Nationwide Building Society has taken the controversial decision to increase some borrowers’ mortgage rates by 1.5%.
Nationwide mortgage customers who rent out their property have been told that their mortgage rate will increase by 1.5%. Nationwide Building Society doesn’t offer buy-to-let mortgages, but it seems that it has allowed residential mortgage customers to rent out their properties and keep their residential mortgage rates.
Nationwide has sent a letter and leaflet to its customers explaining that rates will rise, even for customers who are on a fixed rate.
New mortgage rates to apply from December
For some, who as at 1 December 2010 have been renting out their property for three years or more, the additional 1.5% letting interest rate will be applied from 1 December 2010. For those who have been renting out the property for less than three years as at 1st December, Nationwide will apply the additional letting interest rate from the third anniversary of letting.
Short term rentals
Nationwide will still allow mortgage customers to temporarily rent out their property without incurring the additional 1.5% interest rate for up to six months.
Why the change?
Nationwide’s leaflet to customers says: ‘ Nationwide mortgages are designed and priced for people who live in their homes. The Mortgage Works, Nationwide’s specialist lending company, design and price mortgages for people looking to rent out their property, known as Buy to Let mortgages. The reason they are termed as specialist mortgage is because they carry an additional risk and administration cost. When properties on a Nationwide residential mortgage are rented out we too experience this additional risk and administration costs and it is only fair that those people who rent out their property should meet these additional costs rather than our membership as a whole’.
Vera Cottrell, Principal Policy Adviser at Which? said: ‘It seems a harsh move to change the goal posts for customers now, especially for those who took out a fixed rate mortgage with a perfectly reasonable expectation that their rate wouldn’t change. We would like Nationwide to keep to its existing arrangement with customers. If it must raise rates then this should only be for customers who start renting out their property after December 2010’.
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