Lender attacks “excessive” default interest rate practices

Published on

Octane Capital has criticised what it has called the practices of a growing number of specialist lenders for charging excessive default interest rates.

The lender is warning brokers to “triple-check” the small print when selecting a lender.

It claimed that some lenders conceal default interest rates by setting a very high standard interest rate that is discounted if payment is made on time — meaning the default interest rate, if payments are late, is labelled as the ‘standard’ interest rate.

Some lenders are charging as much as 4% in interest per month when borrowers fail to meet their payment schedules (whether this is described as the standard or default interest rate), Octane claimed.

When its own clients default on their payments, Octane charges 2%–3% more per annum not per month, with the rate chargeable depending on the event of default.

Mark Posniak (pictured), managing director of Octane Capital, said: “By charging ridiculously high default interest rates and, in some cases, concealing them as standard rates of interest, the industry is doing itself no favours. Lenders should work with borrowers who are struggling, not least because that way those same borrowers are more likely to get back on track. Instead, some lenders are kicking borrowers when they’re down, which is not just greedy and self-serving but plain myopic.

“I suspect some lenders are doing this because competition in the industry means margins are being squeezed and so default interest rates can be an instant boost. It’s almost as if they want borrowers to default. But it’s bad for the industry’s brand and makes absolutely no business sense.

“We’re urging brokers to be extra-cautious and triple-check the small print, especially given the slow-moving market, which is putting clients under greater pressure.”

Latest POLL

COMMENT ON MORTGAGE SOUP

We want to hear from you!
Leave a comment and get the conversation started.
You need to register to post, so please login or sign up below.

Latest articles

Investment in learning narrows financial services skills gap

Financial services firms are investing in employee learning at a faster rate than almost...

HTB extends standard BTL pricing to semi-commercial cases

Hampshire Trust Bank (HTB) has broadened its specialist mortgages offering by applying standard buy-to-let...

Danger of rental property shortage looms as landlords plan mass sell-off

A growing number of landlords are preparing to exit the private rental sector (PRS),...

Atom bank selects Provenir to enhance risk decisioning and data orchestration

Atom bank has partnered with Provenir to deploy the software firm's AI Decisioning Platform...

Other news

Investment in learning narrows financial services skills gap

Financial services firms are investing in employee learning at a faster rate than almost...

HTB extends standard BTL pricing to semi-commercial cases

Hampshire Trust Bank (HTB) has broadened its specialist mortgages offering by applying standard buy-to-let...

Danger of rental property shortage looms as landlords plan mass sell-off

A growing number of landlords are preparing to exit the private rental sector (PRS),...
Advertisement