In what I find to be a simply stunning story the FT this week wrote that the NatWest bank was demanding that clients stump up us much as £1 million in a month to cover the fact that the equity in their portfolios had decreased dramatically because of falling house prices.
All this despite the fact that there was no suggestion that the landlords were likely to default on their payments.
Savills Private Finance, a prominent mortgage broker says it has seen quite a bit of evidence recently of the banks willingness to unexpectedly demand money from clients with high value property business’.
Melanie Bien, director of Savills, said this was a new trend as the buy-to-let market was not established in the previous market downturn in the early 1990s. “It is really a feature of the buy-to-let boom and credit crunch.”
The banks say that they are within their rights to do this as they have clauses in their contracts with these clients that state they can review agreements in certain circumstances one of which is if the bank believes there is not enough rental income being made on the property to cover the interest payments.
The really interesting thing is that people who have had the banks do this to them are denying this is even the case with their business. It all sounds like a bit of a worry to me.
