Cheshire Mortgage Corporation has changed the wording of some of its mortgage contract terms after the FSA said they were unfair.
The FSA says the wording in two information booklets in 2004 and 2006 for the lender’s mortgage customers were unfair because it gives CMC “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 of decrease in your monthly payment.”
The FSA says: “We consider that these 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.”
Only a court can determine the fairness of a term but the regulator has a duty to raise any concerns and report these to the Office of Fair Trading.
The lender 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.