February 11, 2010
Nationwide obliges reluctant landlords to remortgage
Existing borrowers with Nationwide mortgages who either choose to or find themselves forced to rent out their existing property when they move home, will have to remortgage to a Let to Buy mortgage with subsidiary The Mortgage Works.
In recent years the number of ‘reluctant landlords’ has grown as more people have been unable to sell their property for the price they want in a depressed housing market.
Some lenders have allowed their customers to keep their existing mortgage arrangements on their first property.
Technically this is dangerous, primarily because reluctant landlords tend not to be aware that they need to change their buildings insurance once their property is rented out. Buildings insurance on one’s primary residence can be rendered null and void once it is let to tenants.
The move by Nationwide will force its borrowers to do things by the book and ensure their arrangements are officially sound.
However, many will inevitably end up paying a higher interest rate as a result.
Nationwide has a price promise to existing borrowers who joined the society before April 2009 which guarantees that they will never pay more than 2% above the Bank Base Rate. Hundreds of thousands of Nationwide borrowers are currently paying just 2.5% for their mortgages, one of the very lowest rates on the market.
Borrowers remortgaging their existing residential property as a buy to let must now choose from TMW’s Let to Buy product range, which includes a new two-year tracker rate charged at 3.99% with a 3.5% fee.
At the same time, TMW has also launched a new range of buy-to-let mortgage products for property investors.
The range includes a Stepped Buy to Let Tracker, which is initially charged at a rate of 4.14% above the Bank of England Base Rate, giving a starting pay rate of 4.64%.
In year two the margin reduces to 2.14% above the Base Rate. Should Bank Base Rate remain at 0.5%, where it has now sat for 11 months, the borrower would pay just 2,64%. If Base Rate has risen by year two, this deal will mitigate the impact on a landlord’s finances.
Tracie Pearce, Strategic Product Marketing Manager, The Mortgage Works said:
“We want to offer our customers choice and flexibility when choosing a mortgage product. The new range is unique to the buy-to-let market, designed to help landlords budget against potential Base Rate increases.”
