An MP has claimed Santander is prepared to throw a couple in their late 70s out into the street because it has refused to extend their interest-only mortgage due to their age.
Len and Val Fitzgerald, who live in Eastbourne, East Sussex, are at risk of losing their home after the Spanish-owned bank launched repossession proceedings against them, though Santander said it had now agreed to a six-month breathing space to allow discussions to continue.
The case has once again thrown the spotlight on interest-only mortgages, and comes weeks after the Financial Conduct Authority sounded an alarm about the “significant numbers” of people with these loans who may be in danger of losing their homes.
There are around 1.67m interest-only mortgages outstanding in the UK, an estimated 180,000 of which are held by people aged 65 and over. In 2012 a former boss of the FCA described these loans as a “ticking timebomb”.
The couple’s MP, Stephen Lloyd, said: “This is a frail elderly couple who always paid their mortgage interest on time every month without ever missing a payment, yet because of some arcane internal decision, the bank refuses to allow anyone over the age of 75 to retain their interest-only mortgage. Consequently Santander are prepared to throw Len and Val Fitzgerald out into the street, which is a shocking and callous decision.”
The couple have found themselves in this position after remortgaging with an eight-year interest-only mortgage of £178,500 in late 2007. Santander said the couple had originally agreed that when the loan ended in December 2015, they would sell the property in order to raise the funds to pay back the capital, but shortly before that date the Fitzgeralds got in touch to say they wanted to extend the term. Santander rejected this request on the grounds of their age and “affordability factors”, and they were advised to seek financial advice.
There have been a series of warnings about interest-only mortgages in recent years, fuelling fears that some of those left with big bills could end up being repossessed.
With this type of loan, the borrower agrees to pay off the interest each month but makes no capital repayments. Borrowers are expected to make sure they have an investment plan in place to pay off the debt at the end of the term. However, some people are facing a shortfall because their investment has underperformed, while others never set anything up.
Len Fitzgerald, 77, told the Eastbourne Herald he and his wife had called on Santander to extend the mortgage until they were 85, adding: “We hardly sleep. It’s a hell of a situation to be in when you are in your late 70s … We are pushing like hell for Santander to extend it.”
The couple are said to owe £180,000 on the property, which was worth £250,000 – effectively ruling out downsizing or equity release, which allows people to unlock some of the value tied up in their property.
The couple complained and took their case to the Financial Ombudsman Service, which ruled in Santander’s favour, and in January the bank instructed solicitors to begin legal proceedings for possession of the property, with a court date originally set for the end of April. However, following representations from Lloyd, a six-month breathing space has now been agreed so that all options could be investigated, the bank said.
Lloyd called on Santander to either increase its age limit for mortgage borrowers or abolish it, and said: “Without such a move, Mr and Mrs Fitzgerald will lose their home. Is that really what the bank wants to see happen? I will also be raising this vital issue in parliament. I am sure there are tens of thousands of other families potentially facing the same, desperate situation in the coming years, which is unacceptable.”
The MP has arranged a meeting next week with Treasury minister John Glen to discuss the case, and has also tabled an early day motion in parliament where he “urges Santander and other major mortgage lenders to follow the example set by Nationwide and other high street lenders to allow interest-only mortgages to customers up to the age of 85 and beyond”.
A Santander spokeswoman said the bank reviewed mortgage lending requirements on a case by case basis and always tried to support customers.
“However, it is not in the interest of either customers or the bank to lend in circumstances where we believe that lending will become unaffordable in the future. We have been working with the Fitzgeralds over a number of years to find an alternative resolution to their request to vary their original mortgage terms and have guided them towards finding appropriate financial advice. We remain in contact and agreed next steps with them last Friday.”