Mortgage Affordability Checks

Remulb

A friend made a joint mortgage application during the early 2000’s which was approved. The mortgage was used to buy a flat using a tracker interest only mortgage.

During the early years of the mortgage it was affordable as the interest rate was <2.5%

However after approximately 10 years the parties broke up and the main earner wanted their name removed from the mortgage. This was, apparently, a simple process as the mortgage company only required the 2 signatures in order to do so.

At that time it appears

• No affordability check was made on the remaining mortgagee (who was self employed, and earned less than the partner), and 

• There was no other contact / communication with the remaining mortgagee.

Subsequent mortgage payments were still able to be made due to the interest rate still being low (around 2.5%). However, over the last 3 years the mortgage rate has shot up to 6.75%, and has become unaffordable. The monthly payments cannot be met, and the mortgagee is unemployed due to ill health. Government support e.g. universal credit etc is being sought but is still insufficient for paying the whole of the mortgage payment.

Discussions are ongoing with the mortgage company and payments have been reduced but this only staves off the evil day.

The mortgagee is not financially savvy and relied on the main earner to sort everything out to do with finances / mortgages.

I am trying to assist based on my knowledge of mortgages, and while I am no expert, I am aware that mortgages were mis-sold in the past.

Q - Does the mortgage company have an obligation to check / should they have checked, that at the time a name was removed from the mortgage it was still affordable particularly as it was the main earners name that had been removed and the remaining mortgagee was self-employed?

If you believe so, what would be the next step?

Desperate times…

ACG

Yes. BUT this is down to the lender to assess.
If your friend had been paying the mortgage and all associated bills for say 6-12 months with no help from the ex, they had evidenced they could afford the mortgage. 

I did a mortgage like this 2 years ago with Skipton, the couple had split up. The lady wanted to remain and on the lenders affordability calculator the mortgage did not fit. However the lady was in receipt of benefits and maintenance the lender did not include. They took a human approach to underwriting and accepted she had paid the mortgage for almost a year with no input from the ex beyond child maintenance. They accepted she could afford it. If we had applied as a brand new customer, they would have declined the application on affordability. 

I think you are going to waste a lot of time trying to apportion blame. Ultimately your friends circumstances have changed and whilst you say no checks were carried out, how do you know? They could have done income checks via HMRC, companies house or bank statements if your friend banks with them. The ex partner could have sorted it all out. 

Its the change in circumstances since the mortgage was taken out that has caused the problem. The lender could have done all the checks in the world but it would not have known your friend was going to be unable to work in the future. You could spend weeks, months, years trying to get the lender to accept they are in the wrong but what do you think it will achieve? They are not going to write off the debt, the property has probably gone up in value in that time and the mortgage was probably less than renting so your friend is unlikely to have had any detriment up until they became ill. 

Ayr_Rage

Also of great importance as it is an interest-only mortgage, what is in place to pay off the capital sum at the end of the term?

I do hope your not so savvy friend realises that they are only paying interest and not any of the capital.

MWT

Remulb said:

Q - Does the mortgage company have an obligation to check / should they have checked, that at the time a name was removed from the mortgage it was still affordable particularly as it was the main earners name that had been removed and the remaining mortgagee was self-employed?

At the time they asked for the other person to be removed they would have represented that they could afford the mortgage payments and have subsequently demonstrated that by making those payments for roughly 14 years...

I don't see how that is going to support any claim that the mortgage was clearly unaffordable for your friend...

Given the start date for this interest only mortgage the end of the term must be approaching so perhaps the solution is to see if they can use the repayment vehicle that they have in place to repay the mortgage a little early?

... or if they have no repayment vehicle and selling the property was the plan then now would seem like a good time to do just that...

Hoenir

Remulb said:

This was, apparently, a simple process as the mortgage company only required the 2 signatures in order to do so.

That would be somewhat surprising. Even in days of less exacting underwriting standards. There were still checks undertaken. Likewise applicants in some instances were allowed to self certified their income. 

RogerPensionGuy

The link below is close to this thread. 

Looks like they looking at watering down mortgage affordability checks in essence and just checking when it goes wrong for customers, these companies can't bd forced to pay any compensation.

Just another ploy to feed the UK house buying or owning feeling and pumping up prices and building companies profits.

So I guess we will see the government pushing out HTB called help to buy or I call helpful in getting in to more debt and espically target 1st time buyers. 

***

https://www.theguardian.com/money/2025/jan/17/uk-mortgage-rules-growth-fca-home-ownership-ppi

silvercar

Some personal responsibility needs to be taken. What did your friend want? To take over the mortgage alone or to sell up and rent or buy somewhere smaller? Arguably, the mortgage at the time could have been cheaper than renting and avoids upheaval. 

In fact the lender has probably done them a favour, all the increase in value since the time of the split belongs to your friend. Something they wouldn’t have had if they had sold up.

MWT

Since it is now 7 months since the OP's one and only post, I doubt they are going to respond at this point...