Interest Only Mortgage Claims
Interest-only — the next mis-selling scandal?
Now that PPI is coming to an end, Claims Management Companies (CMCs) are looking for what’s next and there has been a re-emergence of speculative press stories about the potential for interest-only mortgages to be ‘the next mis-selling scandal’.
But interest-only is not the low-hanging fruit that PPI was for the CMCs. People were sold PPI and were very often unaware they had it. It was bundled in with product sales without much thought about whether the customer needed it or the value it added. An interest-only mortgage by contrast is exactly what it says on the tin — it is chosen because the borrower only pays the interest element of the total loan and doesn’t pay the capital till the end of the mortgage term. In every sale, you are told in clear wording prescribed by the regulator from the outset that you (the borrower) are responsible for repaying the capital sum at the end of the term and this is something you are reminded of each year in your annual mortgage statement.
It’s also been hard to avoid all the publicity around the interest-only ‘ticking timebomb’, urging interest-only borrowers to check they have a repayment plan in place and that it’s on track. And there has been a concerted effort over many years now by both regulator and the industry itself to help those borrowers who find themselves unable to repay the capital at the end of term. There could be all sorts of reasons for this, including action you’ve taken yourself (e.g. cashing in an endowment policy) and circumstances completely beyond your control (such as redundancy, divorce etc).
So unlike PPI claims, interest-only claims are not clear-cut, where fault can be simply identified and redress easily calculated and paid. The outcome for interest-only claims is much less certain and will depend very much on the facts of each case. They will involve a lot of time, effort and cost — not a natural fit for CMCs’ business models.
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