Mortgage lenders are failing consumers in their hour of need

Mortgage lenders are failing to help long-standing customers who have lost their jobs.

Several readers have written to Sunday Times Money to say their lenders are refusing to offer them assistance, or even to give them a fair hearing, when they tell them they have lost their jobs and need to renegotiate their mortgages.

Even though the consumer panel of the Financial Services Authority (FSA) declared last Thursday it would take strong action against companies that levy unfair arrears charges, it is doing nothing to force lenders to help homeowners avoid falling into arrears in the first place.

FSA regulations state they are obliged to consider customers’ individual circumstances and must treat all cases of financial hardship sympathetically — but this does not appear to be happening.

Ian Sanders (pictured above) from Loughborough, Leicestershire, was told in May he was going to be made redundant from his £60,000-a-year post at a Nottingham law firm.

The solicitor, 35, went straight to his lender, HSBC, to negotiate a payment holiday or switch to interest-only repayments while he looked for a job.

“I bought my three-bedroom house in April 2007 for £213,500 and took out a £149,500 mortgage with HSBC. I have got about £50,000 equity in my property and have never defaulted on a payment, so I thought I would have no problem switching for a while,” he said.

Sanders was referred to the bank’s specialist mortgage advice centre, where an adviser curtly informed him HSBC could neither arrange a payment holiday nor could he be switched to interest-only because there was no certainty he would get another job.

Despite protesting to HSBC, Sanders was merely told that the bank could do nothing to help and that it would begin repossession proceedings if he missed more than a couple of payments.

“I have been an HSBC customer for more than 13 years. I have taken out two mortgages with them. For all that time, they have been falling over themselves to offer me their latest deals. “When I had money, they were fantastic but now it’s a different story,” he said.

An HSBC spokesman said the bank does allow some customers to switch to interest-only payments but that all cases are assessed on an individual basis.

He said: “We can’t comment on individual cases. However, if someone can see their income is going to come to an end but they still have a good personal balance sheet at that point, with a robust level of savings, we are unlikely to change the terms of their loan.

“The best thing for them to do in that situation is to maintain their current level of payments — we don’t want them to fall behind if they can help it.”

In another case, Veronica Wray, a self-employed communications consultant from west London, has seen her income drop 70% since the beginning of the year.

She asked Abbey, her lender, whether she could reduce her monthly mortgage repayments of £1,500 to interest-only for a short time.

Abbey refused to discuss any change of mortgage product and said that, at 62, she was too old to remortgage and even if she did so, she would be charged a penalty.

Abbey said: “We have reviewed Ms Wray’s case and are working with her to agree the best option to suit her needs. Abbey has an online guide to help customers in financial difficulty at abbey.com.”

Moneymadeclear.fsa.gov.uk states that your lender should be willing to talk to you about accepting less than the full monthly payments for a time, so make sure you ask about all available options.

For additional information contact the Financial Ombudsman Service on 0845 080 1800, or go to the financial-ombudsman.org.uk website.