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case studies about mortgage arrears and charges



I've told my mortgage company I'm struggling, but they're saying they can't help until I've missed a payment ...

Some people tell us their mortgage company isn't doing enough to help them - even though they know they can't afford their next payment, or are likely to have trouble in the future.

  • Lenders need to respond sympathetically and constructively to customers in financial difficulty. We don’t think it’s fair for a mortgage company to say they can’t help just because a customer hasn’t yet missed a payment.
  • We’ll check a lender has considered the different options to help their customer make their repayments - whether or not they’ve already missed one. For example, we’ve seen lenders change the mortgage repayment date so their customer has a chance to receive their salary, which can be a significant help.
  • If we decide a lender has failed to help their customer - even though they’ve said they’re having trouble - we’ll tell the lender to work constructively with their customer to make arrangements for getting back on track. And we might tell the lender to pay compensation for any extra stress or upset they’ve caused by not helping sooner.
  • Where it’s appropriate, we signpost people to sources of free support such as Citizens Advice or National Debtline. It may be helpful to talk to these organisations at an early stage - as they can help to build a picture of someone’s income and expenditure, which can be useful in working out the best way to move forward.

case study 1

When Mr K fell ill, he changed his mortgage to interest-only. When he took longer than expected to recover, Mr K began to struggle - but the lender said they couldn’t help him. Because the lender wouldn’t help, Mr K had fallen into arrears.

We said the lender could have helped prevent the problem - so it wasn’t fair for them to apply arrears charges. We told them to work with Mr K to create a repayment plan, bearing in mind his health problems.



I can't afford the repayment plan my lender's asking me to agree to ...

There are a number of different options for helping people get back on track with their mortgage payments. We sometimes hear from people who are unhappy with the option their lender has suggested.

  • The rules that apply to mortgages say lenders should be able to justify the repayment plan they’ve offered. So if someone’s told their lender they’re not happy, we’ll check the lender has explained why they think that particular arrangement is fair.
  • In some cases, we decide the mortgage company’s suggestion seems reasonable - but their customer doesn’t want to pay anything at all. In these cases, it’s unlikely we’ll say it’s fair for a lender to write off a mortgage debt altogether. We’ll clearly explain why we think the arrangement is fair - and where it’s appropriate, signpost people to sources of free support to help with their debts and any other difficulties.
  • If we decide a lender hasn’t offered a fair repayment plan - or hasn’t offered one at all - we’ll tell them to work with their customer to find a way forward. And it’s likely we’ll tell them to pay compensation for the worry and stress they’ve caused by not helping sooner.


case study 2

When Mr F lost his job, he began to struggle with his mortgage payments. He contacted his mortgage lender and asked for help. Mr F suggested two possible options - but the lender didn’t agree to either.

We found the lender had considered the options, but had decided they weren’t reasonable. They’d been concerned Mr F couldn’t make the repayments he’d suggested in the first option - and the second would have left him paying more each month. We thought it was fair for the lender not to agree to Mr F’s requests. We encouraged Mr F to work with the lender to find a reasonable solution.



I agreed a repayment plan with my lender - but now they're saying I have to repay all the arrears ...

We sometimes hear from people who’ve had a repayment plan for their mortgage arrears. They tell us the plan was working for them - but the lender wants to end the plan and make them repay all the arrears.

  • People’s circumstances can change quickly - and what’s fair when someone’s first in difficulty might not be the right option later on. We’ll look into why the lender thinks the original repayment plan is no longer the best way forward.
  • We’ll check a lender has taken their customer’s circumstances into account if they’re suggesting a change to a repayment plan. For example, if someone’s getting back on track financially, we might agree it’s reasonable to increase their repayments - as it could reduce the overall amount they’ll have to repay in the long term.
  • We sometimes hear from people who agreed an arrangement such as switching to interest-only payments for a year. If someone’s circumstances have got worse since then, we’re likely to say it’s unfair for the lender to stick rigidly to this original plan.
  • If we decide a mortgage lender hasn’t responded constructively, we’ll tell them to work with their customer to agree a fair repayment plan. And we might tell them to pay compensation for any trouble or upset they’ve caused.


arrears charges have been added to my mortgage - and now I'm even more in debt ...

Mortgage companies apply arrears charges - sometimes known as "arrears management" or "payment shortfall" charges - to cover the administrative costs of managing accounts in arrears. Some people tell us they think these charges are unfair - or unaffordable - because they're already in debt.

  • There may be costs involved in managing accounts in arrears, so we won’t necessarily say that arrears charges are unfair. But we’ll look into whether the charges are justified. To do this, we’ll consider how much extra work the lender has had to do.
  • We’ll also check the lender has taken their customer’s circumstances into account in applying charges. For example, if someone’s worked with their lender to agree a repayment plan without charges - and has kept to that agreement - we might say it’s unfair for a lender to start applying charges later on.
  • We might decide it’s unfair to carry on applying charges if someone’s circumstances mean they’re unlikely ever to be able to make their agreed mortgage repayments - for example, because they’re ill and can no longer work.
  • In some cases, a lender might agree to add arrears charges to the main mortgage balance - often called capitalisation. This can be helpful in some cases, since it can mean someone’s credit file isn’t affected by going into arrears. But we’ll check the lender clearly explained what they were doing - and the impact on their customer’s monthly mortgage repayments.

case study 3

Mr M was struggling with his mortgage payments. His lender agreed to accept reduced payments for three months, without charges. But after the three months, when Mr M returned to his regular payments, the lender charged £40 per month for “arrears management”.

We saw that these charges were in line with the lender’s standard charges. But Mr M had acted proactively, and the lender hadn’t had to do much additional work. Mr M had also made regular overpayments to clear his arrears.

In the circumstances, we didn’t think the lender had fairly applied the charges - so we told them to refund the charges, and any interest charged on the fees.

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