Not upheld: Mortgage administration / arrears handling complaint against Prudential Lifetime Mortgages Limited

Decision detail

Summary

The executor of Mrs S's estate complained to the FOS about a lifetime mortgage taken out by Mr and Mrs S in 2007 with Prudential at 7.37% fixed interest, objecting to the amount of compound interest accrued and the continuation of interest charging after Mrs S's death in 2020. The executor argued the interest rate was too high, that Prudential should have offered lower rates when market rates dropped, and that charging interest after death was immoral and unethical. The ombudsman found the complaint not upheld, determining that Prudential was not responsible for the mortgage's suitability (arranged by an independent broker), that the debt projections were clearly disclosed in the original offer, that fixed interest rates should not be changed mid-term, and that it is standard practice for interest to continue accruing on a debt until repaid, with the debt transferring to the deceased's estate.

The Ombudsman's reasoning

The ombudsman found that Prudential was not responsible for the suitability of the mortgage as it was arranged by an independent broker. Regarding the interest charged, the ombudsman noted that it is normal for all types of mortgages to continue accruing interest until the debt is paid off, and the projections in the mortgage offer made clear how much the debt could increase. The ombudsman rejected the argument that interest should cease at death, explaining that the debt transfers to the estate and continues to accrue interest until repaid. The ombudsman also found that Prudential was not obliged to change the fixed interest rate terms when interest rates dropped, as this would be inconsistent with the nature of a fixed-rate contract.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website