Financial difficulties with mortgages
Do you deal with complaints from consumers in financial difficulty with their mortgage, perhaps for a financial adviser, mortgage broker or lender?
This page explains our approach to complaints about financial difficulties in relation to mortgage debt.
We publish separate guidance on our approach to complaints about:
On this page
Have a complaint about financial difficulties with your mortgage?
See our guidance for consumers about financial difficulties related to mortgage debt.
Complaints we deal with
People come to us when:
- they’ve approached their lender about difficulties with mortgage payments, and they don’t think their lender has done enough to help them
- they’re unhappy with their lender’s response to their situation when they’ve fallen into arrears
- legal proceedings are underway to repossess their home, or it has been repossessed already
Some circumstances can be very specific or individual, sometimes they are linked to other events, such as the Covid-19 pandemic or the rising cost of living.
Rules on financial difficulties with mortgages
When we look at these complaints, we use the regulatory and legal standards that applied at the time of the event that the consumer is complaining about – as well as regulatory guidance.
And we would always expect a mortgage lender to help people who are experiencing financial difficulties.
The Mortgages and Home Finance: Conduct of Business (MCOB) sourcebook sets out how mortgage lenders should provide services to borrowers, covering regulated:
- mortgage contracts – including first and second charge mortgages and bridging loans
- equity release products
- home purchase plans, and
- sale and rent back agreements.
In 2023, around 90% of mortgage lenders signed up to the Mortgage Charter. If the complaint you’re handling involves one of these lenders, then they are subject to the standards set out in the Charter.
That includes allowing borrowers in financial difficulty:
- to switch to interest-only for six months to avoid going into arrears, without an affordability assessment and with no impact on their credit file, from 30 June 2023
- to extend the term as long as this is short of the borrower’s retirement age without an affordability assessment, and to reduce the term back again within six months, from 30 June 2023
- to lock into a new interest rate up to six months before the expiry of their previous rate, and to change the rate at any time up to two weeks before implementation, from 10 July 2023.
We’ll expect lenders to take account of these new measures and offer them to customers where appropriate.
If the complaint is related to the Covid-19 pandemic, we'd advise you to also check the guidance on mortgages and coronavirus from the Financial Conduct Authority (FCA).
Handling mortgage complaints before they come to us
Good complaint handling can repair a relationship, build confidence in financial services, and help customers understand your financial products.
Make sure you understand the customer’s complaint and think about your responsibilities. We'd expect your complaint handling teams to fully understand:
- all relevant requirements and regulations, including the Consumer Duty
- what to send us when we're dealing with a complaint about your firm.
Our decisions database holds all the final decisions we’ve published since 1 April 2013. They're anonymised to protect the identity of complainants but are based on real-life complaints, so will give you a good picture of how we resolve disputes.
Our complaints data will give you an idea of the volume of complaints we receive and resolve, and the proportion that we have upheld in consumers’ favour.
How we resolve complaints about financial difficulties with mortgages
We only look at complaints you've had an opportunity to look into first. If the consumer is unhappy with your decision, or you don't respond to them within the time limits, they can come to us.
When we looking at complaints involving financial difficulties, we’d expect your firm to have treated the customer fairly and responded to them with respect and sympathy. So we’ll want to know whether you:
- explained things to clearly to your customer
- made sure you understood their situation, the reason for the arrears, and when the customer expected their situation to improve
- gave them all the information they needed, and
- set out how you wanted them to engage with you
- suggested flexible, tailored solutions that took account of their personal and financial circumstances
- followed any reasonable requests from the customer, for example in the way you contacted them
Each case is different, so what we require will vary. But we’ll look at the facts and evidence from both you and your customer. We’ll usually consider:
- relevant laws and regulations
- regulators’ rules in place when the event happened, including the Consumer Duty
- guidance, standards and codes of practice in place at the time of the event
- the mortgage offer, and terms and conditions of the mortgage
- a mortgage transaction history covering the period the customer has been in financial difficulties, where possible, and covering any fees and interest applied, running arrears balance, and required contractual monthly payments
- copies of tariffs of charges covering any periods when you charged fees and evidence of legal fees if they have been charged
- contact notes and call recordings
- any correspondence from your customer about their financial difficulties, such as letters or emails, budget sheets
- any correspondence from debt assistance organisations
- correspondence about agreed and broken repayment plans
- evidence of any attempts to support the customer, such as offering repayment plans, capitalisation, payment holidays, restructuring of the mortgage, and any reasoning behind offering – or deciding not to offer – these options
- if you agreed to remove information from a credit file and there were delays, evidence that the credit reference agency has been asked to remove information – and when
- if court action was taken, the court documentation and details of the legal actions that proceeded it or followed it.
We may also consider whether, when dealing with your customer, you looked out for signs of financial difficulty.
Consumers don’t always know the best way to express their concerns or whether or how soon to reach out to discuss their financial difficulties. So we'd expect to see that you, as a lender, have been pro-active in identifying customers who need support and in offering it to them.
We’d also expect you to take any vulnerability into account, including by:
- adapting how or when you communicate with them
- agreeing to deal with a third party on their behalf, or
- tailoring the forbearance you offer
We follow the FCA’s dispute resolution rules (DISP) and will take into account how you’ve tried to put things right.
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When a customer tells you their circumstances have changed, you should always start by looking for ways to adapt to your customer’s new situation. For example, if they tell you:
- they’re changing job and need to change the payment date of their mortgage
- have lost their job or can’t return to work
- won’t be earning due to illness
- their relationship has broken down and their partner has moved out.
In these situations, you might agree to:
- the options set out in the Mortgage Charter
- a reduced payment plan – collecting only the amount the customer can afford – which might in some cases only be the interest – for an agreed period
- a term extension to reduce the payments to an affordable level
- making other changes to the mortgage where appropriate – such as reviewing the interest rate.
You may find your customer has moved on from the problems that caused their financial difficulty, but has accumulated arrears. In these cases, you might find an affordable way for them to repay the arrears which could, where appropriate, include capitalisation.
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The 2023 Mortgage Charter sets out how lenders should provide extra help for borrowers. You should allow your customer to:
- switch to interest only for six months to avoid going into arrears, with no affordability assessment and no impact on credit file
- extend the term short of retirement age with no affordability assessment and to reduce it back within six months
- lock in a new interest rate up to six months before the expiry of a previous rate, and change the rate at any time up to two weeks before implementation.
If taking one of these options doesn’t resolve your customer’s situation – or if your customer is already in arrears – we’ll expect you to consider whether to offer further support tailored to their individual circumstances.
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The FCA’s rules don’t generally require an affordability assessment for a rate switch on an existing mortgage.
But you should consider whether your customer will be able to afford the new rate in their current circumstances. For example, the rate switch may:
- result in higher monthly payments, or
- be unsuitable alongside other changes in their finances, or further borrowing they may have taken out.
If you’re advising your customer about switching to a new rate, we’d expect you to have considered:
- the different rates you offer – fixed, variable and tracker, and
- whether it’s sensible to tie a customer in to an early repayment charge if they’re unable to afford the repayments on any new interest rate.
Your customer may also have been advised to take out a new mortgage as a way out of financial difficulties, including to consolidate other debts.
If so, we’ll look at whether this advice was appropriate for their needs and circumstances. If they’ve missed payments on their existing mortgage, we'll look at whether it was responsible to lend.
If we don’t think the advice was appropriate, we’ll consider what should have happened, and whether the consumer has lost out. For example, perhaps an extension to the mortgage term as a concession would have been better than refusing help.
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You may have already offered your customer one of the options set out in the Mortgage Charter and it hasn’t resolved the situation. Or they may already have missed payments.
If so, we’d want to see whether you’d offered further personalised support, such as:
- changing the payment due date
- offering a temporary reduced payment arrangement – where you agree to collect for example, only what the customer can afford, only the interest, or even grant a payment holiday
- changing the mortgage in some other way, such as extending the term to reduce the monthly payment
- offering a new interest rate, if appropriate
- capitalising any arrears – this is usually only appropriate where the underlying problem that was causing the financial difficulties is resolved, but the customer still needs to pay off the arrears that resulted from it.
This isn’t an exhaustive list and you may find other solutions for your customer. And in some cases, it may be appropriate to use a combination of these options.
Some lenders don’t offer new interest rates. Even where they do, this isn’t always appropriate, as it can increase the risk of an early repayment charge.
Sometimes, however, reducing the interest rate is enough to make the mortgage affordable and might be the best way to help. Offering a new rate after the immediate financial difficulty is over, perhaps alongside capitalisation, might also help get the mortgage on track.
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We sometimes hear from people who are unhappy they couldn’t transfer their mortgage to another product, despite being up to date with their payments. They believe this means they’re paying more than they consider is fair and this has – or is likely to – cause them financial difficulty.
Borrowers in this situation are sometimes known as ‘mortgage prisoners’.
We’ll look at whether your firm has done everything it was required to do and what was fair and reasonable in the circumstances.
We’ll also look at whether the borrower has lost out because your firm was at fault.
Even if your firm can’t offer a lower interest rate, you still have obligations to treat customers in financial difficulty fairly. You should look at other ways to help. For example, if you no longer offer fixed-rate deals, you could ensure the borrower gets free impartial mortgage advice. That way the borrower can look at remortgaging elsewhere.
If your customer can’t remortgage – either with you or another lender – they may find themselves in financial difficulty. In these circumstances, you should look at other ways you may be able to help, such as:
- agreeing payment arrangements or term extensions
- exploring other options.
You have an obligation to support your customer and treat them positively and sympathetically, whether or not you are an active lender taking on new customers.
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Repossession should always be a last resort.
The 2023 Mortgage Charter requires participating lenders not to repossess without consent until at least 12 months after the first missed payment, unless there are exceptional circumstances, after 26 June 2023.
All lenders are expected to act fairly to those in financial difficulty – even those who haven’t signed the Charter. But ultimately, there may come a time when you as lender will feel that legal action is the only option left available.
Where a consumer brings a complaint to us about how you as lender have treated them, we usually expect you to put proceedings on hold so that we can consider the complaint. But if you think there’s a good reason why that wouldn’t be appropriate, we’ll take that into account too.
We’ll look at:
- how much you know or knew about your customer’s circumstances
- whether you tried to get the mortgage back on track before starting legal proceedings
- whether you might have come to an alternative arrangement with your customer – such as giving them reasonable time to sell the property themselves or offering an assisted voluntary sale as an alternative to repossession.
If the customer says you haven’t taken their circumstances into account, we’ll want to know what those circumstances are, and why the consumer feels they make a difference.
If you were aware of the consumer’s circumstances, we might ask why you’re choosing to start legal proceedings. And we’d consider whether that’s fair.
Because repossession should always be a last resort, we’d expect you to show that you have exhausted all other reasonable options.
But if there are no realistic alternatives, delaying taking action could also make things worse for your customer. For example, a delay might lead arrears and interest to increase, and so reduce any remaining equity in the property.
If we uphold a consumer's complaint, we'll tell you what you need to do to put things right. We may also ask you to compensate them for any distress or inconvenience they’ve experienced as a result of the problem.
Case studies
Consumer unhappy that her lender refused to switch mortgage to interest only after losing her job
Mortgages Financial Difficulties Covid-19
Consumer unhappy mortgage lender refused to extend a reduced payment arrangement
Mortgages Financial Difficulties
Consumer complains after being rejected a payment deferral on their mortgage
Mortgages Financial Difficulties Covid-19
Business Support Hub
Businesses and consumer advisers can contact our Business Support Hub on 020 7964 1400 for information on how we might look at a particular complaint, or for guidance on our rules and how we work.
We also work with businesses and other organisations to help prevent complaints.
