Addressing delegates at the Council of Mortgage Lenders’ annual conference today, Jon Pain, retail markets managing director at the FSA, says: “Tracker interest floors can be a legitimate term of a mortgage.
“But this can only be the case if it is clear and unambiguous to the consumer and is consistently and prominently spelt out in the initial Key Facts Illustration and offer document throughout the sales process.”
He adds: “If it is not lenders run the real risk of both breaching our disclosure requirements and having unfair contract term they can’t enforce.”
Halifax and Nationwide both have collars on some of their tracker products at 3% and 2.75% respectively.
As revealed in this week’s issue of Mortgage Strategy, both lenders have sought legal advice and have confirmed that their collar rates are enforceable should base rate be cut further.
Although Nationwide mentions its collar in its KFI, Halifax’s collar is only mentioned within the mortgage offer.
It is understood that the collar clause was taken out of Halifax’s KFI as a result of pressure from the regulator to reduce the length of the document.