Not upheld: unsuitable lending advice complaint against HL Partnership Limited

Decision detail

Summary

Mrs H, a retired person on pension income, took out a £1.6m bridging loan in 2023 to help her daughter and son-in-law purchase development land. The loan was secured against her residential property, which she intended to sell to repay it once the houses were built. The development took longer than expected, requiring a loan extension, and Mrs H had to move into rented accommodation after selling her property in November 2024. Mr L complained on Mrs H's behalf that the advice was unsuitable and that alternative financing options and longer loan terms should have been explored. The ombudsman found the advice suitable because Mrs H's circumstances as a retired person with limited income made the bridging loan an appropriate option, and alternative financing would not have been viable given her income requirements and loan-to-value constraints.

The Ombudsman's reasoning

The ombudsman determined that the bridging loan was suitable for Mrs H's circumstances because: (1) as a retired person on pension income needing to borrow £1.6m, her borrowing options were limited; (2) the bridging loan allowed access to needed funds without monthly repayments, which aligned with her ability to pay; (3) the 12-month term was reasonable given her plan to sell her property and move into one of the new houses; (4) alternative options such as interest-only mortgages would have required monthly payments Mrs H could not afford and would not have met lender income requirements; (5) a lifetime mortgage would have resulted in excessive early repayment charges given her intention to sell; (6) the fees, while high, were clearly disclosed and the total cost was made clear before agreement; (7) inaccuracies in the suitability letter appeared to be templated errors rather than reflections of unsuitable advice; and (8) the ombudsman could not hold HL Partnership responsible for the actions of unregulated advisers or the feasibility of the development plans themselves.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website