Mortgage experts believe that porting-related complaints are on the increase because borrowers are unaware that lenders’ credit criteria often change in reaction to market and regulatory conditions.
In its annual review for the year to March 31, published last month, the FOS says it has seen an increase in the number of complaints from consumers whose application to transfer their mortgage to another property, known as porting, has been denied.
Mortgages rarely allow borrowers to port their mortgage unconditionally and lenders’ criteria vary in their flexibility.
But due to a general tightening of criteria after the FSA’s mortgage market review, borrowers could find themselves in a position where they no longer meet the lender’s requirements.
The FOS does not have a breakdown of how many porting-related complaints it has received as sometimes a complaint could be made up of several different factors. However, it estimates that around 10 per cent of the 7,067 mortgage comp-laints it received in the past year were related to porting in some way.
The Council of Mortgage Lenders says while lending criteria follows market conditions closely, lenders should consider each case individually.
A spokeswoman says: “Market conditions will influence the granting of discretionary mortgage requests and lenders will have to assess each case on its own merits.”
London & Country head of communications David Hollingworth says a lot of people take it for granted that their lender would automatically transfer their mortgage between two properties.
He says: “It is a fair point to say that people are not aware that portability will be subject to a check and this could be against different criteria than when they first took out the mortgage. It does leave borrowers high and dry really. Their position might not have changed at all and yet they are being effectively told they cannot take their mortgage across to a new property.”
Consumer champion Which? Money editor James Daley says lenders can do more to ensure customers understand they might not be able to port their mortgage.
He says: “When you take out a mortgage, you cannot always foresee what is going to happen over the next few years.
“It is important that mortgage companies explain to people that even though they might not foresee themselves moving, if they do, they might not be able to port their mortgage. It is about disclosure, transparency and being up front.”
Emba group sales and marketing director Mike Fitzgerald says brokers and lenders have dual responsibility for telling borrowers that lenders’ criteria can change in reaction to economic and market conditions.
He says: “So many people are initially told they can port their existing mortgage, so they find out what porting means and then do not go any further with their enquiries. Brokers should take a bit of time explaining the conditions around portability.
“It would also be good if lenders made a point of explaining porting to customers and highlight the fact that while they might satisfy the lender’s criteria initially, they may not in two or three years’ time.”
Fitzgerald adds that the wording on mortgage documents can also confuse consumers.
He says: “It might help if the wording on mortgage documents is clearer and the meaning is starker instead of it being a bit woolly when it comes to explaining if you can transfer your mortgage.”
’It does leave borrowers high and dry really. Their position might not have changed at all and yet they are being effectively told they cannot take their mortgage across to a new property’
Daley says it is difficult to see why lenders might not want to allow customers to port their loans.
He says: “On the face of it, it is hard to understand why they would turn people down for porting because, ultimately, it is their chance to lock their customer in for another period.
“It sounds like another example of banks not being flexible with their customers.”
Enness Private Clients partner Islay Robinson says it is possible that lenders tighten their criteria in order to get borrowers off lower rates, which were taken out prior to the economic downfall.
He says: “We have seen lenders be a bit overzealous on their criteria. It is more efficient for them to lend at a higher rate and get people off lower rates. I think there are still a lot of pre-2007 cheap mort-gages around and this is where the root of all of these porting problems is coming from.”
Hollingworth says: “You may have the situation where the lender is not sorry to lose someone.”
Fitzgerald says it is the lender’s right to refuse a borrower’s application to port an existing mort-gage and adds that it is a way of ensuring the quality of mortgage books.
He says: “The lender is under no obligation to take the new mortgage on. Around four years ago, it was a lot easier to port mortgages but lenders’ criteria have tightened up as they look to protect their book.”