National Australia Bank provided an official undertaking to the Financial Services Authority in Britain that it will change the wording on home loan contracts because they placed borrowers in an unfair position, the
Herald Sun reported.
The mortgage contracts included conditions that gave Yorkshire Bank, one of NAB's bank brands in Britain, the right to withdraw loan facilities or to demand immediate repayment of home loans for relatively minor breaches of mortgage terms.
This included the right for Yorkshire to demand repayment in full if the borrower fell behind on a loan with another arm of the bank.
"We considered that the term may give too much power to the bank to withhold the facility for a relatively minor breach of contract," the FSA stated in a report posted yesterday on its website.
The new contract terms allow Yorkshire to demand repayment only if the loan turns out to be fraudulent, a security property becomes damaged or the borrower becomes insolvent.
NAB separately confirmed to the Herald Sun that it established a new company - nabCapital Europe - in connection with its institutional banking business.