Not upheld: Account administration errors complaint against Masthaven Finance Limited

Decision detail

Summary

Mrs A and Mr R complained that Masthaven Finance Limited unfairly charged and applied interest to their second charge mortgage taken out in December 2023 for £53,690 at 13% fixed interest. They alleged errors in interest calculation and questioned why the capital balance had not reduced as expected, with most repayments going toward interest. The loan fell into arrears in April 2025 after Mr R lost employment and requested reduced payments. The ombudsman found that the allocation of repayments to interest rather than capital is standard mortgage practice, particularly at the beginning of a loan term, and that the complainants were clearly informed of the projected interest costs in the mortgage offer. The ombudsman rejected the complaint, finding no unfair treatment by Masthaven and noting that affordability and interest rate variation concerns had not been raised with the firm first.

The Ombudsman's reasoning

The ombudsman found that the allocation of repayments predominantly to interest rather than capital is standard mortgage practice, particularly at the beginning of a loan term when the outstanding balance is highest. The fixed 13% interest rate was clearly disclosed in the mortgage offer, as was the total projected interest payable. The ombudsman rejected the complainants' misunderstanding of interest compounding and their calculation of 4,000% interest. Masthaven's response to the April 2025 financial difficulties was fair and appropriate. The ombudsman noted that affordability and interest rate variation concerns were not raised with Masthaven first and therefore could not be considered.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website