Property – Mortgage – Disability discrimination – Appellant seeking to switch from repayment to interest-only mortgage – Respondent refusing request — Appellant contending respondent’s “no-conversion” policy amounting to disability discrimination – County court finding in favour of respondent – Whether “no-conversion” policy making it impossible or unreasonably difficult for disabled persons to use mortgage service – Appeal dismissed
In 1994, the appellant purchased a property at 164 Claverham Road, Bristol. In 2006, she applied to the respondent to re-mortgage the property. The mortgage offer was dated 19 October 2006 in the sum of £96,000. It was a repayment mortgage for a term of 20 years. There was a fixed rate of 5.59% until 30 November 2008 when it became a variable rate at 1.35% above LIBOR. The offer letter stated the terms of the mortgage reflected past or present financial difficulties. The parties entered into a mortgage deed which stated that the appellant “charges the property by way of legal mortgage with payment of all the money referred to in clause 2.1 of the Mortgage Conditions”. It provided that the respondent was the proprietor of a registered legal mortgage over the property.
The appellant fell into arrears with her repayments after she became unemployed. She also suffered severe depression after the death of a close friend, which amounted to a disability for the purposes of the Disability Discrimination Act 1995 and the Equality Act 2010. Initially, her payments were partly met by payment protection insurance and she applied for payments from the Department for Work and Pensions through its support for mortgage interest scheme (SMI). The SMI did not cover the full amount due each month and the appellant was unable to cover the remainder of the monthly repayments. The respondent refused her request to switch to an interest-only mortgage as its policy was not to provide such mortgages to existing repayment mortgagors. An issue arose whether that policy made it impossible or unreasonably difficult for disabled persons to make use of the mortgage service. The county court found that the respondent had neither discriminated unlawfully against the appellant due to her disability nor failed to make a reasonable adjustment for her under section 21(1) of the 1995 Act. The appellant appealed.
Held: The appeal was dismissed.
(1) The service being provided to the appellant was a repayment mortgage which involved a single loan of a fixed sum, with the property as security and no facility to increase the amount of the loan. The parties freely entered into a mortgage agreement whereby, in exchange for the promise of making monthly repayments, a sum of £96,000 was loaned to the appellant with the property as security. The terms of the mortgage were clear. The offer of an interest-only mortgage would have been a different service, with a different loan, and a different and uncertain security. That different service was never offered, and the appellant had no legal right to be offered it. It was no part of the service being provided by the respondent that the appellant could make interest-only repayments and ignore the capital sum. The service should not be too broadly defined as the provision of all possible kinds of mortgage but as the provision of a particular type of mortgage, namely a repayment mortgage: Birmingham Citizens Permanent Building Society v Caunt [1962] Ch 883 and Edwards v Flamingo Land Ltd [2013] EWCA Civ. 801 applied.
(2) The refusal to change to interest-only (the “no conversions” policy) did not make it impossible or unreasonably difficult for the appellant to access the service. The service being provided was the provision of a repayment mortgage which the appellant had accessed without difficulty in 2006. There was no service involving interest-only mortgages. Even if the service did include interest-only mortgages, there was no evidence that it was impossible or unreasonably difficult for disabled people to access the service when compared to the access offered to other members of the public. The policy was not to provide interest-only mortgages to existing repayment mortgagors, whoever they were. There was no need to make any adjustments to bring about an equality of result because the “no conversions” policy applied to all. It was not a policy that “bit harder” on a disabled borrower compared to a non-disabled borrower. Therefore, section 21(1) of the 1995 Act did not apply.
(3) Even if the policy did somehow restrict access to those with disabilities, there was no obligation to make reasonable adjustments to the policy pursuant to the Equalities legislation. The critical element of a repayment mortgage was the security for the mortgagee represented by the property in question, and the right to its possession. If the repayments were not made, the mortgagee could take possession of the property and sell it immediately, so as to redeem the value of the loan originally made. Such security was reasonably certain. By contrast, with an interest-only mortgage, any security was represented by the value of the property at the end of the term. That might, or might not, provide sufficient security for the loan. The mortgagee had no control over the ultimate security which the property might represent. It would depend on things outside the mortgagee’s control: condition, valuation, the state of the property market so far in the future. Yet it was the mortgagee who bore the risk that, at the end of the term, the property would not be adequate security for the loan. It was not a reasonable adjustment within the meaning of section 21(1) of the 1995 Act to require the lender to abandon the security which it had agreed with the borrower and accept a more speculative and uncertain security.
(4) If the appellant had switched to interest-only, on the county court’s findings, she would be unable to pay off the loan at the end of the term, and be left homeless and destitute, whilst the respondent’s security would be chancy and uncertain. Everything guaranteed by a repayment mortgage would be absent. That demonstrated the fundamental difference between the type of mortgage agreed and the type of mortgage requested. Merely because an interest-only mortgage might, in other circumstances, and depending on the residual equity in the property, have been granted to another mortgagor, did not mean that it was not fundamentally different to a repayment mortgage.
Richard Drabble QC and Stephen Cottle (instructed by South West Law) appeared for the appellant; Robin Allen QC and Clifford Payton (instructed by TLT Solicitors) appeared for the respondent; Catherine Casserley (instructed by the Commission for Equality & Human Rights) appeared for the intervener.
Eileen O’Grady, barrister
Click here to read a transcript of Green v Southern Pacific Mortgage Ltd
