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

Decision detail

Summary

Mr and Mrs B complained about an early repayment charge (ERC) of 2% charged by Godiva Mortgages Limited when they redeemed their buy to let mortgage on 20 December 2023, just 11 days before the ERC was scheduled to reduce to 1%. They argued it was unfair to charge the full 2% given their proximity to the reduction date and requested Godiva reduce the charge or provide calculations for a fair reduction. Godiva declined and did not uphold the complaint. The ombudsman found the ERC was clearly set out in the mortgage offer and properly applied, and that as a commercial mortgage, buy to let products are not subject to residential mortgage regulation. The ombudsman determined that Mr and Mrs B were aware of the terms and made a conscious decision to complete the sale before the reduction date due to concerns about the sale falling through, and therefore the complaint was not upheld.

The Ombudsman's reasoning

The ombudsman found that the ERC was clearly set out in the mortgage offer and was a reasonable pre-estimate of costs. As this is a buy to let (commercial) mortgage, it is not subject to residential mortgage regulation, and borrowers bear greater responsibility for checking terms. The ombudsman determined that while Mr and Mrs B were close to the ERC reduction date, they were aware of the terms and made a conscious decision to complete the sale before the reduction date due to concerns about the sale falling through. The ombudsman rejected the argument that individual loss calculations should be performed, noting that lenders are entitled to project average customer behaviour and apportion costs across the mortgage group at inception rather than on individual redemption dates.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website