Not upheld: Investment mis-selling complaint against Prudential Lifetime Mortgages Limited

Decision detail

Summary

Mrs S and her late husband took out a lifetime mortgage with Prudential in 2008, initially borrowing £15,000 with additional drawdowns between 2009 and 2011. In 2016, Mrs S's son complained on her behalf, arguing the mortgage was unsuitable, that they lacked proper legal advice, that the fixed interest rate of 7.01% was unfairly high and should have tracked the Bank of England base rate, and that documentation discrepancies invalidated the contract. Prudential rejected the complaint, and the FOS investigator initially agreed. The ombudsman upheld the investigator's decision, finding the lifetime mortgage was a suitable recommendation given the couple's inability to sustain traditional mortgage payments and lack of alternative funding sources, that they received independent legal advice from a qualified solicitor, that the fixed interest rate was clearly communicated and not required to track base rates, and that paperwork issues did not invalidate the contract. The complaint was not upheld and no remedy was ordered.

The Ombudsman's reasoning

The ombudsman found that Prudential's recommendation was suitable because: (1) the fact find showed Mr and Mrs S could not sustain traditional mortgage payments and had no other funding sources available; (2) selling and downsizing had been considered and rejected; (3) a lifetime mortgage was a reasonable option to achieve their stated aims; (4) shared appreciation mortgages were not widely available in 2008 and Prudential could only recommend its own products; (5) the fixed interest rate of 7.01% was clearly stated in the mortgage offer and Mr and Mrs S were given appropriate information about how interest would accrue; (6) Mr and Mrs S received independent legal advice from a suitably-qualified solicitor as evidenced by the SHIP Certificate; (7) discrepancies in the solicitor's details did not affect the fact that independent legal advice was actually provided; (8) the fixed rate was not required to track the Bank of England base rate and Prudential was entitled to set its own commercial terms; (9) minor paperwork issues did not invalidate the contract, particularly as Mr and Mrs S had received the benefit of the funds; and (10) the adviser's potential motivation to sell, even without commission, did not lead to unsuitable advice in this case.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website