Mortgage customers head to ombudsman to fight for cheaper rates
More and more households are taking on their mortgage lenders in battles over high interest rates – and winning.
In many cases, homeowners who turn to the Financial Ombudsman Service get thousands of pounds from their lender, plus compensation on top of that.
Rising mortgage costs are causing financial problems for homeowners, and it’s all due to increases in the Bank of England’s base rate.
This rate was less than 1 per cent from 2009 to the end of 2021, but is now 4.5 per cent, adding thousands of pounds a year to the cost of many mortgage repayments.
The base rate has been increased incrementally and has risen 12 times since December 2021. This means that if someone applies for a mortgage but there is a delay in getting it approved, the interest rate offered may have increased in the meantime.
Where that was the fault of the lender or broker, a wave of customers have turned to the ombudsman in an attempt to snag cheap mortgage rates that they believe have been snatched from them.
Complaints on the rise: As mortgage costs rise, so do consumer complaints about prices
FOS figures show an increase in customer complaints with lenders and brokers about mortgage prices, around the same time those rates started to rise.
The FOS maintained 62 such cases in favor of consumers in 2022, up from 20 in 2021 and 15 in 2020.
This year alone, the ombudsman has seen the consumer side in 17 disputes over home mortgage rates, according to an analysis by This is Money.
Many of these FOS cases were filed by customers who were first offered a low mortgage interest rate that was limited in time, and then forced to take a higher one due to delays.
Often the FOS then ordered the lender to honor the lower mortgage rate by paying back the difference and paying them a few hundred pounds for the inconvenience.
| May 2022 | October 2022 | May 2023 | May 22, 2023 | June 5, 2023 | |
|---|---|---|---|---|---|
| Average fixed mortgage for two years | 3.03% | 5.43% | 5.26% | 5.34% | 5.72% |
| Average fixed mortgage for five years | 3.17% | 5.23% | 4.97% | 5.01% | 5.41% |
| Fixed/variable, total products | 5,087 | 2,258 | 5,264 | 5,385 | 4,995 |
| Moneyfacts data is as of the first available day of the month, unless stated otherwise | |||||
Other valid FOS cases are from customers who own a home but take out a new mortgage, which is delayed, leaving them on their lenders’ standard variable rate and paying huge mortgage prices.
In some cases, the consumer got as little as £50 to £150, but others managed to get their hands on more.
In one example, a couple felt they were missing out on a good mortgage rate when their lender, Santander, asked so many questions that the mortgage offer expired.
The couple, referred to as Mr. and Mrs. D by the FOS, were first offered a two-year fixed mortgage at 2.64 percent in the spring of 2022.
After Santander’s questions led to that offer expiring, the lender’s best available rate was 3.52 percent.
Santander apologized for this poor service and agreed to refund the couple £1,150.
But that was not enough for Mr and Mrs D, who turned to the ombudsman.
The FOS sided with the pair and ordered Santander to effectively honor the previous interest rate of 2.64 percent.
The ombudsman said Santander would have to do this by repaying them the difference between what they would pay at an interest rate of 2.64 per cent and 3.52 per cent over the stipulated period.
This works out to around £2,719, as well as £500 in damages and £400 in lawyers’ fees.
A spokesperson for Santander said: ‘The ombudsman of the financial services upheld Santander’s decision not to grant a mortgage in this case due to legal issues with the property.
“Santander is committed to providing customers with the best possible service, but in this case accepts that the customer should have been notified of the decision earlier and we have offered compensation for this delay.”
In another example from 2020, Mr and Mrs B disputed a 3.94 per cent interest rate they had been paid by the Bank of Scotland after their house had been written down.
The pair felt they should have qualified for a lower rate of 1.44 percent, which was available through BoS’s sister bank, Halifax.
The FOS sided with the pair, asking BoS to effectively honor an earlier, lower rate of interest and pay £300 in damages.
A spokesman for the Bank of Scotland said: ‘This case is over two years old, with specific facts specific to the client and his property. It does not reflect the circumstances or experience of the majority of customers coming to the end of a mortgage product.’
A spokesman for the FOS said the ombudsman was getting “more complaints about mortgage interest deductions”, but could not provide exact figures.
Some links in this article may be affiliate links. If you click on it, we may earn a small commission. That helps us fund This Is Money and use it for free. We do not write articles to promote products. We do not allow any commercial relationship to compromise our editorial independence.