Lenders stop us moving house

Published 27th Jul 2009

The latest ‘crazy’ restrictions are restricting homeowners
A terrace of houses in Brighton

Homeowners are being told that they can no longer take an existing mortgage with them if they move home. Most mortgages are supposed to be “portable”, to be transferred to another property if borrowers wish to move mid-term.

It is feared that this latest crackdown by lenders will undermine the property recovery.

Readers have complained to The Sunday Times that some of the biggest lenders are refusing to allow transfers, with such requests being treated like an application for a mortgage from a new customer and subject to the stricter post-credit crunch criteria of banks.

The tough measures also force customers to pay redemption penalties of tens of thousands of pounds to get out of existing deals.

Robert Baldock, a reader from London, is in the middle of a three-year fixed mortgage with Bank of Scotland on his flat in Connaught Square, two doors from Tony Blair. He wants to move but has been told he can’t take his £975,000 mortgage with him. His new property is worth £1.1m, against £1.425m for his present home, which would reduce the value of his loan relative to the property from 89% to 68%. To move, he will have to pay a redemption penalty of 3% of the loan — more than £29,000 — and take out a new mortgage.

“It doesn’t make sense,” he said. “They are more than happy for me to stay where I am and pay a bigger mortgage but will not let me reduce the mortgage and port it to a new, cheaper house.”

Ray Boulger of John Charcol, the mortgage broker, said: “This is crazy — this borrower would have been less of a risk to the bank if he had been allowed to port his mortgage. We are seeing more of this as banks protect their balance sheets.”

Bank of Scotland said customers could port mortgages in some circumstances.

Source: ' Sunday Times '

View All Latest Articles