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Mortgage robo-adviser taken to Fos over new-build advice

Mortgage robo-adviser taken to Fos over new-build advice

The Financial Ombudsman Service has partly upheld a complaint against online mortgage broker Habito about the advice it gave to first-time buyers purchasing a new-build property.

In February 2019 the complainants found a new-build property that required a 5 per cent deposit of £10,000. The property also came with a builder’s incentive of £5,000 towards the purchase price.

Habito recommended a mortgage to the complainants and had incorrectly said they could use the builder’s incentive towards their deposit.

It transpired that the lender would not accept this when the transaction was already underway, and one of the co-complainants, Mr C, said he was consequently forced to withdraw £5,000 from his Lifetime Isa for the deposit.

Mr C also lost his £1,250 bonus by withdrawing the funds within a year of opening his Lisa.

Habito acknowledged it had made mistakes in the application process and offered to pay a total of £410 in compensation to cover additional rent, legal fees and trouble and upset.

It was unwilling to reimburse the bonus Mr C lost on the Lisa withdrawal, however.

The complainants were unhappy with this and brought their complaint to the ombudsman. An investigator at the Fos asked Habito to pay an extra £100 for the trouble and upset caused.

The complainants thought this was unfair and argued that Habito should reimburse the £1,250 Lisa bonus that was lost. The co-complainant, Mr C, argued he would not have lost the money if it wasn’t for Habito’s mistake.

According to a transcript from Mr C’s first conversation with Habito seen by the ombudsman, Mr C explained that his entire share of the deposit would be funded by his Lisa savings.

The ombudsman, Jan O’Leary, found this had been before a builder’s incentive was mentioned, or the incorrect advice by Habito that it could be used towards the deposit.

Ms O’Leary said she was "satisfied it was Mr C’s intention from the start to use the Lisa for his deposit" and "given that completion was originally to take place in early March 2019, Mr C would always have incurred the £1,250 withdrawal penalty" by accessing the funds within a year of opening the Lisa.

She concluded that if Habito "hadn’t made the mistake of telling Mr C that the builder’s incentive could be used", his position "wouldn’t have been any different in relation to the Lisa withdrawal".

Ms O’Leary decided that she saw "no basis on which it would be fair or reasonable for [Habito] to compensate…for the withdrawal costs from Mr C’s Lisa".

On May 1 the government temporarily changed its rules on Lisas in a bid to help those who want to access funds early in light of the coronavirus outbreak. 

HM Treasury announced that individuals whose income had been affected by the pandemic would no longer be charged an additional withdrawal fee if accessing funds early.