The Financial Ombudsman Service (FOS) has published technical notes setting out FOS’ approach to complaints relating to interest-only mortgages and valuations and surveys. The notes are aimed at both mortgage borrowers as well as mortgage brokers and/or mortgage lenders.
In relation to complaints on interest-only mortgages, FOS states:
- It will consider whether a borrower was advised to take out an interest-only mortgage. If advice was given, FOS will consider whether the mortgage was indeed suitable for the borrower at the time the mortgage was taken out. If, however, FOS finds that no advice was given, FOS may deem it unfair to hold the broker and/or lender responsible.
- If an interest-only mortgage borrower has informed their lender of their inability to pay off the mortgage, FOS will consider whether the lender responded ‘sympathetically and constructively’. The fact that the lender may not have advised the borrowers to take out the mortgage becomes irrelevant in such instances.
- Should FOS find that a borrower was wrongly advised to take out an interest-only mortgage resulting in losses to the borrower, FOS will attempt to put the borrower in the position had a more suitable mortgage been provided. This may result in the lender redressing certain fees and charges.
In relation to complaints on valuations and surveys, FOS states:
- If it is found that the lender arranged for the wrong type of survey, which did not flag any problems with the property, FOS may ask the lender to arrange a new survey or ensure that the borrower is not out of pocket as a result of problems which the original survey failed to identify.
- Whilst FOS cannot consider complaints against surveyors, FOS may decide it fair to hold the mortgage lender responsible for fixing problems arising from the survey.
- FOS deems a difference of 10-20% between the market value of the property and that valued by the surveyor, as reasonable. If, however, FOS decides that it was not reasonable for the lender to have relied on the valuation, FOS may ask the lender to ensure the buyer is not out of pocket.
- If a lender has treated a borrower unfairly, FOS may also ask the lender to make up for any upset or inconvenience caused.
- In reaching its decisions on the above, FOS will consider an array of documentation, including mortgage documents and application forms, surveys, solicitors’ records, independent valuations, and builders’ reports and estimates.
In addition to the two technical notes, FOS has also provided case scenarios indicating how the above guidance may work in practice.