HSBC ‘relied on stereotypes’ in refusing age-related loan

HSBC ‘relied on stereotypes’ in refusing age-related loan

The Financial Ombudsman Service has upheld a complaint against HSBC after the bank denied a couple in their 40s a mortgage on the grounds of age.

The unnamed couple was refused a loan of approximately £250,000 on their property on an interest-only basis for 18 years, because the male would be over 65 years old at the end of the proposed term.

Commenting in a seven-page dossier, Fos said: “Rather than considering Mr A and Ms B’s individual circumstances, it seems that the information the bank relied on included untested assumptions, stereotypes or generalisations in respect of age and was not relevant to Mr A and Ms B’s circumstances.”

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The bank has been ordered to pay the couple £500 and has been told to reconsider the loan application.

A spokesman for HSBC said: “As a responsible lender, we need to ensure our customers’ ability to repay their mortgage. With interest-only lending we also need to understand how a customer will repay the capital when the mortgage matures.

“Regulatory requirements to show responsible lending and the repayment vehicles associated with interest-only loans have become more stringent since this application was made in 2012. It is important to stress that, when we look at a mortgage application, we take a number of different factors into account, which includes assessing each customer’s individual circumstances.”

The decision comes months after rival bank Santander unveiled plans to provide lifetime mortgages from this year which would allow customers to repay the interest on their loan until they die, after which the bank would recover the outstanding balance by selling the deceased’s property.

Adviser response

Labelling the case as disgraceful, Frank Cochran, managing director at West Midlands-based FSC Investment Services, said banks and building societies were still reluctant to approve mortgages.

David Wilson, managing director at Tyne and Wear-based NE Money, said: “I think this ruling could potentially result in more people complaining to Fos if their mortgage application is rejected. Lenders need to be extremely clear as to why they have rejected an application because, more often than not, it is because of something that was not made clear in their criteria.”