Cheshire Mortgage Corporation has changed the terms in its mortgage contract after the Financial Services Authority deemed its original wording unfair.
The FSA felt the original wording of the lender’s 2004 and 2006 contracts gave the firm power to vary interest rates without specifying valid reasons for doing so.
It believed the terms had the potential to cause consumer detriment because they could result in monthly mortgage payments being increased in an unpredictable and non-transparent way.
Cheshire Mortgage Corporation has now amended the terms so that they list a valid reason for which the interest rate applicable to the mortgage can be increased or decreased, namely, because of a proportionate response to an increase or decrease in the cost of funding.
The firm has also agreed to provide consumers with 14 days’ notice of any change in the interest rate.
The lender says it has not varied the interest rate for any reason other than the one provided in the new terms so does not believe there has been any customer detriment.
The firm has also agreed to treat existing customers according to the new term.
It will contact its existing customers to notify them about the changes to the contract.
Cheshire Mortgage Corporation is the FSA directly authorised lending division of Blemain Group.
A spokesman for Cheshire Mortgage Corporation says: “We have reached agreement with the FSA on language used to communicate reasons for interest rate changes in our 2004 and 2006 mortgage terms.
“The undertaking confirms that all necessary steps are now being taken to explain potential reasons for rate changes to those customers who received the 2004 and 2006 terms and that in our view no customers have suffered any detriment as result of this matter.”
The FSA says the lender was cooperative and proactive in identifying issues and solutions.