MortgagesMay 20 2016

Countrywide must compensate early repayment charge deal

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Countrywide must compensate early repayment charge deal

Countrywide Principal Services has been ordered by the Financial Ombudsman Service to pay two women the early repayment charge they were hit with when they redeemed a mortgage.

Ms R and Miss R asked Countrywide for mortgage advice to help them move house. Their existing home was on the market, and if it didn’t sell they planned to let it out for about six months until they put it back up for sale the following year.

Countrywide recommended a mortgage for the new house (in joint names) and a mortgage on their existing home (in Ms R’s sole name) which allowed the property to be let out.

When they received the offers, Ms R and Miss R contacted Countrywide and the Financial Ombudsman Service as both mortgages would incur an ERC if they were repaid (in full or in part) early.

As Ms R and Miss R intended to sell one house, and use the money from that to completely pay off one mortgage and reduce the other by half within the next year, they were unhappy with the ERCs.

They went ahead with the two mortgages, so as not to risk the house they were buying, but made a complaint about the advice.

Countrywide told the ombudsman the pair’s priority was to have mortgages with no ERCs, but added they were not eligible for the only option without an ERC to start with.

When some deals became available later without ERCs, Countrywide claimed Ms R and Miss R turned these down, as the costs were too high.

By its own admission it didn’t do that as they wanted mortgages with no ERCs and they didn’t get that. Julia Chapman

The pair denied this and added the only time other mortgages were discussed was after the offers had been made and it was too late to change lender as they risked losing the house.

Because of this difference of opinion, a Fos adjudicator asked Countrywide for further details, but despite chasing the mortgage broker up over the last couple of months, nothing further has been provided.

Reviewing the case, ombudsman Julia Chapman said where there is a disagreement about what happened, she bases her decision “on the balance of probabilities.”

“These were advised mortgage sales and so Countrywide was responsible for ensuring the mortgages were suitable for Ms R and Miss R’s needs,” Ms Chapman said. “By its own admission it didn’t do that as they wanted mortgages with no ERCs and they didn’t get that.

“Countrywide said its sales process meant the adviser would have printed off illustrations and gone through these with Ms R and Miss R, including the fact there were ERCs on both mortgages. But sales processes can fail in some cases, and I think that’s the case here.”

The decision also pointed out this is not a delayed complaint made with the benefit of hindsight, but one brought as soon as the mortgage offers were produced.

“This supports their argument that they were unaware, until that time, that the mortgages had ERCs. But even if they were aware, an unsuitable product doesn’t become suitable because it’s adequately explained,” added Ms Chapman.