“SHARP PRACTICE” AMONG MORTGAGE LENDERS - warns RLA
The RLA are warning landlords that mortgage lenders could soon be changing thier borrowing rates to suit falling property values.
[UKPRwire, Mon Jun 08 2009] Mortgage lenders may try to change their borrowing rates as property values fall – warns the Residential Landlords Association.
Some mortgage agreements enable lenders to alter their rates if the loan-to-value ratio (LTV) changes substantially. For example, an 80% mortgage on a £100,000 property - giving an LTV of 80% - would become a 100% mortgage if the property dropped in value by £20,000.
Of greater concern, however, is evidence, seen by the RLA, where a lender claims to be able to produce “valuations” in support of its own case – even though the landlord’s portfolio of properties could be shown to meet the original LTV.
“Lenders may be seeking large repayments of capital as well as changing to more expensive interest rates,” says Alan Ward, chairman of the Residential Landlords Association - whose members own over 100,000 private rented properties throughout the UK.
Attacking the ‘sharp practice’ in this section of the mortgage industry, Alan warns: “Altering the terms of a contract by amending the valuation to suit the lender’s objectives is grossly unfair to landlords. Not only does it affect the viability of the landlord’s businesses, it threatens the security of tenants.
“Producing ‘bespoke valuations’ is highly un-professional and I call on the Royal Institute of Chartered Surveyors to condemn this practice.
“When property values begin to swing upwards again I doubt these lenders will invoke the same clause to reduce the rate of borrowing.”
• The Residential Landlords Association is a leading national organisation with members owning over 100,000 properties in the UK’s professional private rented sector. The range of members’ services - on www.rla.org.uk - includes legal advice, insurance, financial services, credit referencing and training.
- ENDS -
For further press information please contact Graham King, Powell Communications: tel: 0161 976 2729, mobile 07850 280213