Mortgages

The law firm representing the borrower in yesterday’s appeal ruling against One Savings Bank has spoken out about the impact of the Supreme Court’s decision for victims of economic abuse. Solicitors Howard Kennedy, which represented Catherine Waller-Edwards in her successful appeal against the lender, says it is “landmark development” in protecting individuals who are vulnerable to “undue influence” in financial decisions. The crux of the case was whether or not OSB should have followed a specific procedure – known as the Etridge protocol – to ensure Waller-Edwards understood the full implications of remortgaging the property she owned with her then partner Nicholas Bishop. The protocol requires that lenders confirm a borrower has received independent legal advice if they are taking out a mortgage with another person that is for that person’s benefit. Waller-Edwards’ case was especially complex because the money raised from the remortgage was used for several different purposes and was therefore a “hybrid” loan. Part of the mortgage was to be used to repay Bishop’s sole debts, but part was meant to be for the couple’s joint benefit. Background to the case The situation leading up to the remortgage was also complicated. Waller-Edwards owned a £600,000 home with no mortgage and had £150,000 in savings as well as a £7,000-a-year pension before she entered into a relationship with Bishop in 2011. But she agreed to exchange the home and her savings for a property that Bishop was building, which already had a charge against it from another lender. The couple later took out a £384,000 remortgage from One Savings Bank against the new property, with Bishop stating this was to repay the first mortgage, clear £39,000 of debt and invest in another buy-to-let property together. In reality and without OSB’s knowledge, Bishop also used £142,000 from the mortgage to pay a divorce settlement to his ex-wife. After the remortgage was granted by OSB, the relationship between Bishop and Waller-Edwards broke down, he moved out and the mortgage on the home went into arrears. OSB launched possession proceedings in 2021, which Waller-Edwards appealed, but this was overturned and ultimately the case ended up at the Supreme Court for yesterday’s ruling. The key issues at stake in this case were the fact that the remortgage was a “hybrid” transaction, because the money was used for different purposes rather than all of the sum being used for the benefit of both parties. Although the bank did not know about the sum paid to Bishop’s ex-wife, which was for his benefit and not that of Waller-Edwards, the lender was aware of the £39,000 used to clear his debts. Because of this, Waller-Edwards’ legal team was able to successfully argue that she was effectively acting as a kind of guarantor on that element, making it what’s known as a “surety” transaction rather than a joint mortgage. The other aspect of the legal argument was whether the £39,000 element was a large enough sum to trigger the lender to need to follow the protocol and check the borrower was not acting under “undue influence”. Yesterday’s ruling clarifies that lenders should be following the protocol in any case where one borrower is assuming liability for the other borrower’s debts without any clear advantage to themselves. A landmark ruling for victims of economic abuse Howard Kennedy partner Joel Leigh, the lead solicitor for Waller-Edwards, says: “The Supreme Court’s decision is a landmark development in the law of undue influence, the most significant since Etridge. “It is remarkable that hybrid transactions have gone unrecognised for so long, and that a workable test has only now been confirmed. “While some lenders may have already adopted a cautious approach, the absence of formal recognition likely left many vulnerable individuals without recourse. “These were people who, dependent on a partner who abused their trust, were drawn into transactions that left them financially exposed. “Many will have lost homes, creditworthiness, and stability and lacked the means or confidence to challenge it. “Even those prepared to challenge such contracts would have faced an uphill battle, because without any legal recognition of hybrid transactions, claims were doomed to fail unless (as in Catherine’s case) taken to the highest court in the land. “The Supreme Court’s judgment delivers long-overdue clarity and a vital safeguard: from now on, in any non-commercial hybrid transaction, a more than de minimis [trivial] surety element is enough to put a lender on inquiry and require compliance with the Etridge protocol. “Catherine’s fight has not only secured justice for her but has reshaped the legal landscape, extending meaningful protection to both men and women at risk of economic abuse within their personal relationships.” The lender’s response OSB says: “We note the judgement of the Supreme Court. “We are naturally disappointed by the decision, which was based on a very particular set of facts. “This is a complex case arising from a loan in 2013 and we are assessing the implications of the ruling, although we note that cases involving undue influence are rare. “At the same time, we will review our current procedures.” The post Law firm hails ‘landmark’ win for victims of financial abuse appeared first on Mortgage Strategy.

The Bank of England is testing how artificial intelligence can help forecast inflation and improve its communications, according to rate-setter Megan Greene.   The Monetary Policy Committee member said the central bank was experimenting with several uses for the technology, including providing early warning signs of a financial crisis, analysing the labour market, and short-term predictions about the direction of consumer prices.  Greene said there were “massive” opportunities to use AI to help track the economy but added that central banks should use the technology judiciously.  The Brown University economist was speaking was speaking at a conference at King’s College, London.  Greene said the Bank has used “machine learning techniques” to help produce inflation forecasts.   She added that staff found these models are “more accurate at forecasting consumer price inflation at shorter time horizons so it can be useful there, particularly as cross checks to more traditional models.”  However, Greene was reserved about the effect AI might have on the wider economy.  She said: “There is an argument that AI should boost productivity growth and quite quickly.   “This could happen through income effects, so workers will earn more and will either work less and have more leisure time or will work the same and just consume more.”  “I have my doubts that we’ll see real productivity gains over my forecast horizon, which again is two to three years.”  Her comments come as the Office for National Statistics admitted today that inflation was overstated in April by 0.1%, due to an error in the vehicle excise duty data provided by the Department for Transport, which is used to calculate consumer price inflation.  The cost of living jumped to 3.5% in April from 2.6%, which was higher than expected.  The government’s data body does not plan to revise its inflation data, but will use the correctly weighted data from now on, meaning no further statistics will be affected.  Greene’s comments also come after the Bank said in November it had begun the biggest “root-and-branch” reforms to the way it makes and communicates rate-setting policy in almost 30 years.  These reforms follow a review last April by former US Federal Reserve chair Ben Bernanke review, commissioned after the Bank failed to predict inflation would hit a four-decade high of 11.1% in 2022, sparked by energy price rises and post-pandemic supply chain shocks.  The Bank has promised to change: Its data infrastructure and our modelling framework  The inputs into policymaking, including “the role of the forecast and scenarios, and their underlying assumptions”  The way MPC discussions are structured  How data is used to inform the MPC’s policy decisions  How the Bank communicates its “monetary policy decisions, outlook and risks to both financial markets and the general public”  The overhaul sparked by the Bernanke review is being overseen by Bank deputy governor Clare Lombardelli.  The post Bank of England tests AI to help with inflation forecasts   appeared first on Mortgage Strategy.

Clydesdale Bank will offer brokers direct access to its underwriting team for large loans over £500,000.  The high street lender says intermediaries now have the chance to speak to an underwriter before they submit a case “to confirm that we can help you and your client”. It says, in a broker’s note, that these calls may be able to resolve cases such as: Where non-standard income is required, such as investment income Self-employed applicants where there may have been one-off extraordinary costs When a higher than standard percentage of variable income is needed The bank’s underwriting team is available for calls between 9am and 5pm Monday to Friday, with brokers able to contact their business development managers for more information. Last week, Clydesdale Bank and Virgin Money became the latest lenders to ease their home loan stress rates, allowing customers to borrow around an extra £40,000.   The banks say the new rules apply to variable or fixed-rate residential mortgages for terms under five years. They explain that a typical example of joint borrowers with a combined income of £85,000, can expect to see their maximum borrowing rise to up to £40,000. The post Clydesdale Bank offers brokers access to large loan underwriting team   appeared first on Mortgage Strategy.

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.

The Monetary Policy Committee denied there was any ‘group think’ or a ‘cluster pattern’ in how the members voted on interest rates. Asked by Select Committee member and Liberal Democrat MP Bobby Dean why specific members seemed to consistently vote the same way – Catherine Mann and Huw Pill; and Andrew Bailey and Sarah Breedon – the BoE governor Andrew Bailey played down claims of a serious ‘divide in the committee’. Mann agreed and added that each member took their role very seriously but sometimes interpreted and weighted data differently. “Different people weigh the variables in different ways.” Last month, the Bank’s rate-setting Monetary Policy Committee voted in a 5-2-2 split to cut rates, with Dr Swati Dhingra and Alan Taylor pressing for a larger 0.5% reduction, while Catherine L Mann and Huw Pill were happy with the status quo. Five members Bailey, Breeden, Megan Greene, Clare Lombardelli and Dave Ramsden voted for the 0.25% cut. Dr Dhingra explained to the committee her reasons for being more aggressive in calling for 0.5% cut in June. She said that consumption and investment had been weak and the global situation had resulted in forecasts being revised downwards because the trade policy atmosphere looked very strained. “Alongside these two factors and the general view that we don’t need to weigh down on living standards as much as we have had to, to get price stability back on target – that was the reason I moved towards a larger reduction in bank rate this time.” Mann then explained to the committee her decision to advocate for a rate hold. She said that in February she had voted for a 50bps but from February to May the labour market had not loosened as much as she had expected and consumption was no weaker than she had thought. More importantly, Mann stressed that inflation, though decelerating, was not decelerating consistent with achieving the 2% target in the medium term.  The fact that financial markets had eased quite dramatically was also a contributory factor behind her ‘hold’ vote. Bailey, Dhingra, Breedon and Mann all agreed that the ‘glide path’ on inflation was downward but as Mann stressed, the volatile environment meant there were concerns regarding inflation pressures and this meant timeframes on hitting inflation targets remained uncertain. The post MPC members explains May split decision appeared first on Mortgage Strategy.

UK Finance has called for a comprehensive strategy to increase demand for green home improvements. In its latest report, UK Finance says there is a need for a blend of targeted policy measures, public information campaigns, and advisory services to encourage homeowners, landlords, and housing associations to retrofit their properties. The report draws on YouGov research to show the attitudes of UK consumers specifically towards heat pump technology. The UK needs to install around 1.5m heat pumps per year by 2035 to meet its carbon reduction goals, however, data shows consumer adoption rates are very short of these targets. Research revealed that 54% said the main barrier to discouraging them from getting a head pump was the high up-front cost, while 44% said they would switch if they were provided with a clear idea of the savings in running costs. The report sets out nine recommendations that UK Finance suggests should be included in the government’s upcoming Warm Homes Plan. These include establishing a government-led body or group to drive collaboration across key stakeholders, provide certainty for firms involved in retrofitting and launch a public awareness campaign with independent guidance to counter misinformation. In addition, it has asked for the government to provide grants, subsidies, and a coordinated plan to train sufficient tradespeople and rebalance electricity and gas prices through adjustments to levies/ targeted support. UK Finance urges the government to deploy funding to enable lower-cost green home lending, maintain and expand grant programmes to support green home improvements, set clear long-term expectations so households and firms can prepare and update energy efficiency metrics for accurate property performance and consistency. UK Finance director of sustainability policy Ian Bhullar says: “To meet our ambitious targets on greening the UK’s housing stock we need to drive demand and convince the public of the benefits.” “Lenders are committed to playing their part and through the government’s Warm Homes Plan we have the opportunity to really make a difference. Increasing demand for green home improvements will bring significant benefits, stimulate job creation, drive innovation, and reinforce the UK’s energy security in an increasingly volatile global market.” Yesterday, UK Finance revealed there was a sharp increase in mortgage completions in the first quarter of 2025. The post UK Finance calls for action to increase demand for green home upgrades appeared first on Mortgage Strategy.