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'natwest Charged Us £9,000 When It Ended Our Mortgage Early'

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Telegraph 19/9/14

'Mortgage lenders are incorrectly using new rules to deny borrowers a valuable feature of their mortgage contract that allows them to keep their loan when they move house.

Millions of borrowers have contracts that allow their loan to be moved, or “ported”. But lenders are trapping many in their homes because they do not meet strict new affordability criteria, introduced in April.

Even those who do not want to increase the size or length of their loan, and those whose circumstances or earnings have not changed, are being rejected. Telegraph Money has even seen cases where older borrowers who want to downsize and move to a cheaper property are being turned down.

The only way out is to pay off the loan early, which can attract a hefty penalty, and move to a new lender.

Brokers say some lenders are taking advantage of the new affordability rules as a way to move borrowers off very cheap rates or interest-only loans. Others are simply applying the rules in the wrong way.

The "porting" clause

Most mortgages were promoted and sold as portable. This appealed to borrowers who knew they would need to up or downsize in the future or who wanted flexibility to move. Lenders’ terms and conditions did state that borrowers would have to meet affordability requirements at the time they wanted to move. However, brokers say these checks are now far tougher than when the loans were taken out.

The affordability rules

Tough new rules require lenders to assess borrowers’ incomes and spending habits in great detail to ensure they can afford a loan, both now and when interest rates rise.

The changes were made to end some of the irresponsible lending practices of the past, not to make life harder for existing borrowers. The regulator, the Financial Conduct Authority (FCA), introduced transitional rules to protect existing borrowers who were unable to meet the new affordability requirements.

The special provisions allow lenders to choose not to apply the new rules to existing customers provided that they do not want to borrow more money or extend the loan term. But some are ignoring these provisions.

Is that allowed?

Martin Wheatley, the head of the FCA, said the regulator would not tolerate lenders that used the new rules to disadvantage customers.

An FCA spokesman said: “There is no requirement for lenders to apply the affordability rules when a borrower is simply porting their mortgage and not borrowing more.” But Andrew Montlake of brokerage Coreco said many lenders were ignoring the transitional rules.

Robert Lewis, 70, and his wife, Sue, 66, were shocked when NatWest told them they could not move their interest-only mortgage when they moved to a smaller property this month.

Last November they fixed their rate at 1.89pc until March 2016. They knew they were very likely to downsize during the fixed period and their NatWest mortgage adviser assured them that the loan was fully transferable.

In June the Lewises found their ideal retirement home and contacted NatWest about porting the loan.

Mr Lewis, who has banked with NatWest for 45 years, said: “To my horror I was told this would now not be possible as I did not meet NatWest’s current lending criteria because I had turned 70 in April of this year. Too old to borrow apparently, despite the fact our existing loan runs until I’m aged 73.

“By this stage the contracts had been exchanged and we had little choice but to repay the £290,000 mortgage early. To add salt to the wound NatWest insisted I pay the early redemption penalty of almost £8,700 even though it was the one insisting I redeem the mortgage early. Our retirement plans are now in tatters.”

After Telegraph Money’s intervention NatWest apologised “unreservedly” to Mr and Mrs Lewis. A spokesman said: “We didn’t review their case as we should have and they were refused our help in error.

“That’s unacceptable and we will ensure they are not left out of pocket as a result.”

The Telegraph's Jessica Gorst-Williams has also been tackling the issue.

This week she helped Alison McWilliams, who was denied a transfer by Britannia, part of Co-op Bank. It said the request to port the mortgage had been declined because Ms McWilliams did not meet its affordability criteria.

Ms McWilliams was on a very low rate of 1.05pc and she felt this had a bearing on the decision.

Following The Telegraph's involvement, Britannia agreed to port the loan and compensated Ms McWilliams for the costs she incurred.

Portable loans are "broken" – but banks won’t waive the exit fees

Dominik Lipnicki, a director of mortgage broker Your Mortgage Decisions, said the “porting” model was effectively broken.

“We are seeing a lot of people who were assured their loan was portable when they took it out and are now having their application rejected,” he said. “If home movers want to borrow more money it is right that they should have to pass lenders’ affordability checks. But if a mortgage was sold as portable and it turns out that it’s not because a lender’s criteria have changed, borrowers should not be charged a fee to pay it off early.”

Mr Lipnicki said borrowers on a fixed-rate deal generally faced the highest early redemption penalties. He urged lenders to drop these fees, which can run to tens of thousands of pounds, for borrowers whose application to port was rejected.

A spokesman for the Council of Mortgage Lenders said that given the potential costs to lenders of early redemptions it was unlikely that penalties would be waived.

“When a borrower decides to redeem their mortgage, for whatever reason, it is for lenders to decide whether there are any circumstances in which they would waive any early redemption charges,” she said. “However, given the potential costs to the lender arising from early redemption, it is unlikely that waiving charges would be the norm.”'

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You dont "port" a loan.

What you do is change the security on a loan they have given you.

downsizing could mean a considerable drop in the headroom equity.

porting is a scam word to sell debt.

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IO too I think I read

You did.

Agree re bank protecting the equity.

Imagine,old couple downsize,net off profit and then port loan so it's now 70% + LTV.

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I'm sure the contract probably says something to the effect of 'you can port your loan if you can meet our lending criteria at the time you want to move'. If the debtors are so sure they're correct why don't they take it to court instead of whining like bishes to the press?

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Banks will always find new ways to make money. With these low rates, margins are squashed. Remember the bank is your business partner in life, not your friend!

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Whining muppets. He's probably got the £300k in a savings account, thought he'd earn 3% interest on it for 3 years, then pay off the loan having made a couple of grand profit. Tough sh*t... you're too old to take out a mortgage, enjoy your retirement and stop complaining.

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