Shot Fired Across The Bows Of Lenders Who Mis Sell Mortgages

Decisive action has been taken by the FSA, a government watchdog responsible for regulating the mortgage market against mis selling and ensuring that borrowers are compensated if they are mis sold products.

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.

The FSA forced DB Mortgages to repay charges to the customers, who they said have been treated unfairly and had been charged costs that were far higher than those incurred by the lender in administering accounts that were behind on payments.

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.

Nothing of this nature has every happened in the UK before in terms of fines for irresponsible mortgage lending by banks, but it follows a huge reform since the financial crisis that has gripped the country for over two years. The FSA have made it clear that this is the way that things will be from now on, and any lenders undertaking unfair and irresponsible lending will be fined under the rules concerning the fair treatment of consumers.

This would appear to be the shape of things to come as a statement made by the FSA last week indicates. The FSA said that they would no longer tolerate lax lending practices of this kind. There were also very strong inference that this statement was to be heard loud and clear by the whole of the UK mortgage industry.

The advice however for borrowers, is not to allow their debts to spiral if they find that they struggle to meet repayments. The FSA has advised that consumers need to inform their lender as soon as they realise that they cannot make a repayment and try to come to an agreement in order to ensure that the payments can be caught up with, rather than just not paying the debts and hoping that they will go away.

Another important thing to note is that you should always ensure that you know the full costing of any contract that you enter into. Make sure that you fully explore the charges and costs, and if need be get an expert such as a mortgage broker or a financial adviser to help you make any decisions if you are unsure.

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.