Banks force borrowers off ‘supercheap’ loans
Mortgage borrowers who want to keep cheap tracker deals when they move are being turned down. By Olivia Rudgard
Borrowers are still being blocked from transferring low-rate mortgages to new properties by lenders keen to force them on to more expensive deals, experts say. Some borrowers with extremely low rates, often on tracker mortgages secured when Bank Rate was much higher, struggle to keep their mortgage when they move house.
One case that Telegraph Money has seen involves a couple, a surgeon and a marketing consultant – both highly paid professional people who have a credit rating of 999, the highest possible.
Neville Dastur, 42, a consultant vascular surgeon, and his wife, Emma, a 37-year-old marketing consultant, are moving from their home in Guildford, Surrey, to nearby Farnham to be closer to good schools for their two children.
Their tracker mortgage is portable for up to 90pc of the value of the property value. It was taken out 10 years ago at 6.24pc but repeated Bank Rate cuts mean they now pay just 0.74pc. The family wanted to add £276,400 to the mortgage so they could move quickly before the start of the school term and before their old property was sold.
But when their lender, Santander, carried out an affordability check, the couple were told that Mrs Dastur’s income would be disregarded because she had only 23 months of dividend receipts from her business, a month short of the required amount.
Mr Dastur takes most of his salary from the NHS but, like many doctors, also has some self-employed income. However, the lender told the couple that this would also be discounted. It said this was because he had not provided 24 months of dividend receipts, so he submitted these.
They were then told that a car loan meant they had been rejected, even though it had been paid off in full.
They are concerned that their house purchase will fall through, and said the impact of the upheaval on their two children, Eli, four, and Ava, six, had been considerable.
“We’ve got to be out of our rented house by September 17, so it’s now getting really tight,” Mr Dastur said.
“We were told all along that it would all be OK, we had the agreement in principle. I could understand it if I had a bad credit history, but I don’t.”
One mortgage broker, Simon Collins of John Charcol, said he was baffled by the lender’s reluctance to help its client in this case and added that the Dasturs’ low rate could be a factor.
“Why would you want to stop someone like this from porting [transferring the mortgage to a new property]?” he asked. “You’ve got a 10-year borrowing track record with this client. Why would you be trying to turn this down? It must be down to the rate.”
The Dasturs’ extremely low rate is down to the dramatic fall in Bank Rate since they took out the mortgage a decade ago. In 2006 Bank Rate was 5pc. It rose to a high of 5.75pc in July 2007 but has been falling consistently thereafter.
This means that anyone who took out a long-term tracker mortgage at just above Bank Rate, and still has it now, is paying an extremely good rate, much lower than on any mortgage now available.
Mortgages were then being sold at as low as 0.09 of a percentage point above Bank Rate for the life of the loan. Someone who took up this loan would now be paying just 0.34pc on
their mortgage. The Dasturs pay 0.49 points above Bank Rate.
“These lenders will be losing money hand over fist,” said Mr Collins. “We’ve seen a number that would dearly love to get people off these very low trackers.”
Mr Dastur’s mortgage broker, Martin Gaskell of Gaskells IMA, said he had seen this happen to many of his other clients.
He said it was a “constant battle” against lenders, which did not use common sense to make lending decisions.
“Lenders are being too harsh at the moment and not taking a realistic view,” he said. “They’re working from a ‘computer says yes or no’ attitude rather than working off an individual’s situation. It’s too strict and getting worse all the time.”
In the wake of the financial crisis, increasing regulation has limited lenders’ ability to make some loans. For example, they are allowed to advance only 15pc of their loans to buyers who borrow 4.5 times their earnings or more.
Mr Gaskell said Santander was by no means the worst offender and praised the work of the bank’s business development manager, who he said had been helpful to the couple’s case.
But he said “the smaller building societies are the best – they can take a more sensible view of things”.
“Some of the banks are worse than others. HSBC has great rates but won’t lend to anyone. Nationwide can also be difficult to deal with.”
The Dasturs have found a buyer for their house, which means they can put more equity into the new property and take a smaller mortgage, a proposal the lender has approved.
A spokesman for Santander indicated that the car loan had been behind the Dasturs’ problems. The lender also said it supported “porting” applications from customers who wanted to borrow the same amount or less.
He said: “When reviewing Mr Dastur’s affordability, unsecured debt was highlighted, which had not been initially declared.
“We have taken the additional information now provided by the customer into account and have offered him a loan of £464,000.”
Neville and Emma Dastur had a 0.74pc deal but struggled to keep their loan
Santander said a car loan was behind its decision to block the mortgage