Licensees urged to check loan details

Related tags Bank Hsbc

Licensees urged to check loan details
Licensees are being urged to check any financial products they have attached to their mortgages or loans as they could find themselves facing huge financial costs.

In particular, concern has been raised about a product called the ‘interest rate swap’ which was sold as a protection for interest rate rises on loan repayments. However, many companies are finding they have been hit with higher repayments as this product requires customers to pay additional fees to the bank when rates fall. The issue is only coming to light now because the interest rates were cut by the Bank of England from 5.75% in 2007 to 0.5% in 2009.

In 2006, Roy Myers, who runs three pubs in Redcar, north-east England, asked his bank, HSBC, for a £850,000 mortgage to buy the freehold of a pub. HSBC agreed but told him he would have to take out an interest rate swap with its investment banking division.

“At the time we were just happy that we could take out the mortgage,” said Myers. “We didn’t really get a proper explanation, we were given some leaflets.

“They told me it was a protection against interest rates rising, there was nothing about rates dropping. Then as they did plummet, we now find ourselves paying double — about £3,500 extra per month.”

Myers added: “I honestly believe I was sold a product that was not fully explained to me. And I still don’t fully understand it.”

Michelle Neary, business development manager at financial products specialist firm Legal Plus, said: “About 200,000 businesses have been effected by this. Many have collapsed due to the unexplained risks of these products and we are looking for justice.”

An HSBC spokesman said: “HSBC has extensive processes that are designed to ensure it provides clients with appropriate products according to their needs, as well as a full explanation of the products and risks.”

■ Have you had problems with a financial product? Email gurjit.degun@wrbm.com

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