should bank have charged us for their high risk lending insurance on our mortgage?

Tikal2003

Having watched Martin's recent program I am again wondering about a charge that was added onto our mortgage six years ago by the HSBC of £2000. The situation was this. Husband (then partner) and I were buying our first house. He had recently got a job in the area we were buying in so was still on probation, although as it was as a nurse with the NHS they didn't see this as a big problem and was viewed as pretty secure. We were both recent graduates so were getting the HSBC graduate mortgage deal of that time. Having gone through the timely process of application etc and with our house of choice offer accepted and waiting to proceed we reached the point where we had to go in to sign all of the papers to finalise. However, when we were actually in the office, about to sign all of the papers, we were told that an additional £2000 had been added to the mortgage amount ie. amount borrowed had been increased from £90,000 to £92,000. We were told at this very late stage that as Adrian was still on probation that the mortgage would be only in my name, and as such was a high risk loan. The £2000 was to pay an insurance policy for HSBC's benefit, should we default on the loan.

We weren't happy that this came up at such a late stage, but under the risk of losing the house at a time of high competition, we ( with hindsight, foolishly), agreed to sign anyway. We have often regretted it though, particularly as our solicitor mentioned that what the bank had done was in fact illegal, as they were getting us to pay their bills. Can anyone shed any light on this in the hope that I may be able to claim something back or at worst put it to bed as a lesson learned!! many thanks Maria Simmonite

dunstonh

you cannot claim any of it back. High lending charges are still present today with many lenders.

It isnt to do with individual risk, such as occupation status but to do with the loan to valuation. By moving from 90k to 92k, you increased the loan to valuation and you became liable to pay the fee.

particularly as our solicitor mentioned that what the bank had done was in fact illegal, as they were getting us to pay their bills.

Sounds like a trainee. HLCs have been round for decades and are not illegal.

luckyfool

Dunstonh - the move from 90k to 92k was due to the £2k hlc.

As Dunstonh says the £2,000 is for an HLC or Higher Lending Charge. This is related to the loan to value and in HSBC's case is likely to be due to your mortgage having been for over 90% of the purchase price. This should have been on any original illustrations provided to you by HSBC at the outset and on the original mortgage offer. It may be that you didn't read these properly.

If you still have all the original illustrations and the fee was definitely not there then you may have a case to complain to the lender.

dunstonh

thanks for the 90 to 92k correction.

A valid reason that sees them added after illustrations issued is if the valuation doesnt come in as high as you thought.

i.e. you thought the property was 100k but it only came in valued at £95k. If you were borrowing 90k then it was 90% loan to valuation (LTV) at 100k value but at 95k the LTV was 95% causing an HLC to then apply.