The Financial Ombudsman Service has ordered Connells to compensate two customers more than £5,000 after it wrongly told them that their mortgage offer could be extended.
The decision related to a mortgage offer given by Connells to a Mr and Mrs G who were purchasing a new home in April 2022.
The couple’s mortgage offer was valid for a period of six months, however in the August of that year the couple sought assurances from Connells that their mortgage offer could be extended as their purchase had been delayed.
At the time, Connells said it could. The couple subsequently asked to transfer the offer to a different property but were told by Connells in early October that they could not do this as the offer had expired.
The original mortgage offer the couple had was a fixed interest rate of 2.55 per cent, but after being told this deal had expired the best rate they could get was 4.08 per cent, meaning that the monthly payments would be significantly higher.
Connells offered the couple £450 as compensation for the mistake, but the couple were unsatisfied with this and wanted Connells to compensate them for the difference between the two mortgage rates, which it refused to do.
Having made a complaint to the Fos, the initial complaint was not upheld by a Fos investigator. But it was then passed to ombudsman Esther Absalom-Gough who instead chose to uphold the complaint.
In coming to her decision, Absalon-Gough said Connells should have told Mr and Mrs G in August that their offer was expiring soon and could not have been extended past September.
She said it was unlikely that the couple would have completed on either of the properties before the offer expired in September, but had they been correctly advised by Connells they would have had the option of getting a new mortgage offer.
The ombudsman noted that the couple were prompt in getting a new mortgage offer once they were told their deal had expired and she commented that this would likely have also been the case if they were given the opportunity to do so in August, when rates were lower than what they subsequently secured in October.
In the ombudsman’s decision, she said it was fair and reasonable to ask Connells to pay the couple the difference between the rate they would have received if they made their application in August and the rate they actually secured in October.
As such, Connells were asked to obtain from the lender the details of the interest rate the couple would have paid had it been available to them in August 2022 and to work out how much less the couple would have paid over the fixed-interest period.
This lump sum payment was ordered to be in addition to the £450 compensation Connells initially offered for the upset and disappointment.
The complainants expressed disappointment that they would not be able to secure the initial rate Connells had quoted them in April 2022, however the ombudsman noted that even if Connells had not made the mistake the couple would not have been able to secure that rate as their purchase would not have been ready before the rate expired.
Connells agreed to accept the ombudsman's proposal.
It contacted the couple’s lender who said that if the application had been submitted in August the monthly payments would have been £1,719.
The monthly payment on Mr and Mrs G’s current mortgage is £1,803.57, a difference of £84.57.
Connells said that, over the fixed-rate period of 60 months the amount due would be £5,074.20, plus the £450 compensation.
A spokesperson for Connells told FTAdviser: “We have been happy to work with the ombudsman to reach a resolution as, on this occasion, unfortunately, a mistake has been made. Where issues arise we always work hard to learn from this and improve our service.”
jane.matthews@ft.com
