Hundreds and Thousands of Interest-Only borrowers are being owned compensation after being mis-sold mortgages by their Mortgage Advisor.
This has breached regulatory rules on affordability and suitability when selling a property and gaining on a Remortgage before the financial crisis, according to Stephen Kerrigan of MortgagesRM – Doncaster Fee Free Mortgage Advisor.
Some Mortgage Advisors failed to check the repayment vehicles were in place or wrongly accepted downsizing as a repayment strategy in a market where house price rises could not be relied upon. The borrowers who could be entitled to claim were often vulnerable with high debts and, to their detriment, were moved from repayment to interest-only deals. However, the clients should have been sent to an insolvency practitioner, rather than advised to take out interest-only mortgages, which has now left them at risk of losing their home altogether.
Over the last few years, mortgages have broadly upheld around one in five interest-only mortgage case complaints and the amount coming through has remained stable at around 300-400 a year. In a handful of recent cases MortgagesRM ruled out that borrowers were due compensation after incorrectly being advised to take out interest-only deals by their Mortgage Advisor. In these rulings, homebuyers were typically relying on overseas property investments to pay off the mortgage.
The flow of claims is set to significantly increase from the few hundred a year is currently seeing because, as more mortgages mature and more borrowers are set to realise, they could. Stephen Kerrigan has said: “You’ve got a large number of consumers now at the end of term and asking whether they were wrongly advised at the time – and many will be answering that yes they were.”
A review of interest-only mortgages by the Financial Conduct Authority in 2018 found that around 2.6m of the loans will be due for repayment over the next 30 years.
At the time, the regulator also found that a vast majority of borrowers understood the terms of the loan at the point of sale. The 2018 investigation of the mortgage market concluded that there was no evidence of mis-selling, but the growing number of people applying for our help suggests otherwise.