Shot Fired Across The Bows Of Lenders Who Mis Sell Mortgages
Borrowers should be compensated against mortgage mis selling. That is the view of the Government watchdog in charge of regulating the UK mortgage market, the FSA, who has recently taken strong action against a leading provider for poor lending practices.
Over GBP1million in fines have been handed out to DB mortgages (part of the Deutsche Bank group) for unfair treatment of borrowers in arrears and irresponsible lending practices. The German bank was also forced to repay GBP1.5 million in charges and fees which the Government deemed unfair.
This landmark case is good news for mortgage borrowers in the UK as it will require lenders to lend responsibly in future. Thanks to this landmark ruling, lenders can be penalised through the courts for unfair lending practices and so whilst the days of 100 per cent plus mortgages may be over, lenders will ultimately pay for such lending decisions in future.
To avoid court action and the potential of significant financial penalties, lenders will now have to ensure that they lend responsibly. For example, they will have to ensure that borrowers are not being encouraged to borrow higher loans than they can afford. In addition, they will have to take great care over home loans that continue into a borrowers retirement.
In another ruling that is likely to benefit borrowers, DB Mortgages were forced to repay fees and charges where the amount charged did not accurately reflect the administration work involved. This successful challenge mirrors the claims against High Street banks for the level of charges being applied to current accounts.
This ruling is likely to fundamentally change the landscape of the mortgage industry. The Financial Services Authority (FSA) was keen to point out to the City that it would no longer tolerate poor lending practices of this kind in future. The level of fines and charges refunds also sent a strong message to lenders that they would have to tighten their mortgage practices.
Whilst this ruling is clearly great news for borrowers, it does not alter the responsibility of a potential borrower to be sure they know what they are agreeing to at the outset. Even though the FSA is prepared to challenge lax lending practices, this will not necessarily help you if you who have already taken out a home loan without fully understanding it.
Always ensure that you fully understand any mortgage that you sign up for and that you know exactly what charges will be applicable. Fees vary significantly from lender to lender and you cannot assume that they are all the same.
When considering a mortgage or remortgage, always make sure that you research the products carefully. Make sure you know what the charges are and be sure that you can afford the mortgage payments. Do not be talked into borrowing more than you are comfortable with and make sure the lender is fully aware of all your personal circumstances.
This ruling potentially opens the door for other mis selling claims. So, if you have taken out a mortgage in the last few years and you believe you have been overcharged or mis sold, now might be the time to challenge your lender.
About the Author:
Howard writes for Just Commercial Mortgages the UK's No1 site for the latest commercial mortgage rates and commercial property finance news.
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