The couple, who obtained the mortgage direct using an in-branch adviser, told Mortgage Solutions that they were notified on Friday that they must complete the mortgage application by 3pm that day or risk seeing all documentation declared invalid.
HSBC required the borrowers to sign an offer document that day as the MCD’s implementation today (21 March) would bring about new paperwork, rendering the application non-compliant.
The late notice also meant the £250,000 of mortgage funds were released before exchange of contracts took place, meaning interest was being paid on a loan with no property secured against it over the weekend.
The couple had originally intended to complete on the deal on Friday but had agreed with the solicitor to push it back a few days at the request of the vendor. The borrower explained that a good relationship with the vendor and the fact they were already renting the property they planned to live in meant there was more leeway with the exchange of contracts taking place.
However, the borrowers explained that HSBC had failed to inform them of the EU directive until the very last moment, meaning the purchase could have fallen through completely, costing them “thousands of pounds”.
They said: “If we hadn’t been available to sign the documentation on Friday then the paperwork would have been declared invalid with the mortgage needing to be reissued. This would mean we’d have had to pay another application fee and higher rates on the mortgage as these have increased since we locked into the deal; potentially costing us thousands of pounds.
“Even worse, we may have lost the purchase altogether had the seller not been willing to wait for the process to be completed again. The really big irritation is that they’ve left it until the very last minute to tell us, risking our entire purchase.”
A spokesperson for HSBC said: “Our mortgage advisers have undertaken training in preparation for MCD, so we are disappointed to hear of this case. We apologise for the inconvenience that has been caused to the customer.
“Our mortgage offers are valid for six months and customers who have an existing mortgage offer that expires after MCD came into effect will automatically be sent an updated version, offering the same validity duration.
“We will be in contact with the customer to apologise in person and to see how we can put this right, plus we will address any training needs with the mortgage adviser involved.”
A number of mortgage brokers responded to the case explaining that lenders have made efforts to ensure they are compliant in the run up to the MCD, with changes made to IT systems so that the correct paperwork is in place. In some circumstances, lenders have had to reissue mortgage offers, but this has caused no detriment to advisers or their customers, brokers said.
Sales and marketing director at Personal Touch Financial Services David Carrington said: “This case seems odd compared to the way other lenders are behaving, for something to have gone so late in the process before they flagged anything was a problem. Most lenders have been working with networks on a transitional process for the last few weeks so I’m struggling to see how this could have happened.
“It’s the lender’s responsibility to get these things right and they have the obligation to comply with this directive.”
Dominik Lipnicki, director at Your Mortgage Decisions, added: “Most lenders have been MCD compliant for quite a while now. Clearly going directly to lenders does have its risks as demonstrated here as it is just the consumer against the bank, that said I would be surprised if any lender would let the client suffer as a result of their lack of MCD implementation.”
