Introduction
Tracker mortgages are a type of mortgage that is tied to the Bank of England’s base rate. When the base rate changes, the interest rate on the mortgage changes too. This can be a good option for borrowers who want some certainty about their mortgage payments. However, lenders need to follow certain principles when offering tracker mortgages. In this article, we’ll discuss what those principles are.
Principle 1: Transparency
Lenders must be transparent about the terms and conditions of the tracker mortgage. This includes the interest rate, any fees or charges, and any restrictions or limitations. Lenders should provide clear and concise information in plain language that borrowers can understand.
Principle 2: Fairness
Lenders must treat all borrowers fairly and not discriminate based on factors such as age, gender, or race. Lenders should also ensure that the mortgage is affordable for the borrower and that the borrower is not taking on too much debt.
Principle 3: Responsibility
Lenders have a responsibility to ensure that borrowers understand the risks and benefits of a tracker mortgage. This includes explaining how changes in the base rate will affect the mortgage payments. Lenders should also assess the borrower’s ability to repay the mortgage, taking into account their income, expenses, and other financial commitments.
Principle 4: Flexibility
Lenders should offer flexibility to borrowers who have a tracker mortgage. This could include allowing overpayments, underpayments, or payment holidays. Lenders should also consider the borrower’s circumstances if they experience financial difficulties and provide support where necessary.
Principle 5: Customer Service
Lenders should provide good customer service to borrowers with a tracker mortgage. This includes responding to queries and complaints promptly and effectively. Lenders should also provide clear information about how to contact them and what to do if the borrower is struggling to make payments.
Principle 6: Compliance
Lenders must comply with all relevant laws and regulations when offering tracker mortgages. This includes the Financial Conduct Authority’s rules on mortgage lending and treating customers fairly. Lenders should also have appropriate systems and controls in place to ensure that they are complying with these rules.
Principle 7: Communication
Lenders should communicate clearly and regularly with borrowers who have a tracker mortgage. This includes providing updates on changes to the base rate and how this will affect the mortgage payments. Lenders should also explain any changes to the terms and conditions of the mortgage and provide clear information about any fees or charges.
Principle 8: Accountability
Lenders should take responsibility for their actions and be accountable to their customers. This includes acknowledging mistakes and taking steps to rectify them. Lenders should also have appropriate complaints procedures in place and ensure that customers can escalate complaints to an independent body if necessary.
Principle 9: Sustainability
Lenders should ensure that the tracker mortgage is sustainable for both the borrower and the lender. This means assessing the long-term affordability of the mortgage and considering any potential risks or challenges that could arise in the future.
Principle 10: Innovation
Lenders should be open to innovation and new ways of offering tracker mortgages. This could include using technology to streamline the application process or offering new types of tracker mortgages that are tailored to specific customer needs.
Conclusion
In conclusion, lenders must follow certain principles when offering tracker mortgages. These include transparency, fairness, responsibility, flexibility, customer service, compliance, communication, accountability, sustainability, and innovation. By following these principles, lenders can ensure that they are providing a high-quality service to their customers and contributing to a stable and sustainable housing market.