A financial adviser has slammed the Halifax for applying mortgage lending rules too stringently for clients in interest-only mortgages.
The post-mortgage market review product transfer process from the Halifax has forced existing borrowers to switch to repayment mortgages from interest-only, Chris Nicholson has claimed.
The managing director of Bath Mortgage Search said the application process used to be simple, but since the introduction of the MMR applicants are expected to go through a detailed full-affordability application for interest-only mortgages.
He said: “Under the new process, if the mortgage remains interest-only, Halifax wants to reassess the application fully. Surely these are written for the duration of the mortgage when they applied?”
The mortgage broker claimed that Halifax has made product transfers more difficult, making it more cumbersome and time consuming, even for some of his “financially sophisticated” clients.
He asked why the bank could not do a straight like-for-like product transfer, without switching clients onto a repayment vehicle, or forcing them to go to another provider, or keeping them on an interest-only mortgage but at the lender’s 3.99 per cent standard variable rate.
In May 2012, Halifax raised its SVR from 3.5 per cent to 3.99 per cent, citing at the time the higher cost of raising funds for mortgages from savers and the markets.
Mr Nicholson said that, over the past few weeks, he has only managed to process two out of 11 product transfers, adding: “This would have been 100 per cent a few months ago. The remaining clients are now either forced to remortgage to a new lender or remain on 3.99 per cent SVR.”
Mr Nicholson said he fully accepted that new borrowers have to meet the new, post-MMR lending criteria, but questioned why a full reassessment was necessary for existing clients, often being fully underwritten a second time.
He added: “What I’ve experienced in the last few weeks seems to discriminate against existing borrowers. It has left a sour taste and I no longer feel loyal to the process. It seems to go against treating customers fairly.”
Right to reply
A Lloyds Banking Group spokesman said: “When a product transfer application is made we will reassess affordability considering both current and potential future changes.
“If a customer is unable to provide us with evidence of a repayment vehicle based on our current interest-only lending policy, we will consider the customer’s ability to repay their mortgage based on their earned income.
“We encourage customers to ensure that they have an adequate repayment strategy in place. If this is not the case we will work with customers to assess alternative options such as moving all or part of the balance to a repayment basis.”
