No. You can’t move house. Or have children - lenders refuse to let customers move mortgages
Depending on where you look, some reports are showing a tentative recovery in the housing market in some areas of the UK. But don’t worry, it won’t last long, not if the banks have anything to do with it that is.
More and more lenders are now preventing borrowers from taking their mortgages with them when they move home, known as ‘porting’, claiming they fall foul of tougher qualifying criteria, or their circumstances have changed, even if work/employment details have remained constant.
The Financial Ombudsman Service has expressed concern over a massive rise in complaints from homeowners who have been prevented from porting their mortgages when moving house. The Ombudsman received over 7,000 complaints about mortgages in the 12 months to April this year, and it upheld more than a third of those. It said one in every ten complaints now involves porting. It’s big business, both for those trying to move, and for the lenders themselves.
The crackdown affects both those lucky people on a rock bottom standard variable, as they may not be allowed to take their favourable rate with them, but also those on fixed rate deals facing huge early-redemption penalties if porting is denied. Penalties can be up to 8% of the outstanding balance, working out at £12,000 on a £150,000 loan
This comes as figures from a recent report for the trade body the Council of Mortgage Lenders suggest that, each year, 51% of homeowners who want to move will not be able to because of tighter rules, almost 100,000 homeowners could be blocked from moving either by porting their loans or remortgaging, and 173,000 may not be able to borrow the same size of home loan, forcing them to downsize. It’s all looking pretty grim.
The Sunday Times managed to find a married opera-singing couple who were denied the opportunity to port their mortgage on 2.5% SVR. Their circumstances had changed with the addition of a baby daughter, and their lender, Nationwide, said having a child could affect how much a customer could borrow. So don’t even think about having any of the expensive little blighters if you want to move house.
In theory, most lenders should allow you to take an existing loan and transfer it to a new property, providing the new house is worth no more than the current property. But more problems arise if you need to borrow more, as you will typically have to arrange a further advance, at current (potentially rubbisher) interest rates.
Customers of Bradford & Bingley or Northern Rock’s ‘bad’ list, both now controlled by Northern Rock Asset Management, cannot port while taking a further advance, in effect forcing them to trade down. However, it introduced an exit penalty waiver this year, letting borrowers find a new deal fee-free. State-owned Northern Rock charges borrowers half their exit penalty, known as an early repayment charge, to port their loan if they need to borrow more.
Halifax allow you to port a short-term fixed or variable deal, provided you surrender your attachment to its relatively low SVR, currently 3.5%. Borrowers on interest-only terms will have to have at least a 25% deposit to port their mortgage at Santander, Lloyds Banking Group, including Halifax, as well as Barclays and Northern Rock, or move to a more expensive repayment deal instead.
The Financial Ombudsman considers that, in such situations, it would be fairer for the lender to waive its exit penalties, so if you are getting shafted by a greedy lender and get no joy after complaining to your them in writing, get them on your case (0800 023 4567). Now go.