Not upheld: Mortgage advice complaints complaint against Barclays Bank UK PLC

Decision detail

Summary

Mr and Mrs M complained that Barclays unfairly declined their application to borrow an additional £25,000 on their mortgage for home improvements, particularly given their substantial property equity and investments. Barclays assessed the borrowing as unaffordable based on their income and expenditure under MCOB rules, even after reconsidering revised buy-to-let mortgage payments. Mr and Mrs M were subsequently approved for the same amount as a personal loan at higher cost, which they felt was inconsistent. The Ombudsman upheld Barclays' decision, finding that mortgage lenders must follow strict affordability rules based on income assessment regardless of customer assets, and that different lending criteria apply to secured versus unsecured lending.

The Ombudsman's reasoning

Barclays is required to follow strict regulatory rules (MCOB) when assessing mortgage affordability and must not lend unless it can demonstrate the borrowing is affordable based on income and expenditure assessment. While Mr and Mrs M have substantial equity and investments, these are not liquid assets and cannot override the affordability assessment requirement. The fact that different lending rules apply to secured mortgage lending versus unsecured personal loans means approval for one does not indicate unfair assessment of the other. Barclays' reassessment using revised buy-to-let payments was reasonable given the new fixed rate would not last the entire lending term.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website