MORTGAGE holders are being warned about online notes that act like a “golden ticket” to wipe debts.
The Financial Conduct Authority (FCA) says these notes are worthless and could make financial problems worse.
Some claims are being made on social media and YouTube that borrowers can avoid paying their mortgage by sending their lender a “promissory note”, the FCA said.
The notes claim another party, such as a trust, will either make money available to make mortgage repayments, or claim the note itself should be accepted by the lender to repay the mortgage in full.
Borrowers sending in the notes are often in financial difficulties and are paying for them in the hope it will solve their problems.
Some people may end up spending hundreds of pounds.
However, the regulator said a promissory note is not an acceptable form of mortgage payment – and if one is sent to a lender that does not mean the customer no longer has to repay their mortgage.
Your lender will reject the contents of the letter.
Greg Sachrajda, head of department in retail banking market interventions at the FCA, said: “We have had a number of lenders reporting increasing numbers of borrowers trying to use these promissory notes to clear the mortgages.”
Christmas is often a time when people’s financial problems come to a head, which may make some offers which appear to be “quick fixes” to clear debts particularly attractive.
Mr Sachrajda said: “People are sold a service claiming you can send a lender a promissory note, and this will somehow clear their mortgage. It doesn’t.
“These promissory notes are just an empty promise that someone else will repay the mortgage, they don’t actually make any payments.
“Lenders are rightly rejecting those promissory notes.
“Now, this can seem like a golden ticket for borrowers who are really struggling, essentially a free pass into a world where they’ve become debt free.
“But, of course, it isn’t a free pass. If you’ve borrowed money you have to repay it.
“We often say if something seems too good to be true, it usually is, and that’s certainly true of these promissory notes.”
He said people using the notes can risk making their situation worse as they may be paying “significant sums of money, £500 or more, for something that is worthless”.
Lenders will return the notes and any other documents to the borrower, often signposting them to acceptable types of mortgage repayment.
Mr Sachrajda said: “Lenders are required to treat borrowers in financial difficulty sensitively and fairly and, if appropriate, they can explore options with them like extending the term of the loan, temporarily switching to an interest-only mortgage, or agreeing a payment holiday.
“Even if selling the house ends up being the right next step because the borrower really can’t repay the mortgage in any other way, the bank can still help them with something called an assisted voluntary sale, which gives the borrower more time to sell the property, and the bank can help with the costs and the sales process.”
More probes on fake legal loopholes
Earlier this year, the FCA issued a warning about fake claims about legal loopholes and misinformation claiming people cannot be held liable for their debts.
The regulator has previously warned about claims which may use arguments dating back to the Magna Carta, which people may attempt to apply to various types of debt or taxes.
Mr Sachrajda said: “These are examples of people paying money for services that don’t work and don’t improve their position.”
He said online misinformation around mortgages can lead to “real harm for mortgage borrowers, often vulnerable people who are struggling with their mortgage repayments.”
Mr Sachrajda added: “Our advice to mortgage borrowers is don’t waste your money on useless promissory notes.”
He said people should instead speak to their lender, who can offer “real options that can help”, and they should also consider seeking free help from a debt support charity.
Organisations such as the National Debtline which is run by the Money Advice Trust, StepChange, Citizens Advice and MoneyHelper can help people who are struggling financially.
The Financial Ombudsman Service (FOS) has seen cases where people have been sold promissory notes relating to mortgage payments and it has not upheld cases based on such arguments.
A spokesperson for the FOS said: “Mortgage borrowers – particularly those in financial difficulty – may be targeted by websites and companies offering quick fixes, such as promissory notes.
“These notes do not clear a mortgage or replace the need to make payments.
“Relying on a promissory note to stop making payments puts your home at risk of repossession.
“If you’re having any problems with your mortgage, always speak to your mortgage lender first.”
How to get help with your mortgage payments
Your mortgage is a priority debt and missed payments have serious consequences.
If you are struggling, contact your lender immediately and ask for support.
Do not cancel or reduce payments without agreement.
Lenders must offer tailored help based on your circumstances, and this support is reported to credit reference agencies, which may affect future borrowing.
Options can include a short payment holiday, temporarily reduced payments, extending the mortgage term, or a temporary switch to interest‑only.
Interest usually continues to build and later payments may be higher.
If you are already behind, repossession should be a last resort and lenders must treat you fairly under FCA rules.
If you cannot reach agreement, seek free, independent advice.
What help is out there for first-time buyers?
GETTING on the property ladder can feel like a daunting task but there are schemes out there to help first-time buyers have their own home.
Help to Buy Isa – It’s a tax-free savings account where for every £200 you save, the Government will add an extra £50. But there’s a maximum limit of £3,000 which is paid to your solicitor when you move. These accounts have now closed to new applicants but those who already hold one have until November 2029 to use it.
Help to Buy equity loan – The Government will lend you up to 20% of the home’s value – or 40% in London – after you’ve put down a 5% deposit. The loan is on top of a normal mortgage but it can only be used to buy a new build property.
Lifetime Isa – This is another Government scheme that gives anyone aged 18 to 39 the chance to save tax-free and get a bonus of up to £32,000 towards their first home. You can save up to £4,000 a year and the Government will add 25% on top.
Shared ownership – Co-owning with a housing association means you can buy a part of the property and pay rent on the remaining amount. You can buy anything from 25% to 75% of the property but you’re restricted to specific ones.
Mortgage guarantee scheme – The scheme opens to new 95% mortgages from April 19 2021. Applicants can buy their first home with a 5% deposit, it’s eligible for homes up to £600,000.