We look at Amelia and Frank’s complaint about the interest-only mortgage they were sold.
After visiting a new housing development, Amelia and Frank were advised by the on-site broker to take out a ten-year interest-only mortgage. Amelia’s father later complained that the couple hadn’t understood what they were signing up to. And when they later tried to sell their flat, the market value was lower than the mortgage balance.
What we said
At the time the couple took out the mortgage, they’d both been in low-wage jobs. Amelia, who had learning difficulties, was living with her parents and Frank was renting. In our view, they couldn’t have afforded to save towards repaying their mortgage.
From what we saw, the broker hadn’t done enough to explain the consequences of having an interest-only mortgage. It didn’t seem the couple could have afforded any type of mortgage that would have let them to buy a property in that area.
We told the broker to refund the costs of setting up and ending the mortgage. And we asked Amelia and Frank to try and sell their property for its market value within a year. If they did, we said the broker should pay the difference between the selling price and the balance of the mortgage.