Day: June 5, 2025

The Supreme Court has ruled against One Savings Bank in a case concerning a borrower who said she was subject to “undue influence” by her ex-partner when they took out a remortgage. The court decided that the lender should have followed a specific legal protocol to help ensure that the homeowner, Catherine Waller-Edwards, had not been put under “undue influence” when agreeing to the loan against the property. Legal experts say the ruling means that lenders, and potentially also brokers, will need to take extra steps to satisfy themselves that borrowers are not subject this type of pressure when entering into mortgage contracts. Previous court cases have already resulted in an agreed process that lenders must follow, known as the Etridge Protocol, to help protect borrowers. However, today’s ruling, Waller-Edwards (Appellant) v One Savings Bank Plc (Respondent), means lenders will need to follow this protocol in a wider range of circumstances. The background In this case, the borrower and appellant Catherine Waller-Edwards had previously been financially independent as she owned her £600,000 home mortgage-free, had substantial savings of £150,000 and a modest pension income. But, according to the judgment, in 2011, at a time when she was “emotionally vulnerable” she entered into a relationship with builder and property developer Nicholas Bishop. Bishop persuaded her to exchange her home and savings for a property he was building, which already had a loan charged against it. In 2013, the couple remortgaged the property for £384,000 with One Savings Bank. The lender understood the remortgage would be used to pay off the existing mortgage debt and purchase another property as a buy-to-let. In fact, the money was used to pay off his car finance, credit card and to make a divorce payment to his ex-wife as well as clearing the first mortgage on the property. Following this the relationship between Waller-Edwards and Bishop broke down with Bishop moving out and Waller-Edwards remaining at the property, which was now heavily mortgaged. On her pension income alone she was unable to keep up the repayments and the mortgage went into arrears. The lender began possession proceedings in November 2021. When appealing the repossession, Waller-Edwards argued that the Etridge protocol should have applied and that she was put under undue influence by Bishop when entering into the remortgage because it was partly used to pay off Bishop’s debt of £39,500. The judge agreed, but later the County Court, High Court and Court of Appeal found that One Savings Bank was not required to follow the protocol and carry out checks to ensure that Waller-Edwards was not put under undue influence because it was considered “joint borrowing” rather than a “surety transaction” where she was acting as a kind of guarantor. Today’s judgment reverses that finding. The implications for lenders Herbert Smith Freehills Kramer senior associate Frances Edwards says: “The ‘Etridge protocol’, which has been in place since the early 2000s, seeks to protect vulnerable parties who might be forced to provide security for a loan under undue influence from the other party to the loan. “It requires banks to communicate directly with the party to ask them to obtain independent legal advice about the loan and to obtain confirmation from a solicitor acting for that party that the solicitor has fully explained the nature of the transaction and its practical implications. “In a judgment handed down on 4 June 2025, the UK Supreme Court widened the requirement on banks to follow the protocol where sums are being advanced to two non-commercial parties jointly but the funds are to be used partly for one party’s own purposes. “Practically, this requires banks to send out their usual Etridge protocol letter in these additional circumstances, which many may well have been doing following the Court of Appeal’s judgment in the case. “The judgment provides clarity as to what is required, simplifying the complex ‘fact and degree’ test suggested by the Court of Appeal.” Questions over impact on brokers Blackfords financial crime partner Jennifer Richardson says the ruling significantly increases the liability on lenders to undertake checks in respect of borrowers. But she says: “The decision also raises a lot of questions about how this will be applied in the case of mortgage brokers for example. “Will this liability extend to them as well? Should this lead to a more stringent regulatory regime? “Solicitors are often expected to identify similar situations when dealing with clients, and face regulatory investigations if they fail to do so. “It may be that we see a similar tightening of regulation amongst lenders as a result of this case.” The post Court rules against OSB over ‘undue influence’ in joint mortgage appeared first on Mortgage Strategy.

The Financial Ombudsman Service has opened a consultation on lowering the payouts it directs firms to hand over to consumers.     The study will look at cutting the interest rate applied to compensation handed down against firms who have lost cases to customers.  A typical form of interest FoS uses directs firms to pay to compensate consumers who have been ‘deprived’ of money – that is, not having it available to use – such as where an insurance claim has been wrongly turned down. In these cases, the ombudsman can currently direct the business to pay 8% interest on top of the compensation for the period their customer was out of pocket.   It can also tell a business to pay 8% interest if it doesn’t pay compensation on time.     However, following an earlier Call for Input carried out with the Financial Conduct Authority, FoS now proposes changes to its interest charges.  FoS now recommends charging an interest rate that tracks the Bank of England’s base rate plus-1%.  It says: “The base rate would be calculated as an average rate over the period that the money was due until the date redress payment is made.”  The body’s consultation document also details “a number of other interest rate options and proposals” that are open for comments until 2 July. Financial Ombudsman Service interim chief ombudsman James Dipple-Johnstone says: “We think that reform of the dispute resolution system is crucial to make it fit for the future.   That is why we are acting on feedback from our Call for Input and reviewing a range of our processes to ensure that they work for a modern economy.   “We welcome feedback from stakeholders on whether our proposed new interest rate strikes the right balance between simplicity, fairness and proportionality.”  Economic Secretary to the Treasury Emma Reynolds is currently carrying out a review of FOS to see if it remains “a simple, impartial dispute resolution service”.  Her study will include looking at the body’s compensation structure and whether it acts “as a quasi-regulator”.  In February, the Financial Ombudsman Service chief executive and chief ombudsman Abby Thomas stepped down unexpectedly without notice after joining the body in October 2022.   The post FoS to consult on lowering consumer payouts   appeared first on Mortgage Strategy.

Changes in the way lenders stress test borrowers could increase first-time buyer transactions by up to 24% over the next five years, Savills reveals. Following a change in Bank of England guidance in March, lenders are no longer required to stress test borrowers at the standard variable rate plus 1%. Lenders such as Nationwide and Barclays, among others, have already modified the way they apply the affordability test. Savills says relaxed lending rules are expected to increase the number of buyers, which in turn is expected to drive up house prices.  The amount depends on how much new housing stock is delivered to meet the additional demand.  Based on the historical relationship between loan-to-value ratios and activity levels, stress tests could increase first-time buyer transactions by 47,000 in a higher house price growth scenario, to 80,000 on a lower price growth scenario, which represents an increase of 14% and 24% respectively.  This could cause house prices to rise by an additional 5.0% to 7.5% on top of existing five-year forecasts.  Savills head of residential research Lucian Cook says: “Relaxed lending rules will certainly change the course of travel for the housing market in the medium to long term, but there will be a strong interplay between the extent to which house prices and first-time buyer transactions increase.” “The more increased borrowing capacity impacts prices, the less impact there will be on transactions.” “Change would not be immediate, with the impact on house prices and transactions likely to take place over a period of five years. The current uncertain economic outlook is likely to hold back buyer confidence and willingness to take on substantially more debt in the short term.”  “But in the medium to long term, the market would feel the knock-on impact of a widening pool of buyers. This will be good news for housing delivery but it’s unlikely to be enough to allow the government to hit its housebuilding targets.”  The post Relaxed stress tests may boost FTB sales, lift house prices: Savills appeared first on Mortgage Strategy.

Nationwide will reduce rates by up to 0.12% across selected two-, three- and five-year fixed rate products, with rates starting from 3.90%. Effective tomorrow, reductions have also been made for remortgage customers. Rates for existing customers switching, which are not changing, already start from 3.84%. New customers moving home will see reductions of up to 0.10% across two, three and five-year fixed rate products up to 90% loan-to-value (LTV). A two-year fixed rate at 60% LTV with a £1,499 fee has been lowered by 0.09% to 3.90%, while a two-year fixed rate at 75% LTV with a fee of £999 has been cut by 0.05% to 4.04%. The bank’s five-year fixed rate at 85% LTV with a £999 fee has been reduced by 0.05% to 4.29%. Existing customers moving home will see reductions of up to 0.10% across two, three and five-year fixed rate products up to 90% LTV/ A two-year fixed rate at 60% LTV with a fee of £1,499 has been cut by 0.09% to 3.90% and the two-year fixed rate at 75% LTV with a £999 fee has been trimmed by 0.05% to 4.04%. The five-year fixed rate at 85% LTV with a fee of £999 has been lowered by 0.05% to 4.29%. Nationwide has also made reductions of up to 0.12% for remortgage products across two, three and five-year fixed rate products up to 85% LTV with rates starting from 3.92%. These include a two-year fixed rate at 60% LTV with a £1,499 fee, which has been cut by 0.12% to 3.92%. The three-year fixed rate at 75% LTV with no fee has been cut by 0.07% to 4.47% and the five-year fixed rate at 85% LTV with no fee has been trimmed by 0.09% to 4.52%. Nationwide senior manager of mortgages Carlo Pileggi says: : “These latest reductions will be welcome news for borrowers. We remain as committed as ever to supporting all areas of the market, whether it’s first-time buyers, home movers or those looking for a new deal, and with our reduced rates starting from 3.90%, we aim to be front of mind.” Commenting on the cuts, Trinity Financial head of communications and PR Aaron Strutt says: “Good to see Nationwide lowering rates again after putting them up a few weeks ago especially as most lenders have been pushing up the cost of their mortgages.” “It looks like the lender is lowering its two year fix from 3.99% to 3.90% – £1,499 fee and 40% deposit.” “The two-year remortgage rate is also coming down from 4.04% to 3.92%. £1,499 fee and 40% deposit.” Last month, Nationwide adjusted its mortgage affordability calculation by reducing its stress rates by between 0.75 and 1.25 percentage points. The post Nationwide trims prices by up to 12bps, rates start from 3.90% appeared first on Mortgage Strategy.

The spending review will ‘make or break’ Labour’s chances of building 1.5 million new homes over the next five years, says the Commons housing committee chair.   Housing, Communities and Local Government committee chair Florence Eshalomi (pictured) wrote to the Chancellor to “underscore the importance of investment in social and affordable housing.” Eshalomi warned Rachel Reeves that “the government will fail to meet this target if it relies on the private sector alone,” to hit its target of building some 300,000 homes a year.  The letter from the housing committee chair comes as reports say that housing secretary Angela Rayner, home secretary Yvette Cooper and energy secretary Ed Miliband, are the three remaining ministers holding out for more cash ahead of the government’s multi-year settlement to be announced next Wednesday.  Reeves wants to spend as much as £113bn throughout this parliament across such areas as defence, infrastructure, housing and transport, while capping day-to-day departmental costs.  But Eshalomi said: “Despite the cross-party consensus of the need to increase housebuilding, successive governments have for decades failed to deliver enough new homes.   “This has resulted in and a housing affordability crisis, with families waiting years on social housing waiting lists and the dream of home ownership fading for many.”  She highlighted that Shelter, Crisis, and the National Housing Federation say the government should set a target to deliver 90,000 social rent homes per year to begin to tackle the growing waiting list for social housing in England.  Eshalomi wrote that 1977 was the last time the UK built over 300,000 homes in a single year.  “That year, more homes were built by local authorities than private enterprise,” Eshalomi added. The post Spending review will ‘make or break’ 1.5 million homes pledge: MPs   appeared first on Mortgage Strategy.