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Original poster

How can our mortgage company do this to us?

51 replies

lavenderbongo · 31/05/2010 05:02

We are currently in NZ and renting out our property in the UK. This is not something we planned but an opportunity came up and we took it. The rent we make on our UK property is not enough to cover the mortgage so we are sending a few hundred pounds back to the UK each month to make up the shortfall.

Anyway we took out a ten year fixed term mortgage so that we knew what we were going to be paying each month and would have a bit of security. Anyway this morning I got a letter in the post from Nationwide telling me that because the property is being let out and has been for almost three years we will have to pay 1.5% interest on top of our current mortgage rate. That will mean an increase of a few hundred pounds each month. Something we can't afford.

I am writting this on the verge of tears. I have no idea what we are going to do or how they are allowed to do this. We could sell the house but this will not be easy and I am on the other side of the world! It seems totally illegal to me that you can suddenly introduce a new charge having signed a contract. They are going to loose money in the long term as we will have to sell the house.

Is anyone else in this situation or have any good advice it is a really depressing situation.

OP posts:

JeMeSouviens · 31/05/2010 05:10

In the same situation here, as it's rented out it is now considered buy to let, which have different mortgage rates to homebuyer rates. We are waiting for our tied in period to end then searching for a better deal, when we told the bank this, they couldn't care less.

Kathyjelly · 31/05/2010 05:23

The banks are doing all sorts of things to reduce their (perceived) risk and increase their profits.

We're trying to move and although my dp is in the 20th year of a 25 year mortgage and has never missed a payment, the bank has said that will give them the opportunity to look at the terms again and reduce the amount he is allowed to borrow by 1/3. He's proved he can afford it but they say their risk is too great.

Original poster

lavenderbongo · 31/05/2010 05:56

Thanks for the replies. I am going to ring them as soon as everyone in the UK wakes up. Like us, JeMeSouviens, I bet you didn't buy to let originally. We are probably going to sell now as we are unlikely to return to the UK.
That is really unfair Kathyjelly - you would think that as you have been a reliable customer all that time it would count tfor something.

OP posts:

JeMeSouviens · 31/05/2010 06:05

Exactly, we bought as family home then moved abroad, but quite fairly we changed the terms by then renting it out. We did Advise the bank of this at the time but had no response and of course 2yrs later are denying we did. We will also be out of
pocket substantially each month as rent nowhere near covers existing mortgage but thankfully we can cover it.

FWIW I have bought and sold a property in a country while not being present, it's not hard to do, so don't worry overly much on that side of things. Actually I was living in the UK and sold a place in NZ. All I had to do was take the paperwork to a lawyer my end for signing and send back registered, everything else was managed over the phone or by email.

TeamEdward · 31/05/2010 06:07

This reply has been deleted

Message withdrawn at poster's request.

newkiwi · 31/05/2010 06:44

We have a UK property and live in NZ at the moment. We were given permission to let on the basis that we were planning to return to the UK and live in the property again. Which seems to be an important factor. But the initial 2 year permission is just about to expire and we're wondering whether to reapply or just keep quiet and hope they don't notice. Did you tell the bank originally?

Buy to lets are a bit more risky for banks and a lot of people have used normal mortgages to buy them which is a bit cheeky if it is your intention all along. Good luck when you speak to them- let us know how it goes.

PrettyCandles · 31/05/2010 06:56

We looked into this a few years ago when we were moving out of London and had to decide whether to sell up completely or to try and keep a toe-hold in London by renting out my flat. We learned that (a) mortgages on rental properties always incur more interest, whatever the rental circumstances, and (b) if you move out and rent your property without agreeing this change with the lender they can really stuff you - even terminate your mortgage.

So unfortunately I doubt you have a leg to stand on. This was when banking confidence was still fairly high and they were lending will-nilly, sometimes even 100% mortgages, so now when they are becoming more cautious and reducing their risk I doubt they will be at all flexible.

springaporesling · 31/05/2010 07:02

We did exactly the same as this and were 'allowed' to stay on our normal rate until the period expired upon which we had to move to the buy-to-let rate which as you say is much higher.

jooseyfruit · 31/05/2010 07:25

sorry to hear you're having such stress.

it's a bank holiday here today so you may want to call tomorrow.

LIZS · 31/05/2010 07:25

If you can demonstrate that you plan to return to live there as your principle private residence then you may be able to negotiate. Sorry but 3 yrs as a non-dom landlord would probably redflag it. Check your terms and conditions. Rents normally more than cover equivalent mortgages atm so maybe you need to review that.

btw remember it is a BH here today so you may not get the best advice, if any.

CaptainNancy · 31/05/2010 07:30

If you check your mortgage agreement, you will probably find a clause that relates to this situation- ours says if we wish to let the property we must inform the bank prior to doing so, presumably so they can up the interest rate.

bigstripeytiger · 31/05/2010 07:33

Was the 10 year fixed term deal on a buy to let mortgage?
If it was then I think that you have grounds to question what they have done.

If it wasnt then there probably isnt a lot you can do, as the bank will say that you should have informed them when you started letting the property.

megonthemoon · 31/05/2010 07:40

"It seems totally illegal to me that you can suddenly introduce a new charge having signed a contract"

But unfortunately if the contract you signed with them says that this is an owner-occupier mortgage and that letting it out isn't allowed, then they have every right to switch you to another mortgage. If this was in your mortgage terms, you broke the contract not them so they are well within their right (morally and legally) to change the terms to something more suitable for the risk their loan now incurs.

We specifically asked this question when we took out a mortgage on a property we thought we might want to let and ours allowed us to do so. Check your mortgage contract. If it allows you to let, they are in the wrong; if it doesn't allow you to let, you are in the wrong.

I do feel for you, but it is unfair to expect banks to just do whatever you want them to when it is you that is borrowing all that money from them. Just because they're Goliath and you're David doesn't make them the bad guys in this.

NoahAndTheWhale · 31/05/2010 07:45

Did you let them know when you started renting out the property? I know that buy to let mortgages are generally more expensive due to the added risk involved so if you didn't tell them you are lucky they didn't find out sooner.

If you did tell them and they are now increasing the rate, that does seem wrong.

Sonilaa · 31/05/2010 08:29

it*s bank holiday monday today, so call first thing tomorrow.

msrisotto · 31/05/2010 08:39

Maybe it would be worth looking for a variable interest rate mortgage? My bank (HSBC) weren't bothered that I rented my flat out after living it for under 3 years but i wasn't on a fixed term mtg.

TDiddy · 31/05/2010 08:44

Had the same thing on property that I used to live in but now let out. They sent me a form/procedures to normalise the rent rental arrangements so some of them do allow you get get permission.

Coventry BS do some good buy to let remortages. I had to use them for other former residence where DirectLine changed their policy when taken over by RBS.

See Money supermarket

callmemrs · 31/05/2010 08:47

Agree with Noah.

Mortgage companies require you to tell them of changes to circumstances such as letting the property. In some cases this may change the basis on which they are lending to you.

So it hinges on whether you informed them really. If so, then it seems wrong to suddenly increase the rate. If you didn't, then their argument would be that you broke the terms by not telling them.

newkiwi · 31/05/2010 08:55

It's probably worth talking to an accountant about the tax breaks in NZ. I think that up until October you can right off any losses on your UK property against your income tax in NZ. I've also been told this can include the cost of a flight back to the UK to check it out and probably sell it too. I'm fairly sure there are some issues with capital gains if you keep the property for over three years.

scaryteacher · 31/05/2010 09:47

We let our home in the UK; told the mortgage company when remortgaging and our interest rate hasn't altered; neither are we on a buy to let. However, dh is UK Armed Forces and is thus counted as resident wherever he is posted in the world, as his income is from HMG and we are UK tax payers.

TheBride · 31/05/2010 14:23

If the current 10 year fixed rate deal was agreed on a BTL basis, then the mortgage company is in breach of contract as far as I can see.

If it wasn't agreed on a BTL basis, or you failed to advise them of your change of residency then you are in breach of the original contract so they do have the right to tear it up and make you an offer on revised terms. I am pretty sure that you can also look for another deal with another lender but being non-resident does make it much harder.

I have a bit of sympathy as mortgage companies used to be fairly laissez faire on this but that was when prices were going up 20% a year so if someone defaulted they would make a mint on the repossession. Times have changed unfortunately.

Livingbytheriver · 31/05/2010 16:12

What rotten luck for you, poxey credit crunch! The Nationwide will have upped the rate they charge you are they are not making enough money in other areas of their mortgage lending.

You need to find you original mortgage agreement and your agreement letter from them that they sent to you telling you that you could let your property out. On either bit of paper you need to see if in the small print there is something that says that they reserve the right to add a differential to your mortgage rate or charge you a higher rate if you let out your property. If there isn't then you need to argue that point.

If there is a clause in the small print (which there probably is, sorry to be pessimistic) then depending when you took out your mortgage you could complain on the basis that you have bought a product (this is what lenders call fixed rate deals) that was not properly explained to you when you bough it, once mortgages were regulated by the FSA it was no longer acceptable to just 'sell' a product and leave the customer to just read the terms and conditions. If a product was sold and the customer was not told everything about it they have the right to complain at any point while the product is still running.

How long have you been with Nationwide and how long have you had the fixed rate for? Did you arrange the 10 year deal through a mortgage broker or did you go directly to Nationwide yourself? There is a slim chance you may be able to argue....

GetThePartyStarted · 31/05/2010 16:54

This isn't a new thing, the fact is that BTL mortgages have always been more expensive than residential, because they are more risky. You will have signed a contract for a residential mortgage, and strictly speaking, you have broken the contract by letting the house out. In order for you to legally let the house out, you would have needed to contact the mortgage company and them to have sent you a letter confirming it was authorised to let it out - in the past some companies would do this for free(or a small fee) and let you keep the same rate, some wouldn't.

Nowadays with so many landlords defaulting, they are much less likely to waive their legal right to charge the higher (correct) fees. I read your OP as you took out a residential mortgage and then happened to let it out - if that is not the case you may have a case to challenge it, if it is then I'm afraid you're stuck with it.

I'm really sorry you are in this situation, hope you have luck in selling the house.

Original poster

lavenderbongo · 31/05/2010 20:24

We did tell them we were letting the property as soon as we moved out. We did nothing underhand - they did not inform us of any change to our existing contract with them or ay likely change in the future.

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Original poster

lavenderbongo · 31/05/2010 20:29

I am going to search for our original mortgage contract today. We initially took out the mortgage as a normal home mortgage as we intended to live there - it was our family home. A year later my DH is offerred a job abroad and we took the opportunity - I immediately informed the mortgage company and was told it was fine - we had no information about possible problems of interest rises in the future.
Incidently we have always paid our mortgage and pose no risk to the mortgage company. We only own one property we are not exactly a big business.

OP posts:

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