Not upheld: Mortgage administration / arrears handling complaint against Mortgages Plc

Decision detail

Summary

Mr W complained that Mortgages Plc unreasonably refused to switch his mortgage from interest-only back to repayment without requiring him to complete an income and expenditure assessment. Mr W argued this was not a legal requirement and that he simply wanted to revert to his previous arrangement. MP maintained that as Mr W was solely liable for the payments (despite family contributions), it needed to verify his financial position before increasing his monthly obligations. The ombudsman found MP's approach reasonable and responsible, noting that a lender may require such information even absent explicit regulatory requirements, and upheld MP's position that understanding the consumer's own finances was necessary before making such a change.

The Ombudsman's reasoning

The ombudsman found it reasonable for MP to require income and expenditure information before switching Mr W to a repayment mortgage with higher monthly payments. Although Mr W's family was supporting payments, Mr W remained solely liable for the obligation. A responsible lender should verify the consumer's own financial position before committing them to increased monthly payments, even where no regulatory requirement explicitly mandates this. The fact that the mortgage was well-managed and out of arrears did not eliminate the need for this assessment.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website