A buy-to-let lender has written to 6,700 borrowers– one quarter of its entire landlord loan book – telling them it will be hiking their rates by 2% this December.
The move has evoked fury, with concerns that the extra costs will simply be passed on to tenants in the form of higher rents.
The West Bromwich Building Society is targeting the hike at ‘professional’ landlords only – those owning three or more properties – on ‘lifetime’ tracker deals.
They took out loans which are meant to track the base rate by a set premium once their fixed-rate period has ended – as, in the case of the 6,700 borrowers, all have done.
Those paying1.09% (0.59% above base rate) will soon be paying 3.09%. Those paying 2.69% will be paying 4.69%. It means that on a £150,000 interest-only loan, payments will go up by £250 per month to £386.25 and £586.25 respectively.
West Bromwich Building Society’s move follows that of Bank of Ireland, which hit 13,500 borrowers, including buy-to-let landlords, with a rates hike even though they too thought their tracker mortgages were at a set premium.
The financial ombudsman has received some 300 complaints about Bank of Ireland, which has defended its action saying that it was able to raise the rate thanks to a term and condition in the small print.
It is now thought that other lenders will follow the example of both Bank of Ireland and West Bromwich.
The building society, which has 36 branches, lost £9.4m in the last financial year and is unlikely to return to profitability before 2016, although it is due to move into smart new headquarters in 2015.
West Bromwich says that its hiking of rates for ‘professional’ buy-to-let landlords will generate an extra £15m a year – less if borrowers take their business elsewhere. The society is waiving exit fees until next March.