Interest rate SWAPs are a type of interest rate hedging product, which is a financial product known as a derivative.
There are many different types of interest rate hedging financial products – such as dual-rate SWAPS and caps or collars.
The success of interest rate hedging products is based on the expectation that interest rates will rise – and as with any financial speculation, there is a degree of risk if they should fall.
Lenders have in the past mis-sold high-risk financial products, including interest rate SWAPs.
Interest rate hedging products like SWAPs are sold with loans as “insurance” against interest rates rising, but are a separate financial product from the loan itself.
SWAPs differ from other types of interest rate hedging product because they enable a customer to set the interest rate and swap their existing loan if interest rates increase.
Some lenders specify the level to which the base rate can fall for the SWAP to continue operating – meaning a significant fall in the base rate can render the SWAP agreement void.
In the past, customers who wanted to opt out of SWAPs could find themselves facing high exit penalties from lenders, so were in effect trapped in a downward spiral of financial loss and high interest rates when the base rate fell.
It is now accepted that some lenders mis-sold financial products like SWAPs with loans – and as a result, private investors, SMEs and corporations suffered financial loss, which in some cases was catastrophic.
Many interest rate hedging products were sold because of the commission incentives lenders gave to sales staff – while others were sold to borrowers whose circumstances were not suitable for the product because of the high risk involved.
Many customers who chose to protect their loan payments using SWAPs were also not advised fully of the risks and how SWAPs worked.
Duncan Lewis is a leading firm of professional negligence solicitors and can advise clients who have suffered loss as a result of interest rates SWAPs negligence on how to make a claim for compensation.
Clients who suffer financial loss or other loss as a result of negligent investment advice should first make a complaint through the firm’s own complaints handling procedure (CHP).
The Financial Conduct Authority handles consumer complaints about the mis-selling of financial products such as SWAPs, but any compensation awarded may be limited.
Clients considering suing a lender or financial advisor for professional negligence in recommending SWAPs or mis-selling SWAPs have six years from the date of the event constituting negligence – or three years from the date they first realised negligence had occurred – in which to make a claim.
Because of the complexity of suing a lender or financial advisor over an interest rate SWAP agreement – and proving that they failed in their duty of care towards a client or acted negligently – Duncan Lewis professional negligence solicitors advise clients to get in touch as soon as possible for an assessment of their case.
Duncan Lewis offers Conditional Fee Agreement (CFA) funding to clients making professional negligence claims, with a fixed fee for the initial client meeting and assessment of the claim, so our clients know in advance what they will be paying.
If a lender or financial advisor has give negligent advice leading to financial loss – including mis-selling an interest rates SWAPs agreement – call Duncan Lewis Professional Negligence Solicitors for more information about making a compensation claim on 020 7923 4020