Upheld: Mortgage administration / arrears handling complaint against Rooftop Mortgages Limited

Decision detail

Summary

Miss C complained that her interest-only mortgage balance had increased despite making all payments and an overpayment of £1,000, which seemed impossible. The ombudsman's analysis revealed that between June 2022 and May 2023, the previous lender failed to increase Miss C's direct debit payments sufficiently during a period of rapidly rising interest rates, causing her capital balance to trend upwards. Although a correction process began in early 2023, it stopped when Miss C made her overpayment, meaning approximately £400 of that overpayment was consumed correcting the drift rather than reducing her original debt. The ombudsman upheld the complaint, finding that Rooftop Mortgages Limited, having taken over administration, is responsible for correcting this error and ordered it to reduce the balance by £400 and pay £250 compensation.

The Ombudsman's reasoning

The ombudsman analysed Miss C's mortgage balance over time using a graph and identified that from June 2022, the balance trended upwards rather than fluctuating around a baseline, indicating that monthly interest charges exceeded the direct debit payments. This was likely due to rapid interest rate rises in late 2022 and early 2023 when the previous lender failed to increase payments sufficiently. A correction process appeared to start in early 2023 but stopped when Miss C made her overpayment in May 2023, meaning approximately £400 of her overpayment was used to correct the upwards drift rather than reducing her original debt. The ombudsman concluded that Rooftop, having taken on the debt and payment rights, also adopted responsibility for correcting pre-existing errors, and that it would have been fairer for Miss C to have paid small monthly increases rather than a large lump sum to correct the lender's failure.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website