Minister warns mortgage lenders to expect legal action
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Your support makes all the difference.Mortgage lenders were warned yesterday to clean up bad practice or face tough laws to protect homeowners.
Mortgage lenders were warned yesterday to clean up bad practice or face tough laws to protect homeowners.
Stephen Byers, the Secretary of State for Trade and Industry, threatened legislation if the industry did not respond to public concern about unfair terms and conditions imposed on borrowers.
Mr Byers, who met a dozen lenders at a special summit, said: "If they don't on a voluntary basis agree to a positive way forward, then we will take action and, if necessary, we will introduce legislation to ensure that we put the interests of the individual first."
The summit came after the Consumers' Association highlighted complaints from borrowers about practices ranging from hidden fees to unfair interest calculations. Charging a fee to customers who pay off their mortgage with a lump sum - known as a redemption penalty - was identified by the association as the biggest single cause of complaints. One lender, NatWest Home Loans, agreed to cap its redemption penalties at a maximum of 5 per cent of the loan, after the Office of Fair Trading intervened to stop what it described as "ruinously high charges".
Ministers have also published proposals to introduce minimum standards of fairness and simplicity in mortgage contracts. The proposals on charges, access to mortgages and terms on contracts - dubbed CAT standards - would aim to provide basic standards against which all mortgages could be measured.
Mr Byers, who indicated he may take even tougher action, said: "The individual taking out a mortgage needs to have clear and unambiguous information given to them. Looking at some of the documents which are given to individuals thinking of taking out a mortgage they are simply not clear enough and that needs to be improved."
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