of buy-to-let borrowers are facing a steep increase in their monthly mortgage payments after interest rates were increased by 2% despite being linked to the Bank of England rate.
West Bromwich Building Society is hiking rates on some of its tracker loans, affecting around 6,700 customers, in a change which will increase repayments on a £200,000 loan by an estimated £330.
The move adds to costs for private landlords and has led to concerns that other lenders may follow suit after a similar move by the Bank of Ireland earlier this year.
Tracker mortgages are generally advertised as being linked to the Bank of England rate - but this has not changed for four years, remaining at an historic low of 0.5% which the Bank has indicated will not change until 2016.
But a spokesman for the West Bromwich said: "We believe it is very clearly stated in terms and conditions about the circumstances in which changes to the rates could happen."
The mutual said in a statement: "These changes, which are permitted under the terms and conditions of the accounts, are a reflection of market conditions and the need for us to carry out our business prudently, efficiently and competitively."
Borrowing costs on the financial markets have risen despite the Bank of England's low-interest pledge amid doubts about the timescale of the policy which is linked to the unemployment rate.
The building society has written to customers affected by the change, all of whom have multiple property portfolios, which will come into effect from December 1.
George Spencer, chief executive of property letting service Rentify, said: "Landlords with West Bromwich Building Society will be reeling from the news that their mortgage rate is set to jump by two percentage points, even though there has been no movement in interest rates for more than four years.
"This adds a considerable £330 per month to the mortgage payment on a £200,000 loan, which will significantly impact landlords' profit margins. Landlords with other lenders will be concerned that they will follow suit so it is important to be vigilant."
Earlier this year, the Bank of Ireland told 13,500 customers, many of whom had taken out loans with subsidiary Bristol & West, that rates on their tracker deals were being increased sharply.
But it announced a partial backtrack when it cancelled the rise for 1,200 borrowers after the Financial Conduct Authority became involved. It related to what they had been told about potential changes to mortgage rates.