People’s circumstances can change during the lifetime or term of their mortgage. Losing a job, a relationship breakdown or a period of illness are all examples of things that can lead to a period of financial difficulty and customers being unable to afford mortgage repayments. Some circumstances can be very specific or individual, sometimes they are linked to other events, such as the Covid-19 pandemic or the rising cost of living.
Customers sometimes contact us about a situation that’s ongoing, or some time after they’ve fallen into arrears. They contact us in relation to a variety of situations where making mortgage repayments might have been or will be difficult, and with a variety of complaints.
This page explains our approach to complaints about financial difficulties in relation to mortgage debt. We publish separate guidance about financial difficulties and other types of consumer debt and separate information about unaffordable or irresponsible lending.
Types of complaints we see
People typically bring their complaint to us because they’ve engaged with their mortgage lender about possible or existing difficulties with their mortgage repayments, and they don’t think the lender has done enough to help them. We hear from consumers who tell us:
- I can’t afford my mortgage payments and the lender won’t help me
- the lender wouldn’t agree to something I asked for (for example, a switch to a different mortgage product or interest rate, or a term extension);
- I’m unhappy with recovery action the lender is taking (for example, phone calls or letters about missed payments or court action);
- the lender is harassing me about missing payment or my arrears - they keep calling me or sending me letters.
- I don’t think the charges applied to my account are fair (this could be about arrears fees, or legal costs);
- the lender is trying to repossess my house and I don’t think it’s fair; or
- the lender has repossessed my house and is pursuing me for more money
We’ve been contacted by consumers who are facing financial difficulties caused or affected by Covid-19 while FCA’s additional guidance was in place, they tell us that:
- their mortgage lender refused to grant a payment holiday
- the lender didn’t properly explain the impact of taking a payment holiday or didn’t ask permission from a joint mortgage holder before a payment holiday is granted
- the lender reported a payment holiday on their credit file as a missed payment
- the lender didn’t provide enough support while they were in financial difficulties
And following the Covid-19 pandemic along with other economic pressures, we're seeing an impact on many peoples’ finances. In particular, rising interest rates, high inflation and the cost of living mean that it’s possible that more people will experience financial difficulty, needing support from their lender.
There's more information below about specific measures that were available during the pandemic, and specific measures introduced more recently to deal with rising interest rates and cost of living pressures.
Handling a complaint like this
When you receive a complaint involving financial difficulties, you should reply to your customer within eight weeks. You may be able to resolve a complaint at this stage
If you don’t reply within the time limits, or the customer disagrees with your response, they can bring their complaint to us. We’ll check it’s something we can deal with, and if it is, we’ll investigate.
We’ll expect you to be able to show us that you’ve investigated the complaint thoroughly and that you have reflected carefully on the circumstances.
Find out more about how to resolve a complaint.
Information we will ask for when we receive a complaint
Once a complaint has been referred to us, we will ask you to provide information about your side of events.
The typical information we would normally expect to see about this type of complaint includes:
- mortgage offer and terms and conditions of the mortgage
- a mortgage transaction history covering the period the customer has been in financial difficulties (where possible). This history needs to show any fees and interest applied, running arrears balance, and required contractual monthly payments
- copies of tariffs of charges covering any periods in which fees were charged
- contact notes
- evidence of any correspondence from the customer where they’ve told the business of financial difficulties (for example letters or emails, budget sheets or correspondence from debt assistance organisations)
- correspondence about agreed and broken repayment plans
- evidence of any attempts to support the customer – such as repayment plans, capitalisation, payment holidays, restructuring of the mortgage, and any reasoning behind these decisions
- if the business has agreed to remove information from a credit file and there have been delays, evidence that the credit reference agency has been asked to remove information – and when
- if court action has been taken, the court documentation – if relevant – and details of the legal actions that proceeded it or followed it
We may ask for further information or documents, depending on the circumstances of the case.
Read more about how we handle complaints.
What we look at
As with every case, in reaching a decision about what’s fair and reasonable, we consider:
- the relevant law and regulations,
- any regulator’s rules and guidance that applied at the time, for example the FCA’s mortgage conduct of business rules (MCOB)
- any industry codes of conduct in force at the time
- what we consider was good industry practice at the time
If there are disagreements about the facts, we’ll make our decision about what probably happened using evidence provided by you, your customer and relevant third parties.
Whatever caused the financial difficulties, it is often deeply upsetting for the consumer, and the possibility that they could lose their home causes even more stress. So when we investigate a complaint from a customer in financial difficulties, we expect to see that you have treated your customer fairly and responded to them in a positive and sympathetic manner. This might include whether you have explained things to them in a clear and fair way or have provided them with information they need and outlined what you expect them to do to engage with you.
We will consider whether you have suggested flexible, tailored solutions that take in to account their personal and financial circumstances. And, depending on the type of complaint, we will also look at whether you have followed any reasonable requests the customer made of you, for example if they asked to be contacted at a certain time of day only, or in a certain way.
What support is appropriate will depend on the individual circumstances. Examples include agreeing to a reduced payment arrangement (including a nil arrangement in appropriate cases) for a temporary period, or considering more permanent changes to the mortgage such as term extensions or changing the interest rate (where available). And we’ll also expect you to help borrowers get back on track after their financial difficulty is over – which might include agreeing arrears repayment plans or capitalisation, offering a new interest rate (if available), or extending the mortgage term. In some cases, a package of support including more than one measure might be appropriate. And as customer’s circumstances change over time, you will need to review and change what support you offer.
In some cases, it might be that there is nothing that can be done to get the mortgage back on track because your customer has no prospect of resuming making payments. While repossession should always be a last resort, we might think it wouldn’t be fair to allow the situation to continue indefinitely, worsening the borrower’s position. And we’d expect you to consider helping the customer to exit the mortgage in other ways – for example allowing reasonable time to sell the property or re-finance.
We might also consider whether you were proactive and looked out for signs of financial difficulty in conversations or information available to you. Consumers might not know the best way to express their concerns or whether or how soon to reach out to discuss their financial difficulties. Lenders should be pro-active, in taking opportunities to identify customers who need support, and in offering it.
Where your customer is vulnerable, we’d expect you to take that into account in how you’ve dealt with them. This might include tailoring how or when you communicate with them, agreeing to deal with a third party on their behalf, or tailoring the forbearance you offer.
We sometimes see complaints where a consumer is advised to take out a new mortgage as a way out of financial difficulties. We’ll look at whether the advice given was appropriate for the consumer, bearing in mind their individual needs and circumstances (a key part of those will be if they’ve missed payments on their existing mortgage). If we don’t think the advice was appropriate, we’ll consider what should have happened, and whether the consumer has lost out. For example, perhaps an extension to the mortgage term as a concession would have been a better fit than a completely new mortgage.
We have specific guidance about complaints involving mortgage arrears and charges.
Some consumers are struggling with the cost of living and rising interest rates. Following discussions between government, the Financial Conduct Authority (FCA) and mortgage lenders, extra help for borrowers has been put in place as part of the 2023 Mortgage Charter. Lenders should offer:
- the ability to switch to interest only for six months to avoid going into arrears, with no affordability assessment and no impact on credit file, from 30 June 2023
- the ability to extend the term short of retirement age with no affordability assessment and to reduce it back within six months, from 30 June 2023
- the ability to lock in a new interest rate up to six months before the expiry of a previous rate, and to change the rate at any time up to two weeks before implementation, from 10 July 2023
We’ll expect lenders to take account of these new measures and offer them to customers where appropriate.
If taking one of these options doesn’t resolve your customer’s situation, or if your customer is already in arrears, we’ll expect you to consider whether to offer further support tailored to their individual circumstances.
- changing the payment due date
- offering a temporary reduced payment arrangement – this is where you agree to collect less than the full monthly payment. This might mean collecting only what the customer can afford, only collecting the interest, or even not taking payments at all
- offering a new interest rate – not all lenders offer new interest rates, and even where they do this might not be appropriate, as it can increase the risk of an early repayment charge. But sometimes reducing the interest rate is enough to make the mortgage affordable, in which case this might be the best way to help. Offering a new rate after the immediate financial difficulty is over, perhaps alongside capitalisation, might also help get the mortgage on track
- changing the mortgage in some other way, such as extending the term to reduce the monthly payment
- capitalising any arrears – this is usually only appropriate where the underlying problem that was causing the financial difficulties is resolved, but the customer still needs to pay off the arrears that resulted from it
This isn’t an exhaustive list, and in some cases more than one option might be appropriate.
We will look at the individual circumstances of the complaint and whether you have acted in line with FCA guidance on how lenders should deal with mortgage customers affected by Covid-19.
We’ll consider the following in particular:
- Whether you followed the FCA’s guidance for people having difficulty paying their mortgage during the pandemic. In particular, how you used tailored support forbearance measures such as longer payment holidays, repayment plans, freezing interest, reasonable arrears rescheduling and pausing on repossessions/court action, as well as the moratorium on collecting the capital due at the end of an interest only term.
- How you responded to requests for payment holidays. For example, there’s no need for you to investigate further in order to agree to a payment holiday. Customers already in a payment arrangement or in arrears shouldn’t be treated less favourably. Any payment holiday should not be recorded on or have an impact on the customer’s credit file.
- Even if a customer doesn’t specifically ask for a payment holiday when calling to discuss difficulty in making their payments, whether you asked the customer if they would be interested in a payment holiday.
- Where possible, that you made it make it easy for your customers to contact you – including, where appropriate, through different channels to those you usually make available.
- If you have used a specific exclusion from the guidance (for example, repossessing a consumer's house during the pandemic), you must provide evidence why this was in the consumer's best interest.
The expectations for both first and second charge lender is outlined in the FCA guidance.
We sometimes hear from people who are unhappy that they are unable to transfer their mortgage to another product, despite being up to date with their payments. There may be a number of different reasons for this. Borrowers in this situation are sometimes referred to, or refer to themselves, as “mortgage prisoners”. They tell us that they’re trapped with their current mortgage lender or stuck with a particular rate, despite being up to date with their payments, and are therefore paying more that they consider is fair – and this has, or is likely to, cause them financial difficulty.
When someone contacts us with a complaint like this, we’ll consider whether the lender has done everything it was required to do and what was fair and reasonable in the circumstances – we’ll also look to see whether the borrower lost out as a result of the lender not doing something it was supposed to do. For example, mortgage lenders, and other providers, who no longer offer fixed rate deals, can ensure that, at no cost to the borrower, they receive free impartial mortgage advice, so borrowers can look at re-mortgaging elsewhere to lenders that do offer fixed or tracker rates.
Some customers who find themselves unable to take out a rate lower than the standard variable rate with their existing lender, or re-mortgage to another lender to take out a lower rate, may find themselves struggling to afford their current mortgage payments. It’s important to remember that, even though the lender may be unable to offer a lower rate, they still have obligations to treat customers in financial difficulty fairly – and there may be other ways in which they can help. There may be a number of other concessions they can put in place, but the lender is expected to consider all possible options to ensure their customer is supported and treated positively and sympathetically.
At a time of increasing mortgage interest rates, we expect to hear from customers on variable rates whose mortgage payments have increased – and from customers who come to the end of a fixed rate and find the only options open to them are much more expensive than they’ve been paying to date.
We’ll expect lenders to look at individual circumstances and where a borrower is experiencing, or expecting to experience, financial difficulty to act fairly and sympathetically as in any other case of financial difficulties.
The FCA’s rules don’t require an affordability assessment for a rate switch on an existing mortgage. But where you’re giving advice to your customer about switching to a new rate, we’d expect you to think about whether a new rate is suitable for them in their circumstances – which might include thinking about the different rates you offer (fixed, variable and tracker), including whether it’s sensible to tie a customer in to an early repayment charge if they’re unable to afford the repayments on any new interest rate.
Possession – or repossession – should be a last resort and should only be taken as a course of action where all other reasonable attempts to resolve the situation have failed. We can consider complaints both before possession takes place as well as after it has happened. We’ll look to see how much you know or knew about the consumer’s circumstances and whether you’ve first explored appropriate, sustainable and realistic ways to get the mortgage back on track before starting legal proceedings. Where a consumer brings a complaint to us about how you as lender have treated them, we generally expect you to put proceedings on hold so that we can consider the complaint.
Lenders are expected to act fairly to those in financial difficulty. But ultimately, there may come a time when you as lender will feel that legal action is the only option left available.
The 2023 Mortgage Charter requires participating lenders not to repossess without consent until at least 12 months have passed following the first missed payment, unless there are exceptional circumstances, after 26 June 2023. We’re likely to take this into account as amounting to good industry practice – even where individual lenders haven’t signed the charter.
In any case, even where the last resort of repossession has been reached we’d still expect you to consider whether it’s appropriate to come to some form of arrangement, such as allowing your customer a reasonable time to sell the property themselves or offering an assisted voluntary sale as an alternative to repossession.
If a consumer complains that that you aren’t taking their circumstances into account before taking legal action, we’ll try and get an understanding of what those circumstances are, and why the consumer feels they make a difference.
If you are aware of the consumer’s circumstances, we might ask you why they feel that, despite those, you are choosing to start legal proceedings. At that point, we’d consider whether that’s fair, given all the circumstances.
Putting things right
If we decide you’ve treated your customer unfairly, or have made a mistake, we’ll ask you to put things right. Our general approach is that the customer should be put back in the position they would have been in if the problem hadn’t happened.
The exact details of how we’ll ask you to put things right will depend on the nature of the complaint, and how the customer lost out. But we might ask you to backdate or reconsider payment holiday or reduced payment arrangement requests, look at changing interest rates or the term to see if that makes payments affordable, or to look at other payment plan options.
We may also ask you to compensate them for any distress or inconvenience they’ve experienced as a result of the problem.
Here are some examples of concessions that might be appropriate in some practical scenarios, but it will of course depend on the customer’s circumstances. In all cases, it’s important to listen to what your customers say, understand their circumstances, and to think about what’s the right way to try to assist them.
Your customer contacts you as they have changed job, they are worried as the date they are paid each month is now after the date the mortgage payment is due. This means they can’t make their payment on time. As lender you could agree to change the payment date.
Your customer knows they’re going to be off work for a few months, recovering from an operation. They know their income will reduce significantly during this time. You should review a problem making a repayment during this time with reference to any relevant guidance and in the customer's best interests.
You could agree to a reduced payment plan, or change to interest-only repayment while the customer’s recovering. The shortfall will become agreed arrears and can be recorded on the consumer’s credit file. You can look at a payment plan for arrears once the customer is well. Usually, you should waive arrears fees during this time – as long as the customer keeps to any reduced payment arrangement.
The customers’ relationship breaks down, and one of them moves out. The customer remaining in the house struggles to afford the repayments.
You could agree to a reduced payment plan or temporary change to interest-only repayment – and refer the customer to a debt charity for help and guidance. The shortfall will become agreed arrears and is usually recorded on the customer’s credit file. You could also review the interest rate, or perhaps extend the term to see if that would make the mortgage affordable. We wouldn’t expect you to refuse temporary forbearance when only one of the borrowers contacts you – lenders should offer assistance to borrowers facing financial difficulty. But permanent changes to the mortgage might be more difficult without the consent of both parties.
Ultimately, if the mortgage is no longer affordable the customer may need to sell the house. There may be other considerations here that affect who is responsible for making payments.
Your customer loses their job, so their income is significantly reduced for now.
You could agree to a reduced payment plan or temporary change to interest-only repayment, reviewing the situation every few months. The shortfall will become agreed arrears, and this will normally be recorded on the consumer’s credit file.
If the customer doesn’t go back to work for some time, the level of arrears may mean that you have to think about whether they’re likely to get back on track in a reasonable timescale. And ultimately if the situation doesn’t improve, you might need to consider repossessing the property.
If the customer is able to go back to work, you can look at a payment plan for arrears, or capitalisation. If this is unaffordable for the customer, you could also look at extending the term, reducing the interest rate, or both as part of a package alongside capitalisation.
The customer can’t go back to work because of chronic illness or permanent injury. This significantly reduces their income and they can’t afford their mortgage.
You could look at changing the interest rate or increasing the term to see if that makes the payments affordable for the customer. If not, you could change the payments to interest-only temporarily, or agree to a reduced repayment plan while the customer considers their options. If there’s enough equity, you might agree to take no payments at all while the customer sells the house.
If there’s no way to get the mortgage back on track, possession proceedings might be necessary. But this should be a last resort. And customers should be given a reasonable amount of time to sell their property themselves, if they want to do so.
Consumer unhappy that her lender refused to switch mortgage to interest only after losing her job
Mortgages Financial Difficulties Covid-19
Consumer unhappy mortgage lender refused to extend a reduced payment arrangement
Mortgages Financial Difficulties
Consumer complains after being rejected a payment deferral on their mortgage
Mortgages Financial Difficulties Covid-19
Business Support Hub
If you want to talk informally about a complaint you’ve received, you can speak to our Business Support Hub. Our Business Support Hub can give general information on how the Financial Ombudsman might look at a particular complaint. We also offer guidance on our rules and how we work.
Find out how to contact the Business Support Hub.
Search our decisions database to see final decision issued by our ombudsman on complaints about financial difficulties and mortgages.
Find out more from the Financial Conduct Authority (FCA) on mortgage regulation.
Information for consumers
If you’re a consumer looking for information about how we can help, we have a dedicated page on complaints about financial difficulties and mortgages. Or to make a complaint, find out more about how to complain.