Is Mis Selling Financial Products A Thing Of The Past
The FSA, a government watchdog tasked with regulating the mortgage market has taken decisive action against mis-selling, ensuring that borrowers are compensated if they are misled.
DB Mortgages, a mortgage provider for the Deutsche Bank was hit was fines nearing £1 million last week for irresponsible lending practices and unfair treatment of customers in arrears. Whilst the government was penalizing the company, it also managed to force DB to repay £1.5 million in unfair fines and charges.
This is the very first case of its kind, brought against a mortgage lender in the UK and it is good news for anyone looking to remortgage. First of all it finally gives lenders a big message, enforced by court action, to lend responsibly.
Lenders will have to be very careful with mortgages that continue into a borrower's retirement, when their incomes decline, and borrowers should not now feel that they are being talked into borrowing more than they can afford to repay.
Interestingly, charges on mortgages in the DB case have been successfully challenged on much the same grounds that High Street Banking charges were briefly reclaimed. DB were told to repay unfair charges, they were forced to give back money where the charge did not reflect the cost of administration of an account in arrears.
Is this the shape of things to come in the mortgage industry? Yes. The evidence for that is a statement made by the FSA last week. In it the FSA said that they would no longer tolerate lax lending practices of this kind, and there was a strong inference that this statement was designed to be heard loud and clear by the mortgage industry.
This is good news for borrowers, it does give them added protection against mis-selling, but the best protection is to ask the right questions to start with, after all the FSA is a body that steps in only after things have gone badly wrong and a lot of stress and heartache has occurred.
Make sure a lender tells you about all the fees involved in all areas of the remortgage package if you are shifting your mortgage over from one lender to another. Don't assume that their practices and charges are similar.
When you are considering a particular mortgage product, do your homework. Google the product with the words 'nightmare' 'headache' and 'charges' and see what comes up. When the product is being sold to you make sure that the seller has taken all reasonable steps to understand your circumstances and your ability to pay, it can sometimes be possible to be 'talked up' into borrowing too much because the lender convinces the borrower it is manageable.
If you have borrowed in the last few years and feel you may have been mis-sold or over charged, now might be the ideal time to take action.
Howard writes for Just Commercial Mortgages
the UK's No1 site for the latest commercial mortgage rates
and commercial property finance news.