Upheld: unfair management of mortgage after term end; failure to provide adequate information; failure to adjust payments when interest rates increased complaint against The Mortgage Business Plc

Decision detail

Summary

Mrs A complained to the FOS about her mortgage with TMB, alleging excessive interest rates and charges, lack of preferential rate products, and absence of a repayment vehicle. The FOS found jurisdiction only over the interest rate complaint from May 2018 onwards. While the ombudsman determined that TMB was entitled as a closed book lender not to offer new products and had properly applied market-rate interest, she found that TMB acted unfairly by failing to update Mrs A's monthly payment when interest rates increased after the mortgage term ended in 2022, and by failing to provide clear information about shortfall amounts. However, the ombudsman concluded that Mrs A would have been unable to afford increased payments given her income level, so she would have ended up in the same position regardless of TMB's failure. The complaint was upheld but no financial remedy was awarded.

The Ombudsman's reasoning

While TMB was entitled as a closed book lender not to offer new interest rate products and had made Mrs A aware of remortgage possibilities within the Lloyds group, TMB acted unfairly in its management of the mortgage after the term ended. Although TMB's system restriction prevented it from automatically adjusting the monthly payment when interest rates increased, TMB should have continued to vary payments as it had done during the mortgage term. More importantly, TMB failed to provide Mrs A with sufficient information about the specific amounts involved—the shortfall between what was being collected and what was owed—or clear instructions on how to make additional payments. However, the ombudsman concluded that even if TMB had increased the monthly payment, Mrs A would likely not have been able to afford it, as the interest charges at their peak exceeded her net employed income, meaning the mortgage would have fallen into arrears regardless.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website