[When Your Bank/Building Society Goes Bad
Set the Financial Ombudsman on its tail, says Bill Keeth]
Some years ago I took out a loan with Bonkshire Bank. I was looking to repair and refurbish a property in Middleton prior to selling it on. The terms I was offered seemed advantageous. The Bonkshire said it would lend me the money over 10 years, at 80% LTV (Loan to Value), secured on my home address. But in addition to this, an interest rate would apply for the first 2 years of the loan that would be some 50% below the normal 4.49% interest rate.
Impressive, indeed, with just 2.25% interest payable! So I applied to borrow £120,000, which was 80% of the value of my house at that time.
Oops! Sorry, no. The Bonkshire had forgotten to tell me that the most it was prepared to advance @ 2.25% was £92,000. But 2.25% was still tempting, so I agreed to this, always provided I might have access to the remaining £28,000 in equity for purposes of finance at some future date. The Bonkshire readily agreed. So I borrowed £92,000 @ 2.25% interest over the first 2 years.
I then purchased the property, repaired and refurbished it – then won the National Lottery, in effect. That is to say, properties like the one I had refurbished were selling pretty slowly at that time. But some lucky devil won the National Lottery in my home town – and promptly bought the property I had refurbished! Who would believe such luck?
I wasn’t so lucky back at the Bonkshire. When I requested action on the remaining £28,000 in equity, the Bonkshire refused to honour its promise. And this, despite my honouring all mortgage payments owed to them. Their lending requirements had changed, they said. Besides my age was against me.
I invite you to contemplate this act of Bonkshire Bank skulduggery. Because, in denying me what it had previously promised me, the Bonkshire had made me a much less advantageous deal in retrospect. To some tune, too, the robbers! Because you will recall that what I had originally imagined I was bargaining for was a loan at 80% LTV, repayable @ 2.25% for the first 2 years. But, immediately the Bonkshire restricted the amount I might borrow to £92,000, I was then being constrained to bargain for a loan @ less than 62% LTV – and, a loan @ less than 62% LTV should certainly have attracted a favourable interest rate in the first place.
The Bonkshire Bank’s subsequent refusal to facilitate access to the extra £28,000 security in my home that had originally been available to me upon first applying for a loan simply makes the Bonkshire Bank’s skulduggery all the more reprehensible.
Once upon a time, too (these stories are both true, believe me, only the names of the bandit banking institutions have been changed), I applied for a remortgage with the Avon & Test Building Society. My purpose in doing so was in order to finance a BTL property purchase. But the loan was declined by return post. Now I had full knowledge and understanding of each and every one of the lending criteria applicable to the loan I’d applied for with Avon & Test. Otherwise, I would not have applied for it. So I demanded to know the reason the loan was declined.
“Insufficient rental income,” came the brave reply.
True, the property I’d put forward as collateral was vacant at the time, but only temporarily – and the bank statements I’d supplied to the Avon & Test clearly indicated an historic income well in line with Avon & Test’s stated requirements.
Duh! The clots! The actuarial ee-jits! Call themselves financiers? You’ll never guess what they’d done.
Despite knowing full well that I received rental payments via a letting agent, Avon & Test had neglected to note (Duh! Ee-jits!) that the rental payments paid into my business account from my letting agent, naturally amounted to 10% less than the actual rental receipts, the apparent shortfall representing the letting agent’s agreed commission rate of 10%, which had naturally been deducted at source.
I was already knocking on the Financial Ombudsman’s door by the time Avon & Test offered to repay any expenses I’d incurred (including the surveyor’s fee), provided I didn’t follow my complaint through. So I got a complete refund. I missed out on a mortgage offer, but I got my money back. None of which prevented Avon & Test from reporting my loan application to Experian and the other credit agencies – with the hideously unfair result that the next lender to whom I applied for a loan would probably adjudge my application suspicious.
If a bank or building society should fail you either through ignorance or malpractice, demand satisfaction from Customer Services and, if dissatisfied with their response, report them to the Financial Ombudsman. You will, of course, need to get a “final response” from the bank/building society before doing so. (This is the terminology they use.)
Some 500,000 complaints are made to the Financial Ombudsman per annum, on which he rules favourably in some 50% of cases. Note well, though, that whether you win or lose the Financial Ombudsman will:
a) respond in a civil manner; and,
b) (hah, hah) bill the fool outfit that messed you about close on £1,000 due to your having been constrained to seek out his impartial adjudication in the matter.
This is an extract from Bill Keeth’s new book, BOOST YOUR POCKET MONEY & PENSION – A Winner’s Guide to Buy-to-Let Property Investment, which is available from Amazon as a Kindle book and in hard format, too. [ see below for links to Bill’s books on Amazon.com]
(27 November 2013)
See Amazon Kindle books recently published by Bill Keeth: Every Street in Manchester, Manchester 9, Write It Self-Publish It Sell It, Boost Your Pocket Money and Pension