Not upheld: Mortgage advice complaints complaint against Cambridge Building Society

Decision detail

Summary

Mr and Mrs M and Mr M1 complained that CBS forced them to take out unnecessary life insurance on Mrs M as a condition of obtaining a £210,000 mortgage in 2019, costing approximately £45 per month until cancellation in 2024. The complainants argued that CBS's 2024 statement that life insurance was not required proved the 2019 requirement was a mistake. The ombudsman found that CBS reasonably imposed life insurance as a specific condition in this case because the application involved three borrowers, two in their late sixties/early seventies, applying for a 20-year mortgage term, creating a genuine risk that the mortgage would become unaffordable if either older borrower passed away. The ombudsman concluded that CBS's requirement was reasonable, necessary to demonstrate affordability over the full term, and that the mortgage would likely have been refused without it, making the insurance neither unnecessary nor unfair. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman found that CBS was required under mortgage regulation to assess affordability over the full 20-year term, including potential future changes such as borrower death. Given the ages of Mr and Mrs M and the 20-year term, CBS reasonably identified a risk that income might become unavailable during the term, making the mortgage unaffordable for remaining borrowers. Life insurance was not a general CBS requirement but was a reasonable specific condition in these circumstances to demonstrate the mortgage would remain affordable if one or more borrowers passed away. The broker's appeal process and CBS's agreement to reduce the requirement to Mrs M only (rather than all three borrowers) represented a fair compromise. The 2024 statement that life insurance was not required was accurate as a general policy matter, and the ombudsman did not expect a staff member handling a rate switch to review the original underwriting file from five years earlier.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website