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ombudsman news

issue 139

January/February 2017

complaints involving mortgages, age and unfair decisions

index of case studies

  • 139/7 - consumer complains that lender won't extend mortgage term because of joint account-holder's age
  • 139/8 - consumers complain that mortgage lender has discriminated against pregnant partner on maternity leave
  • 139/9 - consumers say that their lender has discriminated against them because of their age - and won't offer an extension on their mortgage term
  • 139/10 - consumer complains that bank has rejected mortgage application as he's over their age limit
  • 139/11 - consumers complain that lender has discriminated against them based on age - by not porting mortgage that runs into retirement
  • 139/12 - consumer complains lender won't extend mortgage term because he'll be borrowing into retirement

139/7
consumer complains that lender won't extend mortgage term because of joint account-holder's age

When Mr N's mother died, he had the mortgage he held jointly with his parents on the home they shared put into his and his father's names. At the same time, he asked the lender to extend the term by five years - because he was now planning to work beyond the state pension age when it had originally been due to end.

However, the lender said that high levels of debt could cause stress and difficulties, especially in old age - and that the regulator now expected them to be much more careful when lending into retirement. Because Mr N's father was over 90, they refused to extend the mortgage term.

Mr N complained. He pointed out that the original term had been due to end well into his father's 90s - and that his father's share was covered by his pension, which wouldn't change. He said their only alternative would be to sell up and downsize - which would mean his father, who'd anticipated living in the house for the rest of his life, would probably have to move into a care home.

But the lender wouldn't reconsider - and Mr N contacted us.

putting things right

We asked the lender to explain their decision. Initially, they repeated what they'd told Mr N - that his father's age meant they couldn't agree to extend the term.

But on reviewing Mr N's complaint again, the lender accepted that their response had been very general. In fact, the person who'd written to Mr N hadn't even spoken to him to get an idea of his circumstances.

After talking things through with us, the lender offered Mr N an appointment with one of their mortgage advisers to reconsider his application. They also offered him £500 to reflect the upset they'd caused to him and his father by initially rejecting his application without considering it properly.

139/8
consumers complain that mortgage lender has discriminated against pregnant partner on maternity leave

Shortly before their first child was born, Mr L and Ms Q decided to move to a bigger house - and had a mortgage decision in principle from their bank. Before finalising the mortgage, the bank said their underwriters needed more information relating to Ms Q's job at a local school.

The couple provided the details the bank had asked for, and had several further appointments with the bank's mortgage adviser. The mortgage adviser also phoned Ms Q's employer directly. However, the couple were eventually told that their application had been unsuccessful - and that they should try again when Ms Q was back at work after her maternity leave.

Upset, the couple complained - and the bank said they'd review the application. This time, they suggested that Ms Q's fixed-term contract might be something to do with their underwriters' decision - but they still wouldn't reverse it.

Feeling they'd been discriminated against, Mr L and Ms Q then emailed us.

putting things right

We asked the bank how they'd reached their decision. They said that under their lending policy, someone on a fixed-term work contract had to have already been with their employer for 12 months, and have six months left on their contract, in order to take out a mortgage. Ms Q's contract was coming to an end, so she hadn't met these criteria.

We reviewed the information that Mr L and Ms Q had provided about Ms Q's job. We saw that when they'd applied for the mortgage, Ms Q had been on a year's fixed-term contract with less than one month remaining. So the bank were right to say that she hadn't met their criteria.

However, Ms Q's employer had confirmed that her contract would definitely be renewed. And she'd been due to go back to work after four months' maternity leave - three months into her new contract. So the bank could have simply deferred the application by a couple of weeks, when Ms Q would have been into her new contract and meeting the lending criteria.

From the bank's internal records, we saw the underwriters had pointed this out to the mortgage adviser. But Mr L and Ms Q hadn't been told this.

And - despite this - the records also showed that Ms Q had been told to reapply once she was "back from maternity leave". So it wasn't surprising that she believed she'd been treated unfairly because she was on maternity leave.

We told the bank to look again at the couple's mortgage application - and to pay £500 to reflect the problems and upset caused by their poor service and communication.

139/9
consumers say that their lender has discriminated against them because of their age - and won't offer an extension on their mortgage term

Mr and Mrs T had an interest-only mortgage that was due to end in eight years' time. They were planning to repay some of the mortgage balance with an endowment policy, but knew there'd be a shortfall.

Wanting to address this, they spoke to their lender to see if they could extend the mortgage term to 20 years, adding 12 years to the term. But the lender said they could only extend the mortgage term by four years - and that if the couple wanted a longer term, they'd have to look elsewhere for another deal.

Mr and Mrs T complained. The lender responded that the law allowed them to make decisions based on age. They said that when considering term extensions, they looked at the age of the oldest account holder. And they could only extend the mortgage term by four years as this was when Mr T, the oldest borrower, would turn 65, which was his intended retirement age.

Mr and Mrs T felt that this was age discrimination - and asked us to look into whether they'd been treated unfairly.

putting things right

Mrs T told us that she'd still be working for some time after her husband retired - and that her income would be enough to maintain their mortgage payments. She said they were currently supporting their three grown-up children financially, but they'd have more spare cash in the future.

We asked the lender if they'd considered this. They accepted that they'd not been as clear as they could have been. They said the terms and conditions of the couple's particular mortgage said that it couldn't be extended past the age of 65. However, the lender said they were now prepared to look at whether a different mortgage deal would be right for Mr and Mrs T - as some of their mortgages could be extended up to the age of 75.

We let Mr and Mrs T know what the lender had offered - explaining that we thought this was a practical way to try to sort things out. They told us they were relieved that they had options and would be happy to meet with their lender to discuss the best way forward.

139/10
consumer complains that bank has rejected mortgage application as he's over their age limit

When Mr J was interested in buying a house, he contacted his bank to discuss his mortgage options. The bank set up an appointment with one of their advisers. But a few days before the scheduled appointment, the bank called Mr J to cancel it - saying that they couldn't offer him a mortgage as he'd soon be over 70.

Disappointed, Mr J complained. Having reviewed what had happened, the bank acknowledged they'd made a mistake. They said the mortgage adviser had checked the age policy for lending, but had cancelled Mr J's appointment without taking into account whether there were any exceptional circumstances - which was also allowed for under the policy. They apologised for this error and offered Mr J £300 to reflect the upset they'd caused.

However, Mr J remained unhappy - and asked us to look at the bank's response.

putting things right

We asked the bank to clarify their position around lending. They confirmed that they could lend past the age of 70 if someone could show they'd still have a sustainable income to pay their mortgage beyond that age.

We could see why Mr J was upset at how he'd been dealt with. We explained to Mr J that, in our view, the bank had already offered fair compensation to make up for their mistake. But we told the bank to arrange another appointment with Mr J - so he had the chance to give them more details about his individual circumstances, and they could make a decision based on the full picture.

139/11
consumers complain that lender has discriminated against them based on age - by not porting mortgage that runs into retirement

Looking to move house, Mr and Mrs E contacted their mortgage lender - their bank - and asked to port their mortgage. Their new property was slightly more expensive, so they wanted to increase their mortgage balance a little.

However, the bank refused their application - pointing out Mr A had changed his retirement age from 70 to 65 between first taking out the mortgage and asking to port it. This would mean the mortgage would run into his retirement. The bank said they felt this was a significant change - and would mean that the new mortgage wouldn't be affordable once they retired.

The bank asked Mr and Mrs E for details of how they intended to repay the new mortgage - and, not satisfied that they could, offered them a mortgage on a shorter term so it would finish by their retirement. But Mr and Mrs E decided to use a different lender instead - incurring early repayment charges, as well as the new lender's product fee.

The couple then complained to the bank that the decision was unfair - and that they'd been discriminated against. They pointed out that the mortgage they already had took Mr E over the age of 65, which hadn't been an issue when they took it out.

When the bank wouldn't change their position or refund the fees, Mr and Mrs E contacted us.

putting things right

Looking at the paperwork about the old and new mortgages, we confirmed that Mr E had reduced his retirement age from 70 to 65 between the two applications. Given Mr and Mrs E's changed retirement plans and the fact that they wanted to increase their mortgage balance, we agreed that it was right to consider whether they'd be able to afford their mortgage once they'd retired.

And having looked into Mr and Mrs E's circumstances - including the fact Mr E's income would now be dropping significantly before the end of the mortgage term - we didn't think it was unreasonable for the bank to turn down their application.

We told Mr and Mrs E that, from what we'd seen, we didn't think they'd been discriminated against based on their age. Instead, the bank's decision was about the affordability of the mortgage they were asking for. It was reasonable for the bank to think about their situation over the whole term - which meant taking into account their retirement income.

The bank had tried to help by offering Mr and Mrs E an alternative mortgage - and the one they'd gone on to accept with a different lender was on very similar terms to what they'd been offered.

We didn't ask the bank to reconsider their decision - or to refund the fees Mr and Mrs E had incurred.

139/12
consumer complains lender won't extend mortgage term because he'll be borrowing into retirement

Mr B had recently turned 65 and was still running his own business. Aiming to retire at 70, he asked his mortgage lender to extend his mortgage by five years.

However, the lender declined his request. They acknowledged Mr B had substantial income from his work, but explained that when a customer was within ten years of retirement, the lender's policy was to take into account only their retirement income.

The lender pointed out that if Mr B's circumstances were to change and he no longer worked, his pension would be his only income. And they said that, based on his pension income alone, he didn't meet their lending criteria.

Mr B managed to remortgage elsewhere - but complained that he'd been discriminated against because of his age. Unhappy with the lender's response repeating their position, he asked for our view.

putting things right

We asked the lender for further details about their lending criteria - pointing out that it appeared they hadn't looked into Mr B's individual circumstances. We asked why they would only look at his pension income - when he had no plans to retire during the extended mortgage term, and there didn't seem to be any reason to believe he wouldn't be able to carry on working.

The lender accepted - having now reviewed Mr B's situation - that they'd applied their criteria too rigidly. They said that since Mr B had raised his complaint, they'd provided staff with guidance to make sure customers' individual circumstances were taken into account.

On reflection, the lender didn't think Mr B's application should have been declined. But since Mr B had already remortgaged with someone else, it was now too late for them to put things right by extending his term. We suggested that, in the circumstances, they compensate him for the frustration and inconvenience they'd caused - and they agreed to pay him £500.

Image: ombudsman news 139

ombudsman news gives general information on the position at the date of publication. It is not a definitive statement of the law, our approach or our procedure.

The illustrative case studies are based broadly on real-life cases, but are not precedents. Individual cases are decided on their own facts.