Almost 7,000 buy-to-let landlords will face a rise in their mortgage rate, after West Bromwich Building Society said its buy-to-let tracker mortgage rate is to rise by 2 percentage points. The move has led to fears among landlords that other banks and building societies will follow suit.
There are around 6,700 landlords on West Brom's buy-to-let tracker mortgage. As tracker mortgages usually track movements in the Bank of England base rate, these customers might have presumed that there was no mortgage rate increase in the offing.
The Bank of England base rate has been at the record low of 0.5% since March 2009 and the Bank of England governor Mark Carney has hinted that it may not rise for another two years.
However, most lenders reserve the right in their terms and conditions to increase the rate should they deem it necessary. West Brom said its increase – due to come into force on 1 December – reflected "market conditions".
While the 6,700 buy-to-let customers on tracker mortgages are all on different mortgage rates – as the product was on sale from 2006 – the rate rise means that some customers will see their mortgage rate effectively double.
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A West Brom spokesman said: "The West Bromwich has advised a number of buy-to-let borrowers who have tracker mortgage accounts with the West Bromwich Mortgage Company that their rates of interest will be increasing by 2% from 1 December 2013. All borrowers affected are landlords of multiple property portfolios.
"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."
The Bank of Ireland made a similar move earlier this year, when it increased the interest rate on buy-to-let tracker mortgages sold from 2003 onwards.