This morning a client of mine went to visit their bank to organise an extension of their interest only period on their mortgage. It’s very important to note at this stage that the property in question is an investment property and is not the client’s home. The client has lots of things going on at the moment and needed 12 months “breathing space” to resolve some issues.
The Bank was very receptive and understanding and strongly suggested that they would be able to assist once the process was completed.
However as the meeting came to a close the bank dropped the clanger that if the changes were made it would be seen as a change from the original terms and conditions and my client would lose their tracker rate.
The bank said that the legislation changed last October and that any changes to the original terms and conditions such as interest only, lengthening of the term, falling into arrears would all result in the loss of a tracker rate.
I got on to @davidhall75 on twitter and he advised that he believes this was a policy change within the bank last November but that it was not supported with any legislation.
So I spoke to the central bank and asked them could this be the case. They explained that tracker rates are very costly business for the banks and that the banks will use any opportunity to get out of them. When I asked was their legislation allowing them to do this I was told there is no legislation to prevent them.
I pushed a little further and quoted the central banks own website “ Do not worry about losing your tracker rate if you have one- lenders cannot remove your tracker just because you are in arrears.” To which I was told “that only relates to a person’s home.”
I was told the central bank have no intentions of making any move to try and prevent this practice.
My main problem with this is that the central bank see’s the importance of protecting people’s tracker rates on their own home but not for investment properties.
I’d imagine from my own clients the majority of people in this country who have residential investment properties are not tycoons, any shortfall in rental income vs mortgage repayment will have to be paid for from the household budget. If the central bank and the government allow this practice to continue it will be yet another transfer of wealth from the people to the banks.
Yes the banks are losing money on tracker rates but they looked for the business in the first place and I believe this practice is underhand. Both the central bank and government are operating double standards in this instance.