Hidden in the small print of your mortgage contract could be a clause that gives your lender the right to change certain aspects of your loan, including how much interest you pay. Do you think that’s fair?
The Financial Conduct Authority (FCA) recently published a Discussion Paper about the fairness of changes to mortgages after borrowers have signed up.
They want to hear from you about your views on fairness, including any changes you’ve experienced to your mortgage contract and how you were affected.
What you told us
We’ve heard from lots of people who’ve been hit by unexpected changes to their mortgage contracts, many of whom lost out as a result. These changes are often to the ‘price’ of the mortgage, which includes the interest you pay plus any fees and charges.
Here’s an example. Last year more than 12,000 Bank of Ireland customers with ‘tracker’ mortgages saw a sharp increase in their interest rates. Those customers signed up for mortgages that were meant to track the Bank of England base rate. However, a term in the small print (which the Bank of Ireland called a ‘special condition’) allowed the bank to increase interest rates despite the base rate remaining static. Bank of Ireland customers told us how much they’d been affected by the unexpected change to their mortgage deal.
We’re also aware of instances where lenders agree to a ‘cap’ on the interest rate applied to a mortgage, but the small print allows the lender to increase the cap. It’s hard to see how a cap that can be raised is a cap at all!
It won’t always be the price of the mortgage that’s changed. We’ve heard stories of banks withdrawing certain facilities (such as reserve or drawdown facilities) part way through a mortgage term. Indeed any change to your mortgage contract might be unfair if, when you signed up for the mortgage, you didn’t expect the change to happen.
What’s the FCA doing about it?
It’s part of the FCA’s role to consider whether changes to mortgage contracts are fair and reasonable, and to make sure that you’re adequately protected. The FCA is currently thinking about what factors to take into account when assessing fairness in this context.
The FCA issued its Discussion Paper early in the week, aimed at gathering your views on this topic. The FCA is interested in your experiences and expectations of the mortgage market and, in particular, wants to hear what you think makes a change to a mortgage contract fair.
Do you have an experience you’d like to share? Or, if you haven’t experienced a change to your own mortgage, do you have a view on what’s fair and what’s not?
If you’d like to answer the FCA’s specific questions, you can use the Discussion Paper’s online form by 30 September 2014. You can also tell us about your experiences and views right here.