CA calls for replacement of HIP interest payments

The Consumers&#39 Association wants interest rates frozen on thousands of home income plans sold in the 1980s.

New sales of these roll-up loans were outlawed in 1991 but many borrowers face growing debts after their high-risk investments failed. Some elderly borrowers are facing debts over five times the size of their initial loan.

Theresa Fritz, spokeswoman for the CA, says: “Our director, Sheila McKechnie, has formally asked the Council of Mortgage Lenders to put pressure on all members associated with roll-up loans or HIPs to stop collecting interest. Lenders have no legal liability, since in most cases these schemes were mis-sold by intermediaries. But lenders are still making a huge profit – we think enough is enough.”

The CML declined to comment on what actions it is considering in response to the CA&#39s letter.

Several lenders have already turned down the CA&#39s request, including Halifax, Chelsea and West Bromwich.

Jason Clarke, spokesman for Halifax, says: “We&#39ve already taken a number of steps over and above the industry recommendations given when HIP investigations concluded.”

But Cheltenham & Gloucester is one lender that has frozen HIP interest.

Peter Mounty, head of communications, says: “If there had been a desire on the part of all lenders to take the same route they would have done so already.”

The CA is concerned that the delay of mortgage advice regulation until 2004 opens a window for further mis-selling of equity release products – highlighted by the CML as a growth area.

And Fritz adds: “I don&#39t think brokers deliberately mis-sell these products. But there is a large gap between what the industry thinks people understand and what they actually do.”