BM Mortgages “Action Required” letter on interest-only mortgages?

by Readers Question

14:12 PM, 11th May 2020
About 4 months ago

BM Mortgages “Action Required” letter on interest-only mortgages?

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BM Mortgages “Action Required” letter on interest-only mortgages?

I have received a letter from BM Mortgages asking very intrusive questions about how I will repay an interest-only BTL mortgage I have with them and gently threatening to put me on a repayment mortgage (‘ask’ is the way they put it) if I cannot satisfy them that I have an adequate repayment plan in place.

The redemption date is well over six years away. I have had other BTL interest-only mortgages with BM that were redeemed either by the sale of the property or by me paying them down as the redemption date approached but this is the first time they have demanded to know how I will pay one off.

I am not in arrears and am complying with the T&Cs of the mortgage. I cannot see anything in the T&Cs that requires me to provide the information they want (endowment policies, pension plans and – most intrusively – the amount of my savings and investments and who they are with). Neither can I see anything that allows them to forcibly put me on a repayment mortgage. On the contrary, one of the provisions of the loan offer states, “You will need to make separate arrangements to repay this [the loan]. Birmingham Midshires does not know, or need to know details of these arrangements.”!

I am reminded of the shenanigans Mortgage Express got up to and am wondering if BM are trying it on as well. I am tempted to ignore them, but at the same time wary about there being some small print somewhere that allows them to declare ‘force majeure’ on the agreed terms of the loan. I don’t relish having to pay their costs or any penalties.

As it happens, I am in the fortunate position of being able to repay the loan, but as the product is a tracker at base rate plus 0.4% I’m clearly more focused on paying down other loans with higher interest rates.

Has anyone received a similar letter, and what did they do about it?

David



Comments

Puzzler

13:38 PM, 12th May 2020
About 4 months ago

Don't worry, I have had the same from them and other HBOS lenders. It is a legal requirement that they issue these letters under the bank bail-out legislation so that borrowers cannot come back later and say they didn't realise they would have to repay it as some have done who have residential interest-only mortgages. I don't think you need to reply. It's not a threat just offering you an option. It's in your own interest to ensure that you are able to repay it at the end of the term, you may be able to re-mortgage with them, they have some very good rates just now

Ed Regent

15:09 PM, 12th May 2020
About 4 months ago

As others have said, maybe it's more of a concern for building societies. I've had similar requests from Leeds BS.

Simon M

17:50 PM, 12th May 2020
About 4 months ago

Puzzler is right. Banks were caught out when some borrowers hadn't planned for the end of the mortage term and the banks were forced to recover and sell the properties, which is bad publicity for banks and govt. Hence the legislation.
I had a similar letter from Santander about 6 years before end of the mortgage term, which I answered. A year later, the fixed rate period ended and they were very quick to offer me a new fixed rate deal.
BM are still doing BTL mortgages. As you've paid regularly and on time, I'd reply explaining how you will pay it off. If not BM will conclude you have no plan and might then be less supportive.

colette

19:45 PM, 12th May 2020
About 4 months ago

This is a legal requirement since major issues several years ago for anyone with an interest only mortgage whether b to let or residential. It is so the mortgagee cannot say they did not know they would have to repay the mortgage at a future point. I have had these letters over the last 10 years from various mortgage providers and each time told them they would be repaid from savings and company pensions. You would also have been asked in your mortgage application how you were going to repay the mortgage so would have given an answer at that time too. They are not intrusive letters and are there to remind you of your obligation. The questions are no more intrusive than those which you would have completed within y our mortgage application. Any mortgage company can request immediate repayment of a mortgage should it wish to do so

Ian Narbeth

10:39 AM, 13th May 2020
About 4 months ago

Reply to the comment left by colette at 12/05/2020 - 19:45
@colette "Any mortgage company can request immediate repayment of a mortgage should it wish to do so". I certainly hope not. Term mortgages are not overdrafts. Some secondary or tertiary lenders may have this in their terms and conditions but unless you are in breach of the mortgage terms, most lenders cannot demand early repayment. I did once see on demand loans offered by a bank to off-plan purchasers in Singapore buying UK residential property but that is the exception.

H B

10:49 AM, 14th May 2020
About 4 months ago

I agree with what many have said above - these are genuine requests to understand your repayment method and there is no reason not to be honest with them if you have that information.
Lenders are likely to be more concerned with mortgages reaching the end of their life if they are still at a relatively low LTV.
One thing that drives this is that interest only mortgages - residential or BTL - are more likely to fail to repay the principal contractually if they ever reach maturity. Even if the collateral is good, the loans need to be treated as higher risk and more bank capital held against them, even if the borrower keeps on paying interest.

Colin Dartnell

13:26 PM, 17th May 2020
About 4 months ago

They are just covering themselves. I have had the same from lenders and tell them I will remortgage or use investments to pay down the loan when the time comes. I don't actually find the questions intrusive anyway, after all you may owe them a lot of money and they want to know it's secure.

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