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Southern Pacific Mortgages – Disability discrimination in a property context

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05/02/2016

In Southern Pacific Mortgages v V the court considered whether a lender discriminated against a borrower suffering from depression when it refused to convert a mortgage into an interest-only loan.

The borrower had lost her job and become depressed. The borrower’s insurance policy paid her mortgage for some time on the basis that she was disabled by reason of depression. When her insurance ran out, she asked her lender to convert her mortgage to an interest-only loan. When the lender refused, the borrower alleged that the refusal was an unlawful failure to make reasonable adjustments to enable a disabled person to access provision of the mortgage service, pursuant to disability discrimination and human rights legislation.

The County Court held that the lender had not discriminated. Whilst the failure to switch to an interest-only loan made it difficult for the disabled borrower to service the mortgage repayments, it did not affect her ability to sell the house and redeem the mortgage overall. In addition, the court considered various guidance issued to lenders on responsible lending and interest-only mortgages.  The guidance provided that it was not good practice to lend on an interest-only basis except in certain circumstances, which did not apply in this case. Switching to an interest-only mortgage here would not therefore be a reasonable adjustment for the lender to make, and as such disability discrimination had not been made out.

The case is a helpful reminder of the obligations on service providers not to discriminate and it is an interesting application of disability discrimination and human rights laws in a property context. The full judgment can be seen here.

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