Adviser slams West Brom for 2% rate hike

A mortgage adviser has slammed West Bromwich Building Society for hiking buy-to-let rates by 2 per cent for those that who have multiple property portfolios, citing it as not treating customers fairly.

West Brom is set to increase rates from 1.49 per cent to 3.49 per cent from 1 December.

In documentation seen by FTAdviser, the lender says this is due to market conditions.

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Specifically it blames the cost of mortgage funding to providers.

The letter says: “Market conditions have clearly changed significantly since you took your buy-to-let mortgage and have now persisted for four years, with the expectation that they will continue for some time to come. Here at West Bromwich Mortgage Company, we have done all we can to avoid passing on the increase in cost to date, but that cannot continue.”

A mortgage adviser, who did not wish to be named, said: “It would be fair enough if this was a renew but this is a lifetime tracker deal. From a treating customers fairly perspective, it is wrong.

“West Brom should have put a floor on the tracker so it can’t fall below a certain rate, but if they are in trouble, that is their problem, not my clients.”

A statement from West Brom said: “The West Brom has advised a number of buy-to-let borrowers who have tracker mortgage accounts with West Bromwich Mortgage Company that their rates of interest will be increasing by 2 per cent from 1 December 2013.

“All borrowers affected are landlords of multiple property portfolios. 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.”

Ray Boulger, senior technical manager for John Charcol, told FTAdviser: “The Bank of Ireland situation relied on a clause which effectively allowed them to do what they like in the event of exceptional circumstances.

“Buy-to-let is not regulated by the FCA although they clearly regulate West Brom so the mere fact that buy-to-let is not regulated is not going to give them a ‘get out of jail free’ card but make it more difficult for the borrower.

“One could argue this contravenes the reuglator’s TCF requirement if West Brom relied on a clause buried in its contract. Borrowers would be surprised of this rise and take the view this is not something West Brom can do. Clearly those involved could launch a class action.”

In May the Bank of Ireland did a u-turn on a rate rise, stating that it no longer demanded higher interest rate payments on 1,200 customers’ mortgages, but 12,300 customers will still have to pay the increased rate.

In February 2013, the BoI UK wrote to 13,500 mortgage customers to tell them their base rate tracking mortgage would increase from Bank of England base rate plus 1.75 per cent to plus 4.49 per cent on 1 May.