Homeowners are still being forced to undergo strenuous credit-checking if they wish to move their mortgage from one property to another, more than two years after the regulator warned that this should not be necessary.
As a result, some borrowers are losing low-rate deals which contractually they are entitled to keep.
Lenders continue to put customers who want to “port” mortgages through stringent affordability assessments – despite the FCA explicitly saying that they do not need to do this.
Telegraph Money has learned from both brokers and borrowers themselves that “almost no” major lenders are following the FCA’s statement that there is “no need” to put.
In 2014 a spokesman for the regulator said: “If a customer wants to port and there is no extra money being raised or a change to the mortgage terms that is likely to make a difference to affordability, there is no need to undertake an affordability assessment.
“We strongly urge lenders who are not applying the rules correctly to review their policies to ensure that they are making judgments based on common sense and in the interest of their customers.”
Telegraph Money brought to light many cases where buyers had been disadvantaged by lenders’ failure to follow these rules.
More than two years on, it appears some lenders are still not doing so.
Samantha and Jonathan Gibson were told by Clydesdale Bank, their lender, that to move the mortgage they would have to go through an affordability process – despite the fact that they required no more lending and were moving to a house of similar value.
Mrs Gibson said: “It was a two-hour phone call, covering our income, outgoings and everything.
“The whole thing was strange – as if we were doing a brand-new mortgage assessment,” she said.
When asked about the Gibson’s’ case, a spokesman for Clydesdale initially said: “When a property security is changing, we require a full application.
“However, if there is no material change to affordability our underwriting team reviews each case individually. We will contact our customers to help them progress an application should they wish to do so.”
After Telegraph Money went back to the bank and quoted the FCA’s recommendations, the spokesman then said: “If the borrowing for new property is higher than we would need to ensure affordability in line with standard procedures.
“However, if there is no change to lending then affordability assessment isn’t applied.”
But on the same day, a Clydesdale employee called the couple to carry out the full affordability assessment.
Clydesdale said that the Gibson’s’ case was different because they had initially taken the loan out through a broker, so had to do a full affordability assessment with the lender when moving it.
Had they taken the loan out directly with the bank, a spokesman said, they would not have had to undertake the assessment.
The couple were concerned that because Mr Gibson is a contractor and they had arranged the initial mortgage through a specialist broker, they might not be allowed to port it, though they were eventually told that they should be able to do so. :07
Shaun Church, of mortgage broker Private Finance, said that major lenders had largely ignored the FCA’s recommendations.
This was particularly the case where borrowers were on low rates, such as cheap base-rate trackers, he added.
“They’re all re-underwriting ports as full applications. I can’t think of a major lender who isn’t doing it.
“If you no longer meet the criteria, they won’t then lend the same amount to you,” he said.
Buy-to-let lenders also appear to be ignoring their regulator, the PRA, who has said that existing borrowers should not be subject to tougher new affordability rules, which came into force at that start of this year.
Last year the two largest lenders, Lloyds and Nationwide, said that they would allow their own customers to transfer their mortgage to a new deal without being subject to the new requirements – but would not extend this to borrowers re-mortgaging from other banks.
Rob’s Comments. Bullshit, Bullshit, Bullshit. The Clydesdale Bank should whip their mouth with toilet paper after stating the above because of the crap they just spoke.
Using a broker does not mean that the bank DID NOT do affordability checks at the time the Gibson’s completed their first mortgage. They did! It is just another excuse because Clydesdale Bank procedures at the time the Gibson’s first mortgage was completed was not as strict as today.
The Telegraph are correct in exposing this injustice and lender need to be fine by the FCA for not following this procedure.