This area of financial services has been under investigation for some considerable time now, and the potential error by the majority of Lenders is as follows :-
Variable rate mortgages, whether repayment or interest-only, have terms which state that the chargeable rate will be “X” over the Bank of England base rate. It has become apparent that when the BOE have reduced the base rate, Lenders have been slow to follow their rate downwards. Sometimes as much as 2-3 months later. (Historically, when the BOE base rate rises, the Lenders have tended to respond very quickly). They may also have not passed-on the full reduction percentage.
This means that for those months, the Borrower has been over-charged, and for a repayment mortgage, the outstanding balance hasn’t reduced as quickly as it should. Clearly, this is a relatively small sum, and the initial reaction may be, “well so what, it’s made little difference to the overall mortgage”. However, if this happens once, or multiple times, especially as interest rates have consistently fallen over recent years, there is an alarming compounding effect on these small amounts.
For example, if you were overcharged £20 for only 2 months, that means £40 continues to attract interest costs throughout the following months and years. If another base rate drop occurred, and the same pattern repeated, the numbers repeat and start to make a big difference. We have actual figures for a particular example mortgage where the compounded sum, and resultant compensation claim, was valued at just over £23,000, and this was for a very average mortgage.
Claim Assessment and service.
The challenges for making this service widely available were difficult. Firstly, there was the wide range of Lenders and mortgage products, and then establishing exactly what date each Lender responded to historic base rate reductions. Once this was done, there was an essentially required algorithmic program, which would allow individual mortgage details to be input, and the loss/claim value established almost instantly. (Otherwise the work and time involved would have meant the cost of each assessment would either prohibit or take a big proportion of any compensation sum).
Additionally required was up-front funding for the legal work involved with each claim, and also bespoke external insurance cover, to facilitate a no-win, no-fee structure.
The final requirement for a claim, is that it will only be successful from the date at which full FCA regulation came into force, which means mortgages taken out after 2005. Currently any after 2015 will also be unable to claim, purely as there haven’t been enough years for the compounded sum to be worthwhile to claim for.
This claim process is now fully-active and your route to claim is open.
For your free claim assessment, please request our Enquiry Form