Not upheld: unsuitable mortgage recommendation / failure to check lender criteria complaint against LONDON & COUNTRY MORTGAGES LIMITED

Decision detail

Summary

Mr D1, Mrs D, and Mr D2 complained that L&C's broker recommended a mortgage without confirming the lender would permit renting out two rooms of the property, which was central to their financial plan. The family proceeded with the purchase expecting two lodgers to cover the mortgage, but the lender only permitted one lodger, resulting in approximately £825 monthly shortfall and over £20,000 in upfront costs. While the ombudsman found the broker's failure to check with the lender was a clear mistake, it concluded the family would have purchased the same property anyway based on their original stated reasons (poor rental alternatives, desire for campus experience, and the exceptional value of this particular property). The ombudsman upheld L&C's £500 compensation offer as fair and reasonable for the disappointment and distress caused, rejecting the family's claim for £35,000 covering lost income and purchase costs.

The Ombudsman's reasoning

The ombudsman accepted that the broker made a mistake by not checking with the lender whether two rooms could be rented out. However, the key issue was whether the family would have proceeded with the purchase if properly advised. The ombudsman found that based on the family's original stated reasons for the purchase (poor quality and expensive rental alternatives, desire for Mr D2 to have full campus experience, the exceptionally good deal on this particular property, and the practical difficulties of alternatives such as commuting or informal arrangements), it was most likely the family would have purchased the same property anyway. Therefore, the only compensable loss was the disappointment and distress caused by the financial position being worse than expected, not the lost rental income or purchase costs.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website