Landlords with West Bromwich face tracker mortgage rise

image captionTracker mortgage interest rates generally follow the Bank of England's base rate

Thousands of UK landlords are facing a rise in the interest rate charged on their tracker mortgages despite no change in the Bank of England rate.

Some 6,700 landlords who hold buy-to-let tracker mortgages with the West Bromwich Building Society face a two percentage point rise on 1 December.

Tracker mortgages generally follow Bank rate movements, but may include a clause allowing for rate changes.

The building society said the move was a "reflection of market conditions".


The Bank rate has been at a record low of 0.5% for more than four years, leading to low mortgage rates for many homeowners and landlords if they are on tracker mortgages.

The landlords affected in this case - who are owners of multiple properties - are customers of the society's former specialist lending arm called the West Bromwich Mortgage Company. It is a wholly owned subsidiary of the West Bromwich Building Society.

"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," said a spokesman for the West Bromwich.

A similar argument was made by the Bank of Ireland (BOI) when it turned to small print in mortgages to increase repayment demands from more than 12,000 homeowners who took out tracker mortgages from 2003 with the BOI and Bristol and West.

Typical repayment rates rose from 1.35% (0.5% base, plus 0.85% margin) to 2.99% on 1 May, with many residential customers facing a further rise in October, to 3.99%.

'Disappointing move'

Mortgage brokers have expressed surprise at the move by the West Bromwich, but have taken the chance to encourage borrowers to switch in certain circumstances.

"This is another disappointing move from a lender which, like the Bank of Ireland's ongoing changes, will serve to further infuriate buy-to-let landlords who felt secure on a specific product," said Andrew Montlake, director at mortgage brokers Coreco.

"It does nothing to improve the trustworthiness of lenders and shows that lenders have the power to do what they want, when they want, often at the expense of their customers best interests."

George Spencer, chief executive at property and technology company 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."

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