Lenders preventing mortgage transfers

Neil Faulkner
by Lovemoney Staff Neil Faulkner on 17 June 2011  |  Comments 4 comments

Lenders are preventing borrowers from transferring their mortgages to new properties, even though the small print says the mortgages are portable.

Lenders preventing mortgage transfers

The Financial Ombudsman Service – a free service that can force banks and other financial institutions to compensate us when they treat us unfairly – has been receiving increasing numbers of complaints from mortgage customers who want to transfer their mortgages to a new property.

Many mortgages are portable. When you sell your home and buy another, you can move your mortgage to a new property. This process is called 'porting'.

The Financial Ombudsman's recent annual report states that mortgage complaints as a whole are down to 7,100 from 7,500 last year. And while it does not give exact figures about porting, it writes that it has seen an increase in the number of complaints from people who have had their ports refused.

No port in a storm

The nub of the problem is that lenders reassess home movers as if they were new customers, yet they have also toughened up their lending criteria in the past few years. Hence, if you fail the new criteria, you can be turned down for the port even if you don't want to borrow any extra money and your financial circumstances have improved.

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The FOS writes 'It is unusual to see mortgage contracts that allow the consumer unconditionally to “port” their mortgage as a contractual right.' It seems that lenders might not have explained this clearly enough to some aggrieved customers.

If you have recently gone self-employed, you may be rejected as more risky, even if your income has risen. While this might also have happened to you before the financial crisis, it appears more likely now, since lenders are being more conservative.

I have read the story of one woman who says she went on maternity leave at full pay for the whole period of leave. (Now that is a generous employer she has.) However, her port was still refused on the basis that she was in maternity leave. It was not until she had threatened legal action that the lender granted her the port.

It's dodgy ground picking on something so gender-specific, but it seems these sorts of things are happening more often at present.

What to do if your transfer is rejected

Thankfully, porting problems still seem to generate a relatively small number of complaints. April and May figures alone show a combined total of 60,000 remortgage deals. With no more than a few thousand of the 7,100 mortgage complaints last year being related to porting, it seems most borrowers shouldn't be too concerned.

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However, if your lender does refuse your port, you will probably have to repay the mortgage, along with any early redemption charges specified in your contract when you sell, and apply elsewhere for a mortgage on the new property.

You could look at the key facts illustration and the contract, and try to think objectively about whether porting was explained clearly enough from the average person's point of view. Some lenders' documentation is far more obscure than others. If you don't think it was clear, you can complain to the lender and/or your broker with a polite letter setting out your grievances.

If your complaint is rejected, you can complain to the Financial Ombudsman Service.

The FOS says it cannot set the criteria that a lender uses to agree a port, but it can look at whether you have been treated unfairly. If it finds that you have, it can force the lender to compensate you. In some circumstances, the FOS might rule that the lender does not have to agree to the port, but must waive early repayment charges.

Make use of a broker

It can be very useful to make use of a broker if you fancy porting your mortgage. Not only can they quickly work out exactly what your mortgage contract allows you to do, but they can also have a chat with the lender in question - while your mortgage contract may not allow porting, in many cases the lender would rather keep you than see you move your mortgage to another lender. As a result, you may still be able to port, despite what your contract says.

Why not pick the brains of our mortgage team over at our mortgage centre?

Be wary when signing up to long mortgage deals

I like ten-year mortgages at current prices, as I wrote in Pay 5% on your mortgage for a decade and How to pick the right remortgage deal. However, you do need to be confident about your personal circumstances when tying yourself in for so long. I think the recent problems with porting emphasises that.

More: Compare mortgages through lovemoney.com | House price indices are a waste of time

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Comments (4)

  • potatoefeet66
    Love rating 1
    potatoefeet66 said

    Hi I am very interested in your story on porting.

    My lender refused to port my reduced balance of 138k.

    As my income had reduced due to recession and all, they

    said had my income supported the existing loan I'd

    be in new house today , lenders words.

    This I dint really have a major issue over as the equity available in my home is in excess of 75%.

    Keeping in mind my portable kfi criteria was satisfied having no

    tie in's or penaltise and the interest rate of only 0.84%

    I offered to reduce my borrowing from 142k outstanding by using all the equity bring

    balance below 50k. On a property valued in excess of 300k

    the lender once then claimed I made an application for a 50k mortgage and this was

    also declined. This has since been proved as false as they refused point blank to

    accept any further application. This is totally wrong and immoral. I have no secured debt and the lender had also said had my assesed income matched the 138k I'd be in my new house. This was to do with my rate nothing less.

    For two and a half years and 3 yes three FOS teams I'm still fighting this

    as yet unresolved. As FOS are as week as a kitten when it comes to

    huge issues as this. This lender and FOS have failed to support the wider economy

    and the housing Market when faced with there own loss.

    They could not remove my mortgage product which they wanted I'm still paying my mortgage at 0.84% but have been robbed by over 400 pounds every month and years of being mortgage free.

    I'd very much appreciate any help of comments. Please.

    Report on 20 July 2011  |  Love thisLove  0 loves
  • David Hutley
    Love rating 0
    David Hutley said

    A very similar problem here

    I have a mortage with the Yorkshire Building Society for £162000 on a house valued at @£780,000 so the loan to value ratio is around 20%.

    I have a tracker for the life of the mortage at 0.45 above base for the life of the mortgage. I have been overpaying the mortage regularly by around 40% and have never missed a payment.

    I approached the Yorkshire Building Society to borrow a reduced amount at the same loan to value ratio, the idea being to reduce the mortage as we no longer need the space.

    Being self employed was the first issue, I had made less profit in the last year than the year before, maybe by around 10% less ( I was asked to explain why !!! ). They then looked at my credit card which I use for work ( and pay off every month ) and multiplied the balance and deducted this from what they would lend. The kept going with a Motorbike loan which has a balance of around £2500 but they deduct far more from the potential mortage. At no point did they consider any other monies, properties etc that could be seen as being positive.

    At the end they basically said they would not lend me anything - and by doing so they leave me on the mortage of £162,000 which by their own calculations, would be well above what I am able to support ( but I have been ).

    I contacted the Financial Service Ombudsman in Oct 2011 and apart from several letters saying that my case is in a cue, they have done nothing for a year.

    I have now sold the house and will move on the 19th of October and will clear my mortgage entirely.

    I feel ripped of by the Yorkshire Building Society and I believe they have breached their contract with me by refusing to transfer my mortage to a new property.

    I write this out of frustration as there is very little I can do. The FSO is a waste of time at the present and the financial services need an ombudsman with teeth.

    Report on 06 October 2012  |  Love thisLove  0 loves

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