View more on these topics

Big banks are acting like big bullies

Kevin Paterson takes a weekly look at the latest developments in the market and brings you what’s hot and what’s not in the world of mortgages

The backlash against the exorbitant fees charged by banks when their customers go into the red has been given added weight by the office of Fair Trading, which has stated that it considers excessive fees to be illegal. This move has triggering a dramatic increase in complaints and demands for refunds by customers.

This is something I am sure has not passed the ambulance-chasing claims firms by.

But now it seems that banks, in a fit of pique, have picked up their ball and gone home.

It was widely reported recently that banks that are successfully lobbied for refunds of fees are guilty of adopting intimidating practices including demanding that customers move their accounts.

So concerning is the trend that the Financial Ombudsman Service has launched an investigation into the practice.

Indeed, the FOS has uncovered a range of dirty tricks used by big banks in their attempts to intimidate customers into backing down.

These include closing or threatening to close accounts, imposing high fees for supplying information such as copies of bank statements and fees charged, delays in replying to customers’ letters or worse, ignoring them altogether. More disturbingly, they are enlisting the help of debt collectors to deal with overdrawn accounts.

These bullying tactics are sadly all too common among big institutions that think they can act how they please. And the evidence so far seems to bear the allegations out, as one of the biggest culprits, HSBC, announced record profits of almost £12bn recently.

Unfortunately it is not alone, as this came in the same week that the majority of banks announced record profits – in some cases up 30% year-on-year. Priceless.

Lenders’ employed self-cert offers will come back to haunt borrowers

The voice of reason sounded recently on employed self-cert mortgages and it was long overdue. A leading mortgage broker called for advisers to avoid taking on self-cert cases when clients are employed.

I have long been an advocate of self-cert for the self-employed only, so this was welcome news and I suspect we will hear more comments like this as the Financial Services Authority narrows its sights on self-cert as it surely will. It’s just a matter of time.

Employed people can prove their incomes but self-cert is often used to stretch affordability. I hear of examples whereby elements of unusable income are included such as maintenance payments that are not paid as part of court orders or the classic second job, the income from which is unprovable. All this is dodgy ground and will come back to haunt borrowers.

Lenders that offer these schemes are copping out of doing their job properly as there is no reason they could not

amend their lending policies to accommodate additional income – and I’m afraid all income is provable one way or another.

Self-cert was introduced to recognise the disparity between the net income and the affordability of self-employed people as the tried and tested formula of multiples of gross income for the employed was seen not to work, and accounts bore little resemblance to true affordability. After all, it is in the interests of self-employed people to keep net profits as low as possible.

But the introduction of employed self-cert has muddied the water. And importantly, it’s brokers who will face the wrath of the regulator in this regard, as most lenders still insist on income being declared on their application paperwork, often citing responsible lending as the reason for this when in reality they are simply covering their backs. But if income can’t be proved it’s money laundering – and that’s illegal.

Recommended

Pink reshuffles executive team

Pink Home Loans has unveiled its new-look executive team including Kay Leslie as network services director and Elliott Stoneham as chief operating officer. Lisa Hurley has been appointed associate director of finance.

edeus launches buy-to-let product

Edeus has launched a buy-to-let product based on its BLA13 product.The product is available up to 90% LTV at 100% rental coverage based on pay rate which is 0.74% over Bank of England base rate for two years. This gives a pay rate of 5.99%. There is an 1.5% arrangement fee and early repayment charges […]

Exhibitors report quality leads at the Homebuyer Show

A record number of visitors attended the Homebuyer Show at the weekend, resulting in exhibitors reporting a greatly increased number of quality leads.Nearly 15,000 attended the show at London’s ExCeL Centre which had over 250 exhibitors specialising in all areas of property investment in the UK as well as a range of foreign markets from […]

Yorkshire announces record year with mortgage asset growth of 10.4%

Yorkshire has announced a record year for 2006 with underlying mortgage asset growth of 10.4% up to 13.3bn.Gross lending was up 26% to 4bn and net lending was up 52% to 1.3bn year-on-year.Member savings balance grew by 10.6% to 11.3bn and net retail inflow stood at 791m, which was up 84% on 2005.Management expense ratio […]

Pensions - thumbnail

Mothers missing out on millions

New HMRC figures show number of ‘mothers missing out on millions’ in pension rights has doubled in two years – Steve Webb Figures published on 24th March by HM Revenue & Customs show a doubling in the number of mothers missing out unnecessarily on vital pension rights because of a change in the rules on Child […]

Newsletter

News and expert analysis straight to your inbox

Sign up