A win for homeowners...but not the States

Wednesday 21 February 2018

Changes to mortgage costs are due to save homeowners thousands of pounds from this month – but at the cost of the States Treasury.

The change will cancel out administration charges which many people on the property ladder may not even realise they have to pay.

Currently, homeowners are charged registration costs (also known as hypothecs) for their mortgage every 10 years – plus of course both sets of legal fees for the lender and the borrower, making the fee cost up to around £1,000 each decade.

But this will no longer be the case from Friday, after the States Assembly agreed a new law to limit the re-registration fee to every 30 years.

A report by the Jersey Law Commission said “hypothecation should continue to be the method of obtaining security on immoveable property in Jersey” but it felt a change to the ‘mortgage on land’ system was needed to meet “present day requirements.”

It stated: “The ten-year prescription period… for judicial hypothecs… is clearly too short. If a loan secured on a property remains outstanding after ten years, it has to be re-registered to conserve the droit de suite; this may cause problems if in the meantime a second charge has been registered against the property and its holder refuses to reinstate the original order of priority. We recommend that the prescription period …be increased from ten to 25 years.”

But the States took it a step further and extended the re-registration period to every 30 years.

Pictured: The law change means borrowers will now only have to pay to re-register their mortgage every 30 years instead of every 10 years. 

Deputy Anne Pryke, said: “During my time as Housing Minister, a number of Islanders have expressed their view that the 10 year re-registration period was too short and caused them unnecessary costs. By increasing the re-registration period to 30 years, we will be reducing the costs facing home owners as they will no longer have to pay the associated fees every 10 years over the period of a normal 25-30 year mortgage.

“The Law amendment also makes it possible to register a mortgage for a percentage of the value of a property, which is a key feature of shared equity schemes. It is important we open up more opportunities for people to own their home, and I expect this change will facilitate the introduction of new home ownership schemes in the future.”

This has been welcomed by mortgage lenders as it takes away some of the burden from the administration of the costs.  

Jane Needham of Bedell Cristin's Property team said: "This change in the law is terrific news for both lenders and borrowers. Lenders will see a huge reduction in administration time and, perhaps more importantly, borrowers will no longer be faced with two sets of legal fees as well as Court fees, totalling hundreds of pounds."

But this will have an impact to the public purse as those charges were all revenue to the government. Currently the Treasury Department receives around £225,000 every year from the charges but this will drop significantly as the law change means the majority of new and existing mortgages may never need to be re-registered.