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Mortgage complaints driven by market conditions, says ombudsman


Published: 31 May 2012 | Author: Bernard Clarke

Complaints about banking and credit have declined this year as a proportion of the overall total, according to the Financial Ombudsman Service (FOS). Although the absolute number of complaints was broadly unchanged (64,200 in 2012; 65,100 in 2011), the proportion of the caseload made up of banking and credit complaints declined from 31.5% to 24%.

Those numbers are partly explained by a large increase in complaints about payment protection insurance (PPI). The number increased from 104,600 (comprising 51% of complaints) in 2011 to 157,700 (60% of complaints) in 2012. This year’s total of PPI complaints was the highest number ever received about a single financial product.

A high proportion (69%) of complaints about PPI were brought by claims companies (although this was lower than last year’s 76%). The FOS said that more consumers now understood that they did not need to pay someone else to complain on their behalf.

Complaints about mortgages comprised 4% of the ombudsman’s workload overall. The number of complaints increased – from 7,067 in 2011 to 9,537 this year – but remains small against a total of 11.3 million mortgages outstanding in the UK.

The FOS said that many of the mortgage complaints reflected the economy and the state of the mortgage market overall. Administrative errors remained the largest area of complaint, and there was an increase in the number of cases involving financial hardship. The report said:

  • There was little for the ombudsman to do in cases where a lender had already obtained a possession order through the courts. But it expected lenders to ensure that customers in these circumstances were adequately supported and provided with the right level of information and quality of communication.
  • There had been a reduction in complaints from borrowers seeking to "port" their mortgage to another property. But there were more complaints about new loans, including an increase in cases where borrowers were unable to get a mortgage with the loan-to-value ratio they wanted.
  • There had been an increase in complaints from customers who were dissatisfied with their existing lender’s range of mortgages. Some borrowers had tried to move to a new lender to get a better rate, with the ombudsman highlighting dissatisfaction with the explanations provided by some lenders about why an application had been turned down.
  • An increase in complaints about lenders reducing the upper age limit applying to the term of the mortgage. There were also more complaints from borrowers required to provide proof of their income in retirement, or to show how they intended paying off their mortgage after they retired.
  • An increase in complaints from borrowers who wanted to let out their properties, but did not like paying a higher rate or administrative charges to the lender as a condition of agreeing to the letting of the property.

We agree with the FOS’s view that many of the complaints this year arose as a result of conditions in housing and mortgage markets, as well as the wider economy. A significant proportion of complaints were triggered by firms adjusting lending criteria in response to more challenging market conditions and anticipated regulatory changes.