Not upheld: irresponsible lending / unsuitable mortgage advice complaint against Openwork Limited (with Just Mortgages Direct Ltd as appointed representative)

Decision detail

Summary

Mr and Mrs H complained that Openwork provided incorrect mortgage advice when recommending mortgages that would not raise sufficient funds to complete their purchase of a new property. Openwork initially recommended a residential mortgage of £260,500 and a buy-to-let mortgage of £171,295, but these proved insufficient. The firm later arranged revised mortgages of £322,700 and £221,295 respectively, resulting in higher monthly payments than initially expected. While the ombudsman found the initial advice was poor, it concluded that the revised mortgages were suitable and that Mr and Mrs H would likely have proceeded with them had they received correct advice initially, given their need to complete the purchase and the stalled sale of their existing property. The ombudsman upheld Openwork's offer of £2,868 in compensation for distress, inconvenience, and additional costs, but rejected the claim for compensation for additional borrowing costs.

The Ombudsman's reasoning

The ombudsman acknowledged that the initial advice was poor and unfairly raised Mr and Mrs H's expectations about borrowing requirements. However, the ombudsman applied a counterfactual test to determine what Mr and Mrs H would likely have done if given correct advice at the outset. The ombudsman found that: (1) Mr and Mrs H had a genuine need to complete the purchase and the sale of H had stalled, making the buy-to-let option sensible; (2) the revised net payment of £1,644.73 was not significantly out of line with their stated preference of '£1,500ish' with flexibility to pay more; (3) their combined net income of over £6,500 could comfortably absorb the £144.73 monthly increase; (4) both lenders confirmed affordability; (5) on the balance of probabilities, Mr and Mrs H would likely have proceeded with the revised mortgages had they received correct advice initially; and (6) Mr and Mrs H still own both properties and property H has appreciated in value, so they may not suffer actual loss.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website