Not upheld: irresponsible lending / inadequate affordability checks complaint against Union Bancaire Privée (UK) Limited

Decision detail

Summary

Mr and Mrs I complained that UBP failed to carry out adequate affordability checks before offering them a £1.1 million interest-only mortgage in mid-2020, claiming the mortgage was unaffordable and resulted in a £75,000 loss. The mortgage fell into arrears in 2023 and was repaid in 2025 using a bridging loan. UBP had verified income through a chartered accountant's letter, bank statements, and other supporting evidence, calculating disposable income of approximately £82,000 before mortgage costs. The ombudsman found that UBP carried out appropriate affordability checks, had no reason to doubt the verified income information, and that the mortgage was affordable in 2020, with later difficulties arising from unforeseen health issues and interest rate increases rather than lending failures. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman found that UBP carried out appropriate affordability checks by obtaining verified income information through a chartered accountant's letter, bank statements, and other supporting evidence. The ombudsman applied the regulatory principle that a lender can rely on customer-provided evidence unless it has reason to doubt it, and found UBP had no such reason. The stated income was consistent with Mr I's professional occupation, and the accountant would not have provided the letter if concerned about credibility. The mortgage was affordable in 2020 as evidenced by the fact that Mr and Mrs I successfully managed payments until interest rates increased from December 2021 and their health deteriorated in 2023. These were unforeseen changes in circumstances, not failures in UBP's lending process. The ombudsman rejected the argument that UBP should have required SA302s, noting that Mr I provided no evidence from 2017-2019 demonstrating his actual income was lower than stated. Regarding Covid-19 impact, Mr I's occupation was not in a heavily impacted sector and he confirmed no expected income changes. Even if affordability had been incorrectly assessed, the ombudsman would not order refund of £75,000 in interest as it is reasonable for a lender to expect borrowers to pay interest on borrowed funds.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website