Interest rates applied to mortgages
On this page you'll find information for mortgage providers, lenders, brokers, and other financial businesses on complaints about how interest rates have been applied to mortgage products.
Types of complaints we see
People typically bring a complaint to us after trying to arrange a new interest rate for their existing mortgage with their mortgage lender or intermediary and they feel something’s gone wrong or hasn’t happened as expected.
They’re often unhappy with the response when they tried to change the rate they are paying or didn’t get the interest rate product they wanted.
When people contact us to complain, they tell us that:
- delays meant they had to arrange a higher interest rate – particularly in an environment of rising interest rates
- they weren’t told they could arrange a new interest rate product, or weren’t told far enough in advance that their interest rate product was expiring
- they couldn’t arrange a new interest rate product with their lender for another reason, for example, because they’re in arrears or because the joint party to the mortgage won’t agree
- their lender doesn’t offer new interest rate products, which means they’ve become a ‘mortgage prisoner’
Handling a complaint like this
When you receive a complaint involving financial difficulties, you should reply to your customer within eight weeks. You may be able to resolve a complaint at this stage.
If you don’t reply within the time limits – or the customer disagrees with your response – they can bring their complaint to us. We’ll check it’s something we can deal with and, if it is, we’ll investigate.
We’ll expect you to demonstrate that you’ve investigated the complaint thoroughly and that you’ve reflected carefully on the circumstances.
Find out more about how to resolve a complaint.
Information we will ask for when we receive a complaint
Once a complaint has been referred to us, we will ask you to provide information about what happened from your perspective.
The information we expect to see about this type of complaint would normally include:
- The original mortgage offer and terms and conditions
- Details of any changes to the interest rate since, such as new products or variations to the rate
- Details of any application your customer has made – such as the application form, selection or advice letter, details of the decision you made, contact notes and call recordings
- Any communications you sent your customer about changes to their interest rate and whether or not they were able to take a new one
- If you have refused a rate to this customer, confirmation of whether you offer rates more widely and if so an explanation of why this customer wasn’t eligible
We might ask for further information or documents, depending on the circumstances of the case.
Read more about how we handle complaints.
What we look at
As with every case, to reach a decision about what’s fair and reasonable, we consider:
- the relevant law and regulations
- any regulator’s rules and guidance that applied at the time, for example the Financial Conduct Authority’s (FCA’s) ‘Mortgage Conduct of Business’ (MCOB) rules
- any industry codes of conduct in force at the time
- what we consider was good industry practice at the time
If there are disagreements about the facts, we’ll base our decision using evidence that you, your customer and relevant third parties have provided.
We’ll investigate what happened with a view to what we’d expect to see in the circumstances.
-
If you’re a mortgage lender, we’d want to know whether you:
- gave reasonable notice to the borrower that their payment would be changing, perhaps because their fixed-rate product was ending
- considered any requests the borrower made for a new interest rate product, that is, if you offer new interest rates to customers
- actioned requests promptly, without avoidable delay – particularly when interest rates were rising – and if you caused delay, did you put things right?
- gave any consumer arranging a product on an execution-only basis enough clear and factual information so they could make an informed decision
- ensured the consumer could access and easily use any tools or communication channels that you provided to arrange rates
- made sure you didn’t offer different rates to customers with similar characteristics – such as loan to value and credit history
- if you were giving advice, made a suitable recommendation to the consumer based on their needs and circumstances at the time
-
If you’re an intermediary, such as a broker, we’d look at whether:
- you made a suitable recommendation to the consumer – based on their needs and circumstances at the time – including by understanding the lender’s criteria and whether the customer was likely to meet them
- the information you gave the consumer was clear, balanced and in no way misled them, so that they were able to make an informed decision
- you progressed applications within a reasonable time and without avoidable delay – including by resolving follow-up queries and liaising between customer and lender
- you ensured there were no unnecessary barriers to arranging an interest rate product – for example by conducting affordability checks where there was no impact on affordability
-
If the consumer’s switching to a higher rate than their existing one, you need to calculate whether they can afford it. You can do this by comparing the proposed new rate to the reversionary rate that you’d apply.
-
If the consumer has, or has recently had financial difficulties, you should consider their wider circumstances carefully when assessing whether an interest rate product is affordable.
It’s not in the consumer’s best interests to offer them a product that’s not affordable. If the property needs to be sold further down the line, they’ll incur an early repayment charge.
Putting things right
If we decide you’ve treated your customer unfairly or have made a mistake, we’ll ask you to put things right. Our general approach is that the customer should be put back in the position they would have been in if the problem hadn’t happened.
What we ask you to do will depend on the nature of the complaint and how the customer lost out. If you’re a lender, we might ask you to:
- rework the account as if you had agreed an interest rate product, refunding the difference in payments, or
- compensate a customer who moved elsewhere on a less favourable rate.
If you’re an intermediary, we may ask you to pay the borrower the difference between the interest rate product you arranged and the one you could have arranged if there hadn’t been delays.
We may require you to compensate the consumer for other financial losses and any distress or inconvenience they’ve experienced.
Case studies
Freya wanted to switch mortgage before the end of her fixed-term deal
Mortgages Interest
Keith wanted more notice that his fixed-term mortgage deal was about to end
Mortgages Interest
Meena felt she’d been badly advised about switching to a lower rate
Mortgages Interest
Business Support Hub
If you want to talk informally about a complaint you’ve received, you can speak to our Business Support Hub – a free resource for financial businesses and professional consumer advisers.
Our Business Support Hub offer general information on how the Financial Ombudsman might look at a particular complaint, as well as guidance on our rules and how we work.
Find out how to contact the Business Support Hub.
Useful resources
Search our decisions database to see final decisions issued by our ombudsmen on complaints about financial difficulties and mortgages.
Find out more from the Financial Conduct Authority (FCA) on mortgage regulation.
Information for consumers
If you’re a consumer looking for information about how we can help, we have a dedicated page on complaints about mortgage interest rates. Or, if you wish to make a complaint, find out more about how to complain.
