Jump to content
House Price Crash Forum
Debbiebegood

West Bromwich Building Society's Increases Interest Rates For Btlers -- Merged Threads

Recommended Posts

'In the financial year to the end of March, it lost £9.4 million and unless the base rate moves up sharply or there is a spectacular economic recovery, it will not return to profitability until 2016 at the earliest.

The regulators seem happy to let the ship’s captain ride out the storm and the fact that the mutual is moving into spanking new headquarters in 2015 suggests a determination to remain independent.

Its straitened finances probably explain why it has just written to 6,700 buy-to-let borrowers – a quarter of its landlords loan book – telling them that from December they face a sharp rise in mortgage payments, even though their loans are meant to track the base rate by a set premium once the fixed-rate period has ended (all have).

Like other lenders before, it is using – controversially, I imagine, in the eyes of those affected – the loan terms and conditions to increase the tracking rate by two percentage points.

So a loan currently priced at 1.09 per cent – 0.59 percentage points above the base rate – will increase to 3.09 per cent, while at the other end of the spectrum those at 2.69 per cent will rise to 4.69 per cent.

Westhoff defends his move by saying that it is fairer that these few borrowers take a hit rather than the society’s 424,000 savers, who have already suffered rate cuts over the past year.

To prove his point, he says the society’s buy-to-let investors have not only been enjoying to-die-for rates ever since their fixed-rate term arrangements came to an end (1.65 per cent on average, against the 5.85 per cent average they fixed at), but strong rental growth as well.

No doubt his ‘professional’ landlords will beg to disagree, although given that buy-to-let lending is unregulated, they will have little recourse other than taking their business elsewhere or accepting the payment hit. And the terms and conditions do explicitly give the society the right to vary the interest rate.'

An interesting move and a timely moment to decide to reward savers or am I being a tad cynical?

Edited by Sancho Panza

Share this post


Link to post
Share on other sites

I do like a good news story to warm my heart on a monday morning.

This links in with my BBC says B.S. are healthy.

The WBBS is obviously very healthy because they only lost 9 million but have a nice office.

Share this post


Link to post
Share on other sites

Interesting - will others follow suit and will rents rise as a result?

Though from all my intensive research watching HUTH (OK, I know, but it does make the ironing less of a chore) there are many professional LLs up north who only buy the sort of smaller properties that will almost certainly go to HB tenants - they and the EAs usually seem to know to a penny what rent they can expect, I.e. HB rate, which is unlikely to go up any time soon, and in any case gross yields can be extremely high compared to the purchase + doing up costs. I have often see yields of 10 or 11% or even more mentioned. And have wondered why HB rates are so relatively high for properties that can be bought so relatively cheaply. Nothing to do with all the MPs/

councillors with BTL portfolios, I'm sure.

Share this post


Link to post
Share on other sites

Thanks for posting. It demonstrates very well how people become normalised to giveway interest rates:

The Bank of Ireland tried this con earlier in the year and was embarrassed into honouring its original contract terms. Land lords outside of the M25 and the south east are not 'enjoying soaring rental returns'. It's all we can do to keep our heads above the water. We are not to blame for the West Brom's predicament. That was down to bad management. A combination of this and the government's genius idea of giving housing benefit to the tenants rather than the landlords to pay their rent will just lead to more repossessions and more vulnerable tenants being pitched out on to the streets. The West Brom are greedy incompetents.

- MikeMansfieldCorbett , Chester, United Kingdom, 22/9/2013 20:02

Well I'm a landlord and I've just had to reduce the rent. Plus, my tenant has been a nightmare and it didn't even cover my mortgage. Where are all these bloated landlords again?

- Spitfire Charlie , Midsomer, 23/9/2013 05:46

I think that its discrimination against 'Profesional Landlords'. Why target those who work hard to invest their money and not those who let it sit in the bank and gather dust. It is not easy being a landlord. How stressful is it to save? Why are the amateur landlords getting off scott free? 250 pound each month is enough of an increase to put landlords out of business. Obviously many will simply take their business else where and it is good of WBBS to offer this. Surely a 1% increase would have been better for business??

- scottscorsa, Tipton, United Kingdom, 21/9/2013 23:26

My favourite LL misconception on display here(the idea they have any pricing power):

Bank of ireland recently did this, now west brom are doing it, other lenders will follow. If a very high percentage of landlords up and down the country have there costs increased by this new money making scam by the banks do you know what will happen? Rents will rise to cover the landlords cost. It will be the renters that will pay for this not the landlord. Give it time and you will see.

- robbo, berks, United Kingdom, 22/9/2013 14:25

Yup- we'll take the ZIRP but rents will not fall as we charge rent based on what the market will bear you see, but if ZIRP goes away then rents will have to rise as it's related to the cost base now.

Share this post


Link to post
Share on other sites

The Bank of Ireland tried this con earlier in the year and was embarrassed into honouring its original contract terms. Land lords outside of the M25 and the south east are not 'enjoying soaring rental returns'. It's all we can do to keep our heads above the water. We are not to blame for the West Brom's predicament. That was down to bad management. A combination of this and the government's genius idea of giving housing benefit to the tenants rather than the landlords to pay their rent will just lead to more repossessions and more vulnerable tenants being pitched out on to the streets. The West Brom are greedy incompetents.

And the irony award goes to......

Share this post


Link to post
Share on other sites

Things will get really interesting when they use these T+C's on retail customers.Of course that'll never happen.Those clauses are in there because they're never going to be used.

Share this post


Link to post
Share on other sites

And the irony award goes to......

Indeed. As it happens the commentator who made those remarks appears to be a financial adviser in Chester(from July this year):

FINANCIAL advice practice Hadlow Edwards Wealth Management Ltd, has opened a new office in Chester. The Wrexham-based firm said the move was a ‘natural progression’ as it had a growing list of connections and clients in the area. Hadlow Edwards is one of only three St. James’s Place Principal Partner Practices in North

Wales and the North West region.

The official launch of the office was conducted by St. James’s Place Wealth Management’s executive director for the North West and North Wales, Matt Quinn. Chester adviser Mike Mansfield-Corbett has been recruited to head up the Chester office. He has more than 20 years’ experience as a financial adviser is well-known in the city. He said: “The firm is growing fantastically and I’m looking forward to establishing ourselves inChester. “Having a base in the city allows us to continue the fantastic work already achieved in advising clients and building relationships with other professionalcompanies in the area.” The new office is located in Liverpool House, Lower Bridge Street. Warren Hadlow and Medwyn Edwards founded the practice 12 years ago and their arrival in Chester follows the refurbishment and expansion of the company’s head office in Wrexham last year. Medwyn said: “It’s a very exciting time for Hadlow Edwards. Our workforce and client base continue to grow, both in North Wales and Chester. “Our burgeoning list of connections in Cheshire and on the Wirral meant it was natural progression for us to open an office here.

Our current clients and partners have welcomed the news and have been very supportive. “Warren and I are looking forward to being able to provide the same

professional service in Chester, and continuing the excellent growth we have achieved so far.” Matt Quinn added: “It is a real breakthrough for Hadlow Edwards to open an office in Chester. “We ensure that our practices offer high quality advice from high quality advisers. Hadlow Edwards has succeeded in delivering such a service across North Wales, Cheshire and beyond.”

http://www.communitypharmacies.co.uk/uploads/news/files/pharmacy-firm-secures-expansio-64.pdf

Nothing we didn't know already- people of all stripes are up to their necks in BTL as it's a sure-fire thing. My IFA said so.

Edited by The B.L.T.

Share this post


Link to post
Share on other sites

So the banks (or building societies) having realised that they have extracted all they can from the average joe, turn on BTL investors.

Interesting times.

Being a leveraged BTL landlord is like painting a big target on your head. You are an easy target for the tax man (2% residential letting tax anyone?) and extremely vulnerable to the British banks who do not give out fixed mortgages for the term of the 'investment'.

Share this post


Link to post
Share on other sites

Indeed. As it happens the commentator who made those remarks appears to be a financial adviser in Chester(from July this year):

You really couldn't make that up could you?

Share this post


Link to post
Share on other sites

So the banks (or building societies) having realised that they have extracted all they can from the average joe, turn on BTL investors.

There's more going on here than that.

Following on from NAB citing LTV breaches as good cause for repossession,it seems more likely that one or two are looking to make adjustments to their loan porfolios while prices are good.

In terms of the WB,it's looking to lose some of it's weaker BTL players ie those with 3+,where their personal salaries and family home are unlikely to cover any shortfall.They want to keep what they call the 'amateur' BTLer because in all likelihood they'll be less able to take the bankruptcy route away from their liabilites.

For the chap to call it a con is a little strong and unfair.It's a contract that likely,he didn't want to read too closely when he was levering up.

For the WB if they can shift some of these 'professional' BTLer's onto someone else's books,then all good and well.If said BTLer's can't even take a £200 hit,then it's in the WB's to repo sooner rather than later,while prices and volume are moving their way.

Edited by Sancho Panza

Share this post


Link to post
Share on other sites

"Bank of ireland recently did this, now west brom are doing it, other lenders will follow. If a very high percentage of landlords up and down the country have there costs increased by this new money making scam by the banks do you know what will happen? Rents will rise to cover the landlords cost. It will be the renters that will pay for this not the landlord. Give it time and you will see.

- robbo, berks, United Kingdom, 22/9/2013 14:25"

Classic. Of course this means that they will try and rise rents and still have someone willing to pay it.

Share this post


Link to post
Share on other sites

Just makes you wonder how many clients have been advised to fill their boots over the years. Barely above water at record low rates, it beggars belief.

IFA's and Stockbrokers tend to be among the worst long term punters I've met.It's just my personal view and based on my acqauintance,but they're too close to the bubble and their livelihood is too correlated to it's continuance.

He's not called the Sage of Wall St is he?

Share this post


Link to post
Share on other sites

No doubt his 'professional' landlords will beg to disagree, although given that buy-to-let lending is unregulated, they will have little recourse other than taking their business elsewhere or accepting the payment hit. And the terms and conditions do explicitly give the society the right to vary the interest rate.'

An interesting move and a timely moment to decide to reward savers or am I being a tad cynical?

The out cry suggests that many can't move to other lenders* and that even if they do then they will have to accept a higher IR. I suspect many will just stay and pay the higher IR and complain lots (BoI repeated). Interesting to see a british owned institution hardening up on BTL borrowers.

* many reasons including:

LTV breach due to falling property value

real rental income not being high enough

Too many properties in their portfolio

...

West Brom have far fewer funding avenue than most UK lenders, they need the savers more than most but the helping the savers mantra is a little over worked, this is mostly about decreasing the size of black hole generated by assuming the BoE rate would never go to 2.5% let alone 0.5%

Share this post


Link to post
Share on other sites

Just makes you wonder how many clients have been advised to fill their boots over the years. Barely above water at record low rates, it beggars belief.

Perfectly believable in the UK.

Share this post


Link to post
Share on other sites

"Bank of ireland recently did this, now west brom are doing it, other lenders will follow. If a very high percentage of landlords up and down the country have there costs increased by this new money making scam by the banks do you know what will happen? Rents will rise to cover the landlords cost. It will be the renters that will pay for this not the landlord. Give it time and you will see.

- robbo, berks, United Kingdom, 22/9/2013 14:25"

Classic. Of course this means that they will try and rise rents and still have someone willing to pay it.

Most rental properties don't have BTL mortgages secured against them (i.e. council, HA and plenty of private landlords) and they won't be forced to put their rents up. Hence he won't get his very high percentage nationally though this might happen locally where huge number of BTL entered the market in the last decade. They might try but will mostly be unsuccessful

Share this post


Link to post
Share on other sites

The out cry suggests that many can't move to other lenders* and that even if they do then they will have to accept a higher IR. I suspect many will just stay and pay the higher IR and complain lots (BoI repeated). Interesting to see a british owned institution hardening up on BTL borrowers.

West Brom have far fewer funding avenue than most UK lenders, they need the savers more than most but the helping the savers mantra is a little over worked, this is mostly about decreasing the size of black hole generated by assuming the BoE rate would never go to 2.5% let alone 0.5%

That is the reality for many of them I fear.One way to deplete capital is to take on borrowers that are at best,marginally profitable thanks to ZIRP/H2B.

Moving lenders for BTLer's is going to get harder and harder.

Share this post


Link to post
Share on other sites

That is the reality for many of them I fear.One way to deplete capital is to take on borrowers that are at best,marginally profitable thanks to ZIRP/H2B.

Moving lenders for BTLer's is going to get harder and harder.

Milking a captive market.

Easy to do.

Share this post


Link to post
Share on other sites

clearly the next labor government must introduce legislation to protect needy landlords from this, perhaps by forcing banks to offer interest free btl mortgages, or even introducing btl tax credits in addition to child and working tax credits

Share this post


Link to post
Share on other sites

Squeal piggies. :)

I hope the BTLers do come to realise they were wrong.

Many of them were unthinking 'can't go wrong with bricks...' parroting idiots who ruined the lives so so many sensible people.

So now they are an easy target for the lenders.

Just hope the government decides to charge them business rates.

Plus squeezes on rents and a few other aspects and people will rue the day they got sucked.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   218 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.