Where a borrower does not take any action as the mortgage term approaches its maturity date and the balance has yet to be paid, the mortgage may either renew automatically or go into arrears.
In order for a mortgage to be renewed automatically, (i) the lender must be willing to renew; and (ii) the borrower must be notified of the renewal terms and conditions at least 21 days before the maturity date (i.e., the mortgagor must also be willing to renew), unless the original mortgage agreement provided otherwise. A hidden increase in the interest rate is likely unlawful.
Where a borrower defaults, the law operates to prevent lenders from increasing interest rates on autorenewals and prohibits the imposition of penalties, fees or fines that are linked to the default and not tied to actual incurred losses. In other words, any mortgage terms which have the effect of increasing the interest charged on arrears above the pre-default rate would be contrary to the law.
If your mortgage has been automatically renewed, please contact us for a free consultation. Additionally, if you have, or previously had, a Haventree Bank mortgage or a mortgage from any other bank that was automatically renewed, please complete the form here.