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Halifax have been accused of manipulating the mortgage market to their own advantage, after customers complained the building society were unvervaluing their property.
Downward evaluations mean customers seeking to remortgage their homes are no longer eligible for the best mortgage deals and instead have to pay a higher interest rate. Halifax charges 5.29% for a five year fixed mortgage if there is equity of 5% or less in the property. This compares to a very competitive 3.99% for equity of 25%, a difference of £2,600 a year on a £200,000 home loan.
Mortgage brokers have continually warned homeowners that 40% may yet be wiped off the value of their property, although prices have fallen by an average 21% from the summer 2007 peak, according to Halifax’s own house-price index.
Government pressure on banks to lend to customers has been considerable ever since the £750 billion bailout. The intention of the bailout was to encourage lenders to issue loans to low risk borrowers and attract a new wave of first time buyers into the market. However, the Halifax controversy appears to suggest underhand conditions are being imposed which means even low risk borrowers cannot access the best rates.
HSBC have already committed £1 billion in loans to borrowers with deposits of 10%, as part of the £15bn it pledged to lend this year. HSBC are offering a very competitive fixed rate over five years at 3.99%.
Yet one Sunday Times reader complained her application was refused despite having the required 40% equity. The apparent reason was because she did not have 75% of the value of her mortgage in savings — £160,000.
Financial adviser Neil Avery of Timothy James, said: “We’re increasingly finding that what lenders are saying and what they are doing is very different. The outcome implies Halifax is working the property market to its advantage.”
Mortgage brokers have witnessed some alarming incidents of downward evaluations. They claim thousands of customers on Halifax’s cheap two-year deals taken out just before the 2007 credit crisis are now applying to the bank for a “transfer deal”. Brokers, however, have been shocked at the manner in which
Halifax has slashed its online price index by thousands of pounds within the space of a few days.
The building society then offers existing customers transfer deals at interest higher rates.
Mr Avery told a familiar story of one client living in an expensive London home. “On Friday their property valuation according to the Halifax’s computer system stood at £1.3m. This was already down 19% on what the client paid for the house two years ago,” he said.
“Halifax published its new valuations on Tuesday, just three days later. The house was worth £965,000 — a further correction of 25%. This will mean the couple pay about £290 a month more, or £14,000, over the next four years,” Avery said.
Halifax defended their price indexing system claimin it reflects changes as the the market fluctuates and any complaints would be dealt with on an independent basis.
