Not upheld: mortgage term extension refusal and affordability assessment complaint against Bank of Scotland plc (trading as Birmingham Midshires and Bank of Scotland)

Decision detail

Summary

Mr and Mrs P complained about Bank of Scotland's refusal to extend their interest only mortgage term beyond August 2024 and to provide further borrowing. The mortgage, taken out in 2017 for around £223,000, was due for repayment in 2024 but Mr and Mrs P were unable to repay the capital. Bank of Scotland refused their 2024 applications for a five-year term extension and further borrowing. The ombudsman found that Bank of Scotland acted reasonably in refusing these applications, as the mortgage was clearly established as interest only with agreed repayment terms, and extending the term would not help given the mortgage had become unaffordable with substantial arrears accumulating. The ombudsman found Bank of Scotland had shown appropriate forbearance and did not uphold the complaint.

The Ombudsman's reasoning

The ombudsman found that Bank of Scotland acted reasonably in refusing the term extension and further borrowing applications. The mortgage was clearly established as interest only with repayment due in 2024, and Mr and Mrs P had agreed to these terms. Bank of Scotland showed appropriate forbearance by engaging with Mr and Mrs P, requesting financial information, and extending deadlines. Extending the term would not help as the mortgage appears unaffordable (no payments since November 2024), and extending would increase arrears, reduce equity, and worsen the situation if still unpaid at the end of an extended term. The bank has allowed reasonable time for Mr and Mrs P to find alternative solutions such as refinancing, selling the property, or equity release.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website