Mortgage prisoners have suffered longer than they had to, a campaigner has claimed, after a landmark Financial Ombudsman Service ruling found Co-operative Bank customers were “unfairly” overcharged mortgage interest for more than a decade.
The Fos confirmed its final decision, finding that Mortgage Agency Services No.5, part of the Co-operative Banking group, treated customers unfairly when it increased their standard variable rate from 2.99 to 5.75 per cent from 2009 to 2012.
While the Fos gave its opinion on the case recently, this was not the first time it has looked at the case, having previously examined it back in 2014.
A campaigner close to the case, who did not want to be named, said this had led to those involved suffering for a longer period of time than was necessary.
In response, a spokesperson for the Fos said: “A mortgage is likely to be the most significant loan a home buyer is ever going to acquire, which is why it’s so important they are treated with transparency and fairness.
“It’s crucial that consumers are able to understand what their mortgage means for their finances, and how interest rates could change.
“These specific cases are complex and have been subject to significant legal challenge by MAS5.
"We are pleased that we can now resolve these complaints and, where we’re satisfied customers were charged interest unfairly, consumers can obtain redress.
“If people don't feel they've been treated fairly by their mortgage provider, they should contact our free, independent service and we'll see if we can help.”
The case
The details of the case were explained by the All-Party Parliamentary Group on Mortgage Prisoners, which said that MAS5 increased the SVR four times over the period 2009 to 2012.
The bank claimed these increases were “necessary” rises to reflect changes in the cost of funds it was using to fund its mortgage lending business.
However, the Fos found that “the evidence doesn’t show that there were changes in the overall costs MAS5 was liable itself to pay for the funds that it used”.
The Fos also reported “as a result, the changes to the SVR MAS5 made between 2009 and 2012 - which collectively added 2.79 per cent to the SVR - were not made for reasons permitted by the contract”.
The Fos’s conclusion was that “the evidence shows that MAS5’s cost of funding did not increase”.
As a result, the APPG’s perspective was that MAS5 and the Co-operative Banking Group - which bought the closed book of MAS5 business after the financial crisis - had misled customers.
As an example of this, the group pointed to a letter sent by MAS5 in February 2011 which said that the SVR increase was “a direct reflection of the increased costs of funding your mortgage loan.”
Additionally, in April 2012, the letter said that the SVR increase had been made after “careful consideration” and that the “rate we are charged for funding your mortgage has increased considerably”.
