Sub-prime lender Cheshire Mortgage Corporation has changed the wording of some of its mortgage contract terms after the FSA labelled them unfair.
Cheshire Mortgage Corporation is a subsidiary of the Blemain Group.
The FSA says the wording in two Cheshire information booklets printed in 2004 and 2006 were unfair because it gave the firm “unrestricted power to vary interest rates without the firm specifying valid reasons for making such variations in the contract.”
A term in the 2006 version of the booklet says: “Where the interest rate on your mortgage is variable (at any time during your loan period) we can vary the interest rate at any time. You will be notified of any change in accordance with the mortgage conditions. The notification will include details of the resulting increase or decrease in your monthly payment.”
The FSA says: “We consider that the terms, as drafted, had the potential to cause consumer detriment because they could result in monthly mortgage payments being increased in an unpredictable and non-transparent way.”
The company changed the wording of the term for new customers in February. It now says the rate of the mortgage could increase or decrease depending on funding costs.
Lentune Mortgage Consultancy director Stuart Gregory says: “It is good to see the regulator taking action like this but it has got to be consistent, especially as lenders have been changing their criteria a lot recently.”