Partially upheld: Irresponsible lending complaint against Masthaven Finance Limited

Decision detail

Summary

Ms E complained about a second charge mortgage taken with Masthaven in May 2024 for approximately £33,000, arguing it was lent irresponsibly because Masthaven did not explore her sickness benefits and failed to consider that her first charge mortgage would end in approximately two years. Ms E paid on time for three months before falling ill and unable to work, leading to arrears. Masthaven assessed affordability based on earned income and found it sustainable, and handled Ms E's subsequent financial difficulties by allowing time for a property sale before pursuing legal action after nine months of non-payment. The ombudsman upheld the complaint in part, finding that Masthaven should have given greater consideration to the sustainability of the mortgage given the imminent end of the first charge mortgage term, and ordered Masthaven to waive the early repayment charge if the property must be sold due to the first charge mortgage term ending.

The Ombudsman's reasoning

The ombudsman found that while the mortgage was affordable at the time of lending based on Ms E's earned income, Masthaven should have given greater consideration to the sustainability of the mortgage given that Ms E's first charge mortgage would end in approximately two years. This was a significant fact that should have influenced Masthaven's lending decision. The ombudsman rejected the argument that Masthaven should have assessed affordability based on sickness benefits, as lenders cannot anticipate all possible changes in circumstances. The ombudsman also found Masthaven's handling of Ms E's financial difficulties was not unreasonable, as it allowed time for a property sale and only pursued legal action after nine months of non-payment with no indication of future payments. However, the ombudsman determined that if Ms E must sell her property to repay the first charge mortgage within the five-year ERC period, she would suffer a loss directly attributable to Masthaven's lending decision, and therefore the ERC should be waived in that scenario.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website