Not upheld: mortgage arrears calculation and repossession timing complaint against Bank of Scotland plc (trading as Halifax)

Decision detail

Summary

Mr and Mrs B complained that BOS overcharged them on their interest-only mortgage by failing to correct the arrears balance following a February 2017 ombudsman decision, and that BOS should have repossessed the property sooner rather than extending the term and deferring recovery action. The ombudsman found that BOS did amend the arrears balance in March 2017 as directed, reducing it to £197,571.68, and that the expected monthly payments shown on statements were not interest charges. The ombudsman also found that BOS did not treat Mr and Mrs B unfairly by deferring repossession given their vulnerability, the property being on the market for sale, and the impact of the coronavirus pandemic. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman found that BOS did correctly amend the arrears balance in March 2017 in accordance with the February 2017 ombudsman decision, reducing it from what would have been £284,857.19 to £197,571.68. The expected monthly payments listed on statements (£13,698.75) were not interest charges or other charges, and interest was not charged on those amounts; interest is charged only on the outstanding mortgage balance. The increase in mortgage balance over time resulted from unpaid interest on the outstanding balance, not from overcharging. Regarding repossession, while it may not have been unreasonable for BOS to begin legal proceedings sooner given the level of arrears, the ombudsman found it was not unfair for BOS to defer action given Mr and Mrs B's vulnerability, the property being on the market, the payment protection policy payments, and the coronavirus pandemic's impact on the property market and government restrictions on residential repossession.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website