Lee Grandin, director of Landlord Mortgages, is more sympathetic. “Technically these were commercial contracts, but these are normal consumers who maybe have bought one or two properties,” he says. He also questions whether the lenders can get away with calling their products trackers when they include clauses that enable them to raise the rates in the way that they have, regardless of the BBR.
However, he admits that he can see things from both sides, conceding that the lenders would not do something like this unless it were necessary. “Lenders have to protect themselves,” he says, “It must be difficult for them, but it seems very unfair to the borrowers.”
Market conditions
Both lenders have cited market conditions with regards to their decisions to raise rates. Under current market conditions mortgage funding costs are high and these lenders are under pressure to reshape their balance sheets. Whittaker says that what they are really hoping for is that some borrowers will move away and remortgage elsewhere. This appears to be borne out by Bank of Ireland’s decision to waive any early repayment charges for affected borrowers who do decide to remortgage away from it. He says there are plenty of products available for borrowers to move to. Table 1 shows the top 10 buy-to-let trackers currently available. For those unable to move however, Mr Whittaker says it’s just “tough”.
Does this action taken by the lenders damage their reputations and put mortgage brokers off recommending them to customers in the future? Mr Whittaker says that it would not stop him recommending either firm in the future. However, as Mr Grandin points out, neither firm has to worry about its reputation much at the moment as they are not taking on any new buy-to-let lending.
Nevertheless, borrowers facing rises of hundreds of pounds in their monthly payments, especially in a climate of austerity, are understandably unhappy.
Ultimately, it looks like the issue of whether the lenders’ actions are unfair will have to be resolved in the courts. No doubt the West Bromwich borrowers will follow the Bank of Ireland borrowers in organising their own legal action.
The outcome is likely to determine whether other lenders, struggling in adverse market conditions, will also consider going down a similar route. While the two lenders have done their homework, they clearly have a fight on their hands.
