The move, which will also see banks obliged to contact borrowers towards the end of their mortgage deal, is aimed at preventing a potential spike in repossessions as borrowers come off cheap short-term fixed rates and is being introduced by the British Banking Association (BBA).
As well as contacting clients to avoid pitfalls, the revised Banking Code would also demand that lenders offer concessions to customers who contacted their provider prior to any difficulties.
Speaking to the Independent newspaper, BBA chief executive, Angela Knight, said: “Banks will have to adhere to this because it will be a contractual requirement as part of their membership of the BBA. We are not going to wait and watch as consumers get into financial difficulties.
“We would urge anyone facing difficulties to first contact their bank. This should be their first port of call. But we will also proactively contact them. These steps are already seen as best practice by our members, but this will be the first time they become part of the Banking Code.”
However, the initiative could put lenders in direct competition with intermediaries for remortgage business and also raise implications under ‘Treating Customers Fairly’, as customers may not be offered a whole of market choice.
Dev Malle, sales director at Personal Touch, commented: “It brings up the age-old debate of who the client belongs to. This highlights that intermediaries need a decent client bank and if lenders are contacting them three months prior, brokers should be contacting them five months before. It might be good practice for banks but they can only look at their own range. Only brokers can give the client the best choice.”
Richard Fox, chief executive of the Society of Mortgage Professionals, said: “Some brokers will squeal about this, but it is a problem which should have been sorted years ago. Lenders should do it for customer service but any adviser who contacts the client six months prior to the end of the deal will always be on the front foot.”
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