Now I’m worried Birmingham Midshires will raise their Tracker margins

I think you are right to be worried!

Me too

I have had difficulties with Birmingham Midshires before in a very similar way. When the bank rate was around 4% I obtained a tracker mortgage with a rate of 2% below bank rate for the first two years then 2% over for the rest of the term. When the bank rate went to 0.5% the interest should have been negative, i.e. they pay me. I repeatedly asked where in the contract any mention of interest being unable to go negative. I failed to get any response. They kept ignoring the question. It seems that the normal rules of mathematics do not apply to building societies! Or perhaps they just don’t understand basic maths at all, which is why they are in this mess now!

Based on the wording quoted it seems clear to me that your interest rate is in fact fixed at 0.4% above BBR - it is only variable in the sense that it will vary in line with base rate - so you have a fixed rate mortgage. But in the current "Alice in Wonderland" climate where financial institutions seem to think that words mean whatever they want them to, who knows what they might try?

Ed,

A pragmatic response for you:

Real problems can always be solved, its only the imagined ones that appear insurmountable.

I can't recall who said that quote, but it has helped me a great deal over the years.

I have found it a complete waste of energy and brain power to worry about something that has not happened yet. Focus on the now and deal with the real problems.

The fact is that interest rates ARE going to go up, when the BOE base rate rises!

That is why you should focus on what you can do NOW to protect yourself ... mend the roof while the sun is shining.

This post might give you some pointers:

http://www.propertytribes.com/ways-future-proof-your-property-portfolio-while-interest-t-8243-3.html

If you look on Page 3 of the thread, you will find that I actually reveal a proven strategy to get your BMS interest rates LOWERED!

http://www.propertytribes.com/ways-future-proof-your-property-portfolio-while-interest-t-8243-3.html#pid99529

Knowledge and action can overcome most problems!

Reply to the comment left by "Vanessa Warwick" at "07/10/2013 - 18:51":

Hi Vanessa

I suspect the purpose of Ed's post is to rally support for the Class action and the associated marketing fund.

Whether we are affected by West Brom or BoI is irrelevant, if we all wait for all of our lenders to do this before we take action it will be too late.

Fortunately, a lot of very sensible and forward thinking folk have recognised the potential threats to their business models beyond the BoE rates increasing and are not burying their heads in the sand simply because their lender(s) have done the foul deed of increasing their tracker rate margins YET!

What action are you taking to protect your business against your lenders doing this to your mortgages Vanessa?
.

Yes Mark, you've rumbled me!

I agree, it's vital to fight now rather than let this escalate. As I see it, paying some money into the Class Action fund is really like an insurance policy to help protect my low tracker payments with both BM & Mortgage Express.

Vanessa – most of your 6 ways to future-proof your property portfolio make sense in the context of a risk of rising interest rates …….. except borrowing more! (Number 3). I have concentrated on the 2nd one: build a cash buffer.

Has there been a discussion here or on Property Tribes on the minimum size of a cash buffer? It would make a good thread. I remember a Money Centre seminar in about 2005 mentioning £25K, which I’d say is too low for even a small portfolio. Actually, the seminar was very valuable for us, we more than doubled our portfolio.

[PS Vanessa ,the BM trackers in question are indeed the ones you mentioned in your 2nd PT link: “older loans enjoy very low rate trackers”. Re-negotiating the rate is the last thing I want to do.]

Hi All,

I've got a BM mortgage on my domicile (OK, it's not a BTL, but I also have a similar one with the Bank of Scotland). I too enjoy a great interest rate which is 1% above BoE base rate. I'm concerned that there will be a ground swell of activity which encourages other lenders to follow suit and before we know it, it will become de facto for every lender to execute the minute small print and stitch all their customers whenever it suits them.

I say this needs to be nipped in the bud sooner rather than later.

Correct me if I'm wrong, but this feels like mis-selling in the same sense as the disastrous tactics of PPI? Since when did any of us have it explained that the capped interest above BoE is not actually capped and subject to the whims, and extraordinarily, can influenced by competitor lender activities?!

I for one would testify that the financial advisor explained that the capped rate was fixed above BoE for the term of the loan, and not subject to change. Given that this contradicts the small print, this alone should manifest as a selling misdemeanour under legal scrutiny?

Reply to the comment left by "Matthew James" at "07/10/2013 - 21:17":

Matthew, I agree with most of your points and all of the sentiment. Sadly, I think landlords probably won't be covered by the consumer protection arrangements behind the PPP payouts. We're considered businesses I believe.

Meanwhile, the brokers and financial advisors won't have deep pockets to provide 'windfall payouts'. I wouldn't blame them too much anyway, would they really have known that the bank's tracker promise was dodgy? Mark might have something to report here!

Reply to the comment left by "Ed Atkinson" at "07/10/2013 - 21:15":

Hi Ed

You will recall from the workshop presentations I delivered at TMC that I recommended a 20% liquidity reserve, i.e. 20% of total debt should be held in liquidity as a reserve.

There have been several discussion on both forums about that which I have join in with over the years and also details on The Money Centre website. Sadly I can't easily find those discussions as many of them were spin off from other strategy based discssions.

I did, however, document my entire strategy in the Advice section of this website. plenty bedtime reading for you there 🙂