Mortgage broker messed up

anticlaus105

We arranged for our mortgage to switch to a new product (with the same lender) on 1 April through a large, well‑known broker. Everything was completed in February, and we were told the new rate would automatically take effect on 1 April with nothing further required from us.

For context, I hadn’t realised we would be staying with the same lender. The broker contacted us because we had used them previously, and after reviewing our circumstances they advised remaining with our current lender.

When I logged in on 1 April, I discovered we had been moved onto the lender’s SVR instead. I called the lender, who confirmed they had no record whatsoever of a product switch. I then contacted the broker, who investigated and admitted the error was on their side.

As things stand, we are stuck on the SVR until at least 1 May. It also appears likely that the lender may no longer honour the original rate we secured. The broker is attempting to get them to reinstate it, but this is not guaranteed. The broker acknowledged the situation and, without any prompting, raised the issue of compensation and outlined what they expect to reimburse.

While on the SVR we are paying around £180 extra per month in interest, and our monthly payments are over £100 higher than they should be. The product we originally secured is now 1.4% more expensive. That would mean an extra £110 per month in interest and payments around £75 higher.

I’m waiting to see whether the broker can get us back onto the original rate. If they can, most of the damage is limited to the SVR period. If not, the additional interest over the term would be around £3,000, with roughly £2,200 in higher monthly payments on the new rate.

One issue that won’t be fixed is that the new product will likely end at least a month later than originally planned. If rates rise again, as they have recently, being pushed a month or more later into the market could have a significant long‑term impact.

To mitigate this, if the replacement product ends later than the original one, I intend to ask for compensation to cover the cost of redeeming the mortgage at the original end date. This seems more straightforward than waiting until the date we should have been able to switch, checking rates, and passing on any additional costs caused by the delay.

I spoke to our mortgage adviser on the 1st and was told a complaint would be opened to start the process and arrange compensation. I then received an electronic letter stating my complaint as: “You are unhappy that your product transfer did not complete as expected, meaning you have reverted to SVR and have lost out on the lower rate.” I’m assuming this wording suggests they believe the original rate may no longer be available. The letter also says they will begin investigating within 7 days and have up to 56 days to complete the investigation, and that at that point I may be able to escalate to the Financial Ombudsman Service.

I’m assuming that in the background, if they cannot reinstate the original rate, they are working to arrange a new product, as the longer we remain on SVR the worse the financial impact becomes. I plan to call them next week to clarify.

One potential complication is that we had hoped to borrow additional funds but were told we were not eligible due to affordability. To smooth the process, the broker recommended staying with our current lender. If affordability was tight before, there is a risk that due to the extra costs we are now incurring the lender may deem us ineligible for a new product. If we remain on SVR, and assuming no further rate rises, the extra interest alone will be nearly £5,000 and the additional payments over £8,000.

I’m trying to understand what my next steps should be and what I need to be aware of going forward and would appreciate any advice.

ACG

Next steps - let the broker investigate and come back to you with their suggestion on putting it right.

I think if this was me, I would offer to cover the difference between rate applied for and SVR for 1-2 months (however long your stuck on it) and the difference between the original rate and the higher rate for the duration - depending on how much that is, I might offer you a reduced amount as a lump sum or £110pm for whatever the tie in period.

You mention about the end date finishing later and wanting them to pay the ERC to get out of that deal, I think thats asking too much and I would reject that part. For the same of a month, asking a broker to pay the ERC IF rates comes down is a bit cheeky in my opinion - would you cover the difference if rates went up? Obviously you would have the option of taking that to the ombudsman if you disagreed.

You dont need to worry at this stage though, we work in a regulated industry. There appears to be clear signs you wanted to proceed so I am sure they will put it right.

dunstonh

I’m waiting to see whether the broker can get us back onto the original rate. If they can, most of the damage is limited to the SVR period. If not, the additional interest over the term would be around £3,000, with roughly £2,200 in higher monthly payments on the new rate.

The lender is highly unlikely to take the hit on this as its not their fault. Most likely outcome is that the broker will calculate the differences and pay you.

One issue that won’t be fixed is that the new product will likely end at least a month later than originally planned. If rates rise again, as they have recently, being pushed a month or more later into the market could have a significant long‑term impact.

Fixed rate mortgages are not exactly 2 years or 3 years or whatever. They have a fixed date. This means a 3 year mortgage could be as little as 2.5 years or as much as 3.5 years.

To mitigate this, if the replacement product ends later than the original one, I intend to ask for compensation to cover the cost of redeeming the mortgage at the original end date. This seems more straightforward than waiting until the date we should have been able to switch, checking rates, and passing on any additional costs caused by the delay.

I don't think that is justifiable and unlikely to be accepted. Especially since you are likely to end up in a more expensive deal, but the extra cost is covered by the brokerage firm. along with the period you are on SVR and its replacement is put into place.

In general, the complaints process looks to work on resolution now. Not protected periods where you want t hedge your bets in years to come.

anticlaus105

Thank you for the replies.

Regarding the ERC being covered so I can end the product on the original end date, I think that’s entirely reasonable. If I locked in a product 6 months before the original end date and rates rose, I would be able to exit with an ERC and take the lower rate. Equally, rates could fall, and they could fall further during the final months of the new product, which would work in my favour.

The point is that I have no way of knowing which way rates will move (assuming they move at all), and I won’t until the relevant time. I’m only in this situation because the mortgage broker made an error. I’m happy to wait and calculate any additional costs when the time comes. At that point, the broker can choose either to pay the ERC and allow me to take a lower rate, or to cover any increased costs on a future mortgage I have to take at a later date.

The reality is that a situation has arisen through no fault of my own, and I expect to be put back into the position I should have been in. Many people wouldn’t think this far ahead and would simply accept whatever is offered without running the numbers. Unfortunately for the broker, I’m not that person.

EDIT: Even if rates remain unchanged and I switch products on the new end date, I would view the ERC being covered as also covering any future knock‑on effects of the error. All subsequent mortgages will now be misaligned from where they should have been, and there’s no realistic way to calculate the long‑term impact of that in advance.

ACG

You cant be put back in the position you would have been 100% without being unreasonable. Asking them to cover the ERC for the sake of a month on a difference the broker is already covering (in my opinion) is unreasonable and ridiculous. That does not mean I am right, but I think you would be spending a lot of time with the financial ombudsman, waiting months for an outcome that you are unlikely to get.

See what the broker comes back with. But consider that you might end up wasting a lot of time and come out of this without the outcome you want.

Also dont forget, they may offer you the money in a lump sum upfront to get it off their desk. That is not something they have to do, they could pay it monthly.

Im going to bow out at this point as I think we have very different views on what is reasonable.

jones_guitar

You normally need to go interal via the banks product switch. You can't always go the same lender for a new mortgage via a new application. Sounds stupid but I was told this directly by my bank, who appeared not to allow it.

I had a larger well known firm. Struggled somewhat, lied to me. The advisors I dealt with, was even a senior.

They will investigate and offer something. I took mine to court and got a refund. This was not an easy process.

I went to a new broker, more expensive, didn't stuggle at all.

dunstonh

Regarding the ERC being covered so I can end the product on the original end date, I think that’s entirely reasonable. 

No its not because it allows you to hedge your bets and look for enrichment.

Almost certainly, you are going to end up in a pocket because of this, as the broker will likely cover the SVR period and the cost of the deal period. Plus, you will get the money up front and can earn interest on it.

It is an unreasonable request.

The point is that I have no way of knowing which way rates will move (assuming they move at all), and I won’t until the relevant time. 

Which is no different to the position you would have been in had the mortgage started a few weeks earlier.

I’m happy to wait and calculate any additional costs when the time comes. At that point, the broker can choose either to pay the ERC and allow me to take a lower rate, or to cover any increased costs on a future mortgage I have to take at a later date.

That is unrealistic. The PI insurer and the FOS (if you took it to them) would both have a calculation based on clearing it up now.

The reality is that a situation has arisen through no fault of my own, and I expect to be put back into the position I should have been in. Many people wouldn’t think this far ahead and would simply accept whatever is offered without running the numbers. Unfortunately for the broker, I’m not that person.

It is not unfortunate for the broker. You asking for something unreasonable isn't a problem for them. They just say no, and tell you how they are going to do it. You can take it to the FOS and wait for 6-12 months for them to say no too.

Some complaints you cannot call the outcome but this type of thing has happened before and the process used is pretty well known.

EDIT: Even if rates remain unchanged and I switch products on the new end date, I would view the ERC being covered as also covering any future knock‑on effects of the error. All subsequent mortgages will now be misaligned from where they should have been, and there’s no realistic way to calculate the long‑term impact of that in advance.

That is just getting bizarre. You also forget one thing, you can arrange product transfers typically 3-6 months in advance of the deal end date. So, a 2-4 week difference in the deal endpoint is irrelevant.

anticlaus105

Thank you to everyone who’s taken the time to comment.

I’m not looking to be unreasonable, and I’ve taken on board the points raised about the ERC.

I need them to place me on a product as soon as possible, and then I’ll wait to see what resolution they propose.

For those still willing to help, I’m concerned about what happens if their offer isn’t acceptable. I’ve read about someone in a similar situation who was offered £350 and felt they had no choice but to accept it, though I don’t know the full details.

If I’m not satisfied with what they offer, what are the next steps? jones_guitar mentioned going to court. Why go that route rather than the Financial Ombudsman Service? Or was that after trying the FOS?

jones_guitar

jones_guitar mentioned going to court. Why go that route rather than the Financial Ombudsman Service? Or was that after trying the FOS?

You need to be specific about your complaint with them. You'll be surprised, mine offered a reduced broker fee plus some compensation. They should help if the error was theirs.

I can't remember the exact detail with mine. I never accepted the compensation, I wanted a full refund plus legal fees. They refused to give me the compensation in the end, it was only a valid offer for so long.

To your question, the small claims court is higher than the ombudsman, and you have control. The ombudsman are a middle man, better for the broker. The court you are actually writing the legal claim, and the broker will probably appoint a solicitor to defend it. The law is the law, and you can win as I did, and I was granted my compensation back.

The ombudsman wouldn't have granted my compensation back - 100percent.

jones_guitar

No you pick one or the other. FOS or small claims court. The small claims court is higher and you are in control. You can not do both.

If FOS doesn't side with you. The broker has this evidence. A lawyer ones told me she wished people didn't go to ombudsman services prior to speaking to her, as they damage and complicate cases. That stuck in my mind, and a couple of people said you can not do both.

The FOS won't accept someone who tried court. The broker will tell you to take it to the FOS. You are submitting all facts, legal references to a court and they need to reply. If they are in the wrong they are in the wrong.

With an ombudsman service, a case is presented weaker from the off set.

Because the court is higher you lose the ability to go to FOS.

ACG

https://forums.moneysavingexpert.com/discussion/comment/81950336#Comment_81950336

The ombudsman is better for the innocent party.

They look at things from a fairness perspective. A court looks at it from a legal/contractual perspective.