Offset mortgage and the Ombudsman

Halevie1

I've had an interest only offset mortgage with Intelligent Finance for 20 years and it's been nothing but problems. Incorrect charges and charges that IF can't explain. For the past two years I've left the mortgage (£450,000) fully offset by the savings account (£451,000) to prove the point but IF is still charging interest. They say it is because the interest on the mortgage (7%) is more than the interest on the savings account (1.4%). But that isn't the way offset mortgages work - it is the value not the interest that is offset. I've taken this to the ombudsman three times and each time they find in IF's favour. Having tried to explain and provided the maths to the Ombudsman, it seems they don't understand basic financial products and how they work. My wife is a financial accountant and it's like trying to talk to a child getting a sensible answer from IF or the Ombudsman.

If this is happening to my account, it must be happening to thousands of others. It is only when the account is fully offset that the situation is apparent. When it isn't offset, the incorrect charges are masked by other transfers backwards and forwards between accounts - such as reductions in the capital value, which shouldn't happen in an interest only mortgage! 

silvercar

I have an interest only offset (not with IF), that is fully offset at the moment. I don't pay any interest unless there is a change in the interest rate in a month. Then they calculate the interest in the offset at the old rate and the interest on the mortgage at the new rate - so if the interest rate increases then I have a payment to make.

So in theory it is the capital that is offset against the mortgage, but in practice they are calculating the interest on both and offsetting one against the other.

The only thing I can think of is that the savings account you have isn't the mortgage offset account. Otherwise as you say, the rates should be the same.

silvercar

Looking at IF's explanation of how their offset works here you have the options of "Choose how to receive your offset benefit – shorter term, lower payments or reduced debt." could they have you on the wrong option?

DullGreyGuy

Have you actually dug out the contracts to check what the terms are?

Presumably you haven't accepted the adjudicator/investigator's decision each time with the ombudsman and therefore an Ombudsman made a decision? Do you have the case reference for the latest rejected case (unless it was a couple of months ago, in which case the next one) as they are all published on their website and will be easier to read why the ombudsman is siding with IF?

https://www.financial-ombudsman.org.uk/decision/DRN-4002748.pdf was the only case I could see that sounded anything like yours. 

Hoenir

Halevie1 said:

If this is happening to my account, it must be happening to thousands of others.

Unlikely if you've no substantive evidence i.e. the original contractual terms that detail how the product operates. Unfortunately you cannot tell the lender how you think their product should work.  20 years is a long time to attempt to resolve the issue. 

ACG

Hoenir said:

Halevie1 said:

If this is happening to my account, it must be happening to thousands of others.

Unlikely if you've no substantive evidence i.e. the original contractual terms that detail how the product operates. Unfortunately you cannot tell the lender how you think their product should work.  20 years is a long time to attempt to resolve the issue. 

I sort of agree with Hoenir here - although I accept you have a lot more information than I do. 
Whenever I have worked for banks, if we made a mistake the proverbial would hit the fan. We would do our best to stop it from going to the ombudsman, we would be dealing with the products team, legal etc and either getting new T&Cs written up, finding out how many accounts are involved and so on. 

The fact they have allowed it to go to the ombudsman 3 times (to me) suggests their product is working like it should. 

Is there a cap on the savings interest rate but not on the mortgage for example? I agree with the point you are making - ie if you have £100k mortgage and £100k savings you would not expect there to be any interest. But do the T&Cs back that up? As a broker (admittedly I have only done 2 offset mortgages in 13 years), if a client came to me to say this was happening, I would be a little concerned as I would have recommended it on the basis of how you describe it, so if that is not happening - I would want to know why. 

saajan_12

Halevie1 said:

I've had an interest only offset mortgage with Intelligent Finance for 20 years ...But that isn't the way offset mortgages work - it is the value not the interest that is offset. I've taken this to the ombudsman three times and each time they find in IF's favour. Having tried to explain and provided the maths to the Ombudsman, it seems they don't understand basic financial products and how they work. My wife is a financial accountant and it's like trying to talk to a child getting a sensible answer from IF or the Ombudsman.

Why have you let this continue for 20 years? 
This seems like a fundamental difference in opinion on what product you have, so the first port of call would be to dig out the T&Cs of your product. Not debate how general offset mortgages work. 

Halevie1

Thanks for the comments so far. IF's product information explains that the money in the offset account (£451,00) is used to offset the mortgage value (£450,000). So I only pay interest on the remaining value. That is what I expect from an offset account. There has been £1,000 in credit for the past two years (mortgage vs offset account) and so they pay interest of 1.4% on it into my offset savings account. They also charge an amount which varies as interest on the mortgage, that I can't work out and they can't explain. The Ombudsman's thinking on the latest complaint is also attached. 

It clearly isn't right to be offsetting the interest rather than the capital value as that is the whole point of an offset mortgage.

Offsetting interest vs capital value



 
IF's product information


IF's explanation


Ombudsman's conclusion regarding the current complaint



  

silvercar

Wow! certainly looks like the ombudsman doesn't understand that it is the interest rate that is wrong not the calculation. Could you ask IF in simple terms, why the interest on the savings account isn't identical to the interest on the mortgage? 

I have seen this once before on here and the explanation was user error. The mortgagee had by mistake built up savings in a savings account with the same provider rather than in the actual offset savings account. 

Halevie1

silvercar said:

Wow! certainly looks like the ombudsman doesn't understand that it is the interest rate that is wrong not the calculation. Could you ask IF in simple terms, why the interest on the savings account isn't identical to the interest on the mortgage? 

I have seen this once before on here and the explanation was user error. The mortgagee had by mistake built up savings in a savings account with the same provider rather than in the actual offset savings account. 

The IF mortgages department won't discuss this and has maintained that position for the past two years. They just refer me back to their 2022 letter (part of it above). The savings account is the offset account (there was also a current account that they took interest payments from but IF closed current accounts 12 - 18 months ago. The value in the current account and the savings account were used to offset the mortgage account). The other IF "inconsistency" is the the T&Cs say is an interest only account and the capital value will not change during the term. But for years it has been taking payments from the current account and reducing the capital value.

tetrarch

Halevie1 said:

silvercar said:

Wow! certainly looks like the ombudsman doesn't understand that it is the interest rate that is wrong not the calculation. Could you ask IF in simple terms, why the interest on the savings account isn't identical to the interest on the mortgage? 

I have seen this once before on here and the explanation was user error. The mortgagee had by mistake built up savings in a savings account with the same provider rather than in the actual offset savings account. 

The IF mortgages department won't discuss this and has maintained that position for the past two years. They just refer me back to their 2022 letter (part of it above). The savings account is the offset account (there was also a current account that they took interest payments from but IF closed current accounts 12 - 18 months ago. The value in the current account and the savings account were used to offset the mortgage account). The other IF "inconsistency" is the the T&Cs say is an interest only account and the capital value will not change during the term. But for years it has been taking payments from the current account and reducing the capital value.

The emboldened part above is the crux of your problem. I would suggest that, had IF continued to offer a current account then your offset arrangement would have worked as advertised. It's only these (ostensibly) offsetting mortgage and savings accounts that have caused the problem

What relationship changes were stated by IF when these accounts were withdrawn?

Regards

Tet