Portfolio Landlord exploitation?

Portfolio Landlord exploitation?

11:13 AM, 7th June 2021, About 2 weeks ago 22

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I have come to the end of my 5 years fixed mortgage product. At the time of taking the Mortgage, there was no such definition of Portfolio or Non-Portfolio Landlord (the one who owns more than 4 properties). I simply decided to switch product with the same lender and I own exactly the same number of properties as I did 5 years ago.

When questioned by the lender, if I currently owned more than 4 properties, to which I answered “Yes”. The product which I fancied from their list was no longer available as they stated that, as a Portfolio Landlord, this product was not available, and they offered a product which was 1% higher than my choice.

My concern is that I did not ask for more borrowing there was no credit search as it was a simple product switch. How lenders can justify an extra 1% and why as a portfolio landlord I am penalised for something which was not applicable at the time of taking a mortgage with them?

As I already have a Mortgage with them, this is not as if there is an extra risk to the lender. In my view lenders are exploiting BTL borrowers because of Prudential Regulation new rules and as a result, my costs have gone up significantly not to mention S24 has already eaten up 20% of our profits.

Any views appreciated.

Simon



Comments

by Nick Price

22:48 PM, 7th June 2021, About 2 weeks ago

I think many have failed to make the obvious comment: what counts as a portfolio landlord differs from lender to lender, and also how much they are penalised. I'm finding Skipton pretty good on this. They allow up to 10 properties. Likewise Coventry was good on this when l last checked. Virgin allows up to five with them and ten in total. Rates are pretty good from all three, and you can get sub 2 percent if your ltv is below 60 percent.

by Seething Landlord

23:07 PM, 7th June 2021, About 2 weeks ago

Reply to the comment left by Simon Hall at 07/06/2021 - 20:17
The last line of your original post said "any views appreciated" but you clearly do not appreciate any views that differ from your own.

by Ian Narbeth

10:01 AM, 8th June 2021, About 2 weeks ago

Hi Simon
I too am a portfolio landlord. The rationale is that the Government/Bank of England want to reduce the risk of mortgage defaults. Borrowers who are heavily exposed to property because they own more than a few are seen as being riskier. No, I don't understand it either! The lenders then use this to their advantage. The Government gives them cover to behave in an anti-competitive manner. Normally, the larger customer would get better terms.
So, in the interests of allegedly reducing the risk of landlords defaulting the argument is: you are too risky for a loan at 3% but we are happy to lend at 4%-5%. Whether an individual borrower is a good or bad credit risk should be a matter of judgment for the lender and not determined by arbitrary diktat from the Government/Bank of England.
Try a thought experiment. Who is the riskier borrower? A landlord with 50 properties and 25% gearing or a landlord with 3 properties at 75% gearing and with two tenants not paying rent?
As an HMO landlord I am used to paying about 3/4% to 1% more than for a BTL loan because of the (incorrect in my view) perception that HMOs are riskier. I would argue they are less risky than BTL because the income is more secure. If one or even two out of 5 or 6 tenants in a house stops paying rent the remainder will cover the outgoings. If one out of a single tenant stops, then that is a major problem.

A few lenders now do not penalise portfolio landlords.

by Helen

11:48 AM, 8th June 2021, About 2 weeks ago

I absolutely agree that it is crazy that us portfolio landlords with a proven good record are being penalised over an 'accidental landlord' who is just going into the business and knows nothing. I agree that we are spreading our risk rather than having all our eggs in one basket. It just doesn't make sense.

by Simon Hall

12:46 PM, 8th June 2021, About 2 weeks ago

Reply to the comment left by Ian Narbeth at 08/06/2021 - 10:01
Hi Ian, I concur with your analysis albeit comments in relation to so-called alleged risk for the lender...risk can possibly be justified for new lending, further borrowings or changing its terms but it would be complete bonkers to apply same risk strategy for product switch as you are already their customer and already hold a Mortgage with them.

"The Government gives them cover to behave in an anti-competitive manner."

Above is absolutely true and BTW the culprit in action is in fact Coventry Building Society whose Interest Rates are similar to Residential Mortgages (very competitive) but decided to hit portfolio landlords to enhance their savers interest rate returns at the back of exploitation of portfolio landlords. I have also heard TMW also started to exploit product switches.

by Simon Hall

12:52 PM, 8th June 2021, About 2 weeks ago

For the avoidance of doubt I do not take issue with lenders for applying mark up on Portfolio Landlords where new Mortgages are applied, further advances, changing terms etc but Product Switch as there is NO further risk and NO further underwriting so WHY apply different Interest rate?

by David Mensah

11:43 AM, 12th June 2021, About A week ago

I have had the same problem at my bank (Handelsbanken). Had many long discussions with the bankers there, There are several issues.
Firstly, it is considerably more costly for them to do compliance on portfolio landlords.
To be honest, a much bigger pain for me also, as they now want all kinds of very detailed information, some of which they are ill-equipped to assess because they are not accountants.
Secondly, the same data gets assessed in their models as a higher risk category, and so generates higher interest rates.
This all stems from regulatory changes post 2008. The Gov't thinks that portfolio landlords are riskier, and banks need to show that they are taking this into account. Even for a bank like Handelsbanken, where local bankers have a lot more discretionary power, this ends up raising interest rates.
It is a pain, but apparently hard to do much about.
I do agree with some of the previous comments that there are many cases of portfolio landlords who are genuinely low-risk, and it is too bad that these one-size-fits-all rules are causing this kind of pain.
Surely there is a hole in the market here for a bank that can figure out a way to reward low-risk portfolios.

by Simon Hall

12:52 PM, 13th June 2021, About A week ago

Reply to the comment left by David Mensah at 12/06/2021 - 11:43
Hi David, thanks for your input. Out of interest, what sort of typical Mortgage rate is offered by Handelsbanken? I had never heard of this institute. I just looked them up and realised that they specialise in Portfolio lending. Your response would be appreciated.

by David Mensah

20:29 PM, 13th June 2021, About A week ago

Reply to the comment left by Simon Hall at 13/06/2021 - 12:52just over 3% on professional HMOs, which is my specialty. I haven't been able to get better rates elsewhere for HMOs, you can for vanilla BTLs.

Up to now I've always been happy to work with them,

by Simon Hall

21:01 PM, 13th June 2021, About A week ago

Reply to the comment left by David Mensah at 13/06/2021 - 20:29
Thanks David. Do they have any restrictions such as maximum number of background properties with other lenders or there is no limit?

For Single Let properties Non-HMO's do they offer better rates?


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