The Financial Services Authority (FSA) who are responsible for regulating all of financial services including mortgages has fined one of the well known lenders after discovery of their mis-selling.
Over 1million 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 1.5 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 borrower’s 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.
The news of mortgage lenders being fined for such business being undertaken gives new faith to borrowers, and it is thought that we may see a further decrease in mortgage lending as banks are becoming more and more nervous about lending to customers since the recent market crises and the new regulation that is being implemented by the regulators. It is clear that they mean business and that they will no longer allow consumers to be exploited and left in poor financial circumstances when they are already struggling.
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 won’t necessarily help you if you who have already taken out a home loan without fully understanding it.
If you decide to remortgage, ensure that you know all fees and costs involved before signing on the dotted line. This is important as you could end up paying more and subsequently fall into arrears if you’ve not explored all costs.
Doing adequate research can only help when remortgaging, for such a big decision there is no such thing as being over prepared. Google the company and the remortgage product with the words ‘nightmare’ ‘headache’ and ‘charges’ and see what comes up. There is also a moral responsibility on your side to be honest with the lender and to ensure the lender has taken all reasonable steps to fully understand your circumstances and your ability to pay.
If you think you may have been mis-sold your mortgage in the past few years, it would be a good time to sort it out now while it’s a hot topic and claim back any charges.
Howard writes for Just Commercial Mortgages the UK’s No1 site for the latest commercial mortgage rates and commercial property finance news.