The mortgage code provides protection for you as a mortgage borrower.
It sets out minimum standards which mortgage lenders have to meet.
By giving you this information, your lender is confirming to you that
they keep to the principals of the mortgage code. This provides important protection for
you, as the code sets out:
- How your mortgage should be arranged;
- What information you should receive before you commit yourself;
and
- How your mortgage should be dealt with once it is in place.
If a lender fails to meet the standards of the code, and you suffer as
a result, you have the right to compensation under a compulsory independent complaints
scheme. The rest of this document concentrates on the details which are most relevant to
you when you are arranging a mortgage. We then give you an outline of the codes main
commitments. You can use this document as a checklist to help you through the process of
arranging a mortgage.
Choosing a mortgage.
There are three different levels of service which your lender may provide to help you
choose a suitable mortgage. The lender will tell you, at the beginning, which of these
levels of service they can provide. The levels are:
- Advice and recommendation on which of the mortgages they can
provide is most suitable for you;
- Information on the different types of mortgage product on offer
so that you can make an informed choice of which to take; or
- Information on a single mortgage product only, if only one mortgage
is available or if you have already made up your mind.
Check that you understand which level of service you are being offered,
and what this means for you. Whichever level of service they provide, your lender should
give you information on all the following areas of the mortgage you are considering:
- The repayment method (for example, endowment, capital and interest) and the repayment
period.
- The financial consequences of repaying the mortgage early.
- The type of interest rate - variable, fixed, discounted, capped and so on.
- What your future repayments after any fixed or discounted period might be.
- Whether you have to take any insurance services with the mortgage, and if so whether the
insurance must be arranged by the lender or intermediary.
- The cost and fees which might be involved with the mortgage - valuation fees,
arrangement fees, legal fees, early redemption fees and so on.
- Whether you can continue with your selected mortgage terms if you move house.
- When your account details may be passed to credit reference agencies.
- Mortgage interest tax relief (MIRAS).
- Whether you need to pay a high percentage lending fee, and if so what this means to you.
Before your mortgage is complete, your lender will confirm, in writing,
the level of service they have provided, and the reasons for any mortgage recommendation
(if they give you one). Check that you fully understand this written confirmation, and ask
if there is anything that is still not clear to you at this stage.
The codes main commitments
The code has 10 main commitments. Broadly speaking, these say that lenders will
- Act fairly and reasonably with you at all times;
- Make sure that all services and products keep to the conditions of the
code, even if they have their own terms and conditions.
- Give you information on services and products in plain language, and
offer help if there is any area which you do not understand.
- Help you choose a mortgage to fit your needs, unless you have already
decided on your mortgage;
- Help you to understand the financial effects of having a mortgage;
- Help you understand how your mortgage account works;
- Make sure that the procedures staff follow reflect the commitments set
out in the code;
- Correct errors and handle complaints speedily;
- Consider cases of financial difficulty and mortgage arrears (missed
payments) sympathetically and positively; and
- Make sure that all services and products meet the relevant laws and
regulations.
- The code goes into more detail on each of these commitments.
Keeping the code
How the lenders keep the mortgage code is monitored independently. And any organisation
under the code must be a member of a recognised complaints scheme - such as the Banking
Ombudsman, the Building Societies Ombudsmen, or the Mortgage Code Arbitration Scheme.
This gives you an extra level of protection, as each of these schemes
can award compensation of up to £100000 to you if you suffer as
a result of your lender failing to keep the code. Your lender will
be able to tell you which scheme applies.
Copies of the full code are available from:
The Council of Mortgage Lenders
3, Saville Row
London W1X 1AF
or at www.mortgagecode.org.uk
