Next steps with mortgage broker compensation claim
Discussion
Sorry, this is a bit of a long one.
Our mortgage broker made an error which resulted in us losing a mortgage deal (I’ve posted about it previously here: https://www.pistonheads.com/gassing/topic.asp?h=0&... They have admitted the mistake, and we’ve been going back and forth over their compensation offer. Because rates increased sharply at the time, our financial loss is around £3,000. So far, they have offered approximately £1,800 and, after correcting a miscalculation, £2,000. Both figures include a £200 payment for distress and inconvenience, which they chose to add without us requesting it.
Their position is that they will only compensate us for the increase in monthly payments. I’ve explained that the higher interest rate adds more interest to the balance each month than the extra we pay, meaning the remaining balance at the end of the product term will be higher as a direct result of their error.
Their explanation is:
“Firstly, while I appreciate your concerns around the inclusion of capital erosion or our lack thereof, I must explain that when calculating the total cost of a mortgage, we do so based on the rules set out by our regulator, the Financial Conduct Authority (FCA). They calculate the total cost of a mortgage product based on the aggregated monthly payments under each contract over the relevant period and also including any relevant fees.
As we have used the recognised formula to calculate the total cost difference between the two products as set out by our regulator, and in line with the way in which our advice is provided when considering the total cost of products, we are unable to reconsider the amount involved based on the calculation you have suggested.”
In other words, they are saying the FCA requires them to compensate only the difference in monthly payments, even though our actual loss is significantly higher.
I rejected their £2,000 offer because I want to be put back into the position I would have been in had they not made the error, not left roughly £1,000 worse off.
After rejecting the offer, they went quiet. Three weeks later I chased them, and they then forwarded an email (just the body, not the header showing when it was sent) which neither my wife nor I ever received. It simply repeated that they are sticking to the £2,000 offer because “The calculations provided are correct as per the expectations of our regulator, the Financial Conduct Authority and as such we are unable to change them.”
My options now seem to be: escalate to the Financial Ombudsman Service, use Money Claim Online, or instruct solicitors.
I’ve read that you can go to the FOS first and still pursue court action afterwards if you’re not satisfied, but that doing so can weaken a later court case, so some people suggest going straight to court instead.
I’d appreciate any thoughts or guidance on what to do next. Does the FCA genuinely expect compensation to be based on a calculation that ignores part of the loss, or are the broker trying their luck?
Our mortgage broker made an error which resulted in us losing a mortgage deal (I’ve posted about it previously here: https://www.pistonheads.com/gassing/topic.asp?h=0&... They have admitted the mistake, and we’ve been going back and forth over their compensation offer. Because rates increased sharply at the time, our financial loss is around £3,000. So far, they have offered approximately £1,800 and, after correcting a miscalculation, £2,000. Both figures include a £200 payment for distress and inconvenience, which they chose to add without us requesting it.
Their position is that they will only compensate us for the increase in monthly payments. I’ve explained that the higher interest rate adds more interest to the balance each month than the extra we pay, meaning the remaining balance at the end of the product term will be higher as a direct result of their error.
Their explanation is:
“Firstly, while I appreciate your concerns around the inclusion of capital erosion or our lack thereof, I must explain that when calculating the total cost of a mortgage, we do so based on the rules set out by our regulator, the Financial Conduct Authority (FCA). They calculate the total cost of a mortgage product based on the aggregated monthly payments under each contract over the relevant period and also including any relevant fees.
As we have used the recognised formula to calculate the total cost difference between the two products as set out by our regulator, and in line with the way in which our advice is provided when considering the total cost of products, we are unable to reconsider the amount involved based on the calculation you have suggested.”
In other words, they are saying the FCA requires them to compensate only the difference in monthly payments, even though our actual loss is significantly higher.
I rejected their £2,000 offer because I want to be put back into the position I would have been in had they not made the error, not left roughly £1,000 worse off.
After rejecting the offer, they went quiet. Three weeks later I chased them, and they then forwarded an email (just the body, not the header showing when it was sent) which neither my wife nor I ever received. It simply repeated that they are sticking to the £2,000 offer because “The calculations provided are correct as per the expectations of our regulator, the Financial Conduct Authority and as such we are unable to change them.”
My options now seem to be: escalate to the Financial Ombudsman Service, use Money Claim Online, or instruct solicitors.
I’ve read that you can go to the FOS first and still pursue court action afterwards if you’re not satisfied, but that doing so can weaken a later court case, so some people suggest going straight to court instead.
I’d appreciate any thoughts or guidance on what to do next. Does the FCA genuinely expect compensation to be based on a calculation that ignores part of the loss, or are the broker trying their luck?
I appreciate this will be disappointing but I would take the £2k. If you complain to FOS, I would expect they would refer back to the FCA guidance and say what you were offered was not unreasonable. This is based on my experience of working for an Ombudsman within financial services (but not FOS).
I can’t comment with any experience on the other routes but wouldn’t expect going to FOS first would disadvantage you.
As an aside, it might well be possible to find similar cases that FOS have considered in the past, either on their website or by googling it to give you a feel for things. The Ombudsman’s office I used to work for used to published decisions (then known as Determinations).
Good luck
Rob
I can’t comment with any experience on the other routes but wouldn’t expect going to FOS first would disadvantage you.
As an aside, it might well be possible to find similar cases that FOS have considered in the past, either on their website or by googling it to give you a feel for things. The Ombudsman’s office I used to work for used to published decisions (then known as Determinations).
Good luck
Rob
If you go to the FOS there will be a considerable wait time before they even look at it.
You have been offered redress for at least the position you currently have been placed in and I would suggest that the FOS will side with them.
Arguing over a future differential in loan size I doubt will get you far given you haven’t actually sustained that loss.
Going to a solicitor will probably cost you more than that £1k.
A no win no fee solicitors might be worth a chat to just to see if they think there is any mileage.
You have been offered redress for at least the position you currently have been placed in and I would suggest that the FOS will side with them.
Arguing over a future differential in loan size I doubt will get you far given you haven’t actually sustained that loss.
Going to a solicitor will probably cost you more than that £1k.
A no win no fee solicitors might be worth a chat to just to see if they think there is any mileage.
Thanks again for all the comments.
@alscar - your reply illustrates the problem I’m facing. You say it’s difficult to argue over a differential in loan size because I “haven’t sustained that loss”. But by the same logic, I also haven’t yet sustained the full loss of the increased monthly payments either, because I’ve only made three higher payments so far (one during the SVR month and two on the new higher‑rate product). So, under your approach, they’d only owe me the difference on those three payments and after that I should jog on. That clearly isn’t a fair or complete way to assess the loss.
Here are the figures that show the real issue.
In February we agreed a mortgage deal to start on 1 April.
Balance on 1 April: £93,051.10
Agreed deal: 29‑month fix at 4.19%, monthly payment £691.10
What actually happened:
1 month on SVR 6.54%, payment £808.28
Followed by 29 months at 5.44%, monthly payment £753.46
Ignoring the SVR month, the monthly payment difference is £62.36, but the interest added to the balance is far higher - starting at around £98 per month and gradually reducing to around £91. Their offer only covers the payment difference and completely ignores the extra interest quietly accumulating in the background.
To keep this fair, I’m ignoring month 30 because the original product was supposed to run for 29 months. So, I’m comparing:
29 months on the 4.19% deal
vs
1 month SVR + 28 months on the 5.44% deal
29 months at 4.19%
Total paid: £20,041.90
Interest charged: £8,865.66
End balance: £81,874.86
1 month SVR + 28 months at 5.44%
Total paid: £21,905.16
Interest charged: £11,657.24
End balance: £82,803.18
Difference
Extra paid: £1,863.26
Extra interest charged: £2,791.58
Higher end balance: £928.32
As you can see, the extra payments plus the higher remaining balance equal the extra interest charged. This is not hypothetical - it’s the actual financial effect of the error.
I haven’t yet suffered the full loss in overpayments because that will take another 25 months to play out. Each month the balance ends up roughly £30 higher than it would have been under the 4.19% deal, which is why the end balance is about £928 higher. That isn’t an imaginary loss. If I redeem or switch product, I have to pay that extra capital and if I stay on a mortgage, I continue paying interest on it.
And before anyone says “just pay the £2,000 off the mortgage and you’ll be better off” - that’s not correct. If I do that, the current mortgage ends up around £1,404.08 lower than the 4.19% scenario at the end of month 29, but I will have paid £1,863.26 extra to get there. So yes, it reduces the deficit, but I’m still around £459.18 worse off.
All this also ignores month 30, where I’m stuck on 5.44%. My previous fixes were 2.83% and 1.29%, and the agreed deal was 4.19%. If I take the average of those, I could reasonably have switched to something like 2.47%, but instead I’ll be stuck at 5.44% for an extra month - another ~£200 loss. I’ve not included that in the figures above because it’s more speculative, but it’s still a realistic consequence.
I suppose the question how much do I want to fight over it?
@alscar - your reply illustrates the problem I’m facing. You say it’s difficult to argue over a differential in loan size because I “haven’t sustained that loss”. But by the same logic, I also haven’t yet sustained the full loss of the increased monthly payments either, because I’ve only made three higher payments so far (one during the SVR month and two on the new higher‑rate product). So, under your approach, they’d only owe me the difference on those three payments and after that I should jog on. That clearly isn’t a fair or complete way to assess the loss.
Here are the figures that show the real issue.
In February we agreed a mortgage deal to start on 1 April.
Balance on 1 April: £93,051.10
Agreed deal: 29‑month fix at 4.19%, monthly payment £691.10
What actually happened:
1 month on SVR 6.54%, payment £808.28
Followed by 29 months at 5.44%, monthly payment £753.46
Ignoring the SVR month, the monthly payment difference is £62.36, but the interest added to the balance is far higher - starting at around £98 per month and gradually reducing to around £91. Their offer only covers the payment difference and completely ignores the extra interest quietly accumulating in the background.
To keep this fair, I’m ignoring month 30 because the original product was supposed to run for 29 months. So, I’m comparing:
29 months on the 4.19% deal
vs
1 month SVR + 28 months on the 5.44% deal
29 months at 4.19%
Total paid: £20,041.90
Interest charged: £8,865.66
End balance: £81,874.86
1 month SVR + 28 months at 5.44%
Total paid: £21,905.16
Interest charged: £11,657.24
End balance: £82,803.18
Difference
Extra paid: £1,863.26
Extra interest charged: £2,791.58
Higher end balance: £928.32
As you can see, the extra payments plus the higher remaining balance equal the extra interest charged. This is not hypothetical - it’s the actual financial effect of the error.
I haven’t yet suffered the full loss in overpayments because that will take another 25 months to play out. Each month the balance ends up roughly £30 higher than it would have been under the 4.19% deal, which is why the end balance is about £928 higher. That isn’t an imaginary loss. If I redeem or switch product, I have to pay that extra capital and if I stay on a mortgage, I continue paying interest on it.
And before anyone says “just pay the £2,000 off the mortgage and you’ll be better off” - that’s not correct. If I do that, the current mortgage ends up around £1,404.08 lower than the 4.19% scenario at the end of month 29, but I will have paid £1,863.26 extra to get there. So yes, it reduces the deficit, but I’m still around £459.18 worse off.
All this also ignores month 30, where I’m stuck on 5.44%. My previous fixes were 2.83% and 1.29%, and the agreed deal was 4.19%. If I take the average of those, I could reasonably have switched to something like 2.47%, but instead I’ll be stuck at 5.44% for an extra month - another ~£200 loss. I’ve not included that in the figures above because it’s more speculative, but it’s still a realistic consequence.
I suppose the question how much do I want to fight over it?
I haven’t gone through and verified all your figures but happily accept those as being correct.
That’s why I suggested asking a non win Solicitor as to whether they thought there was any mileage in continuing to claim.
I’m sure any normal Solicitor will charge you more than you might possibly win.
I’ve no idea what costs and hassle putting a small claims court case together yourself is though.
I hope I’m wrong in that I personally doubt the FOS or even the FCA would agree with your complaint.
Either way good luck in resolving but at least you have £2k sitting on the table waiting to be accepted.
That’s why I suggested asking a non win Solicitor as to whether they thought there was any mileage in continuing to claim.
I’m sure any normal Solicitor will charge you more than you might possibly win.
I’ve no idea what costs and hassle putting a small claims court case together yourself is though.
I hope I’m wrong in that I personally doubt the FOS or even the FCA would agree with your complaint.
Either way good luck in resolving but at least you have £2k sitting on the table waiting to be accepted.
Wackywoo105 said:
And before anyone says just pay the £2,000 off the mortgage and you ll be better off - that s not correct. If I do that, the current mortgage ends up around £1,404.08 lower than the 4.19% scenario at the end of month 29, but I will have paid £1,863.26 extra to get there. So yes, it reduces the deficit, but I m still around £459.18 worse off.
I suppose the question how much do I want to fight over it?
If I’m understanding right, you’re £460 worse off if you use the £2,000 compo against the mortgage. Less than £16 a month on your 29 month term.I suppose the question how much do I want to fight over it?
Personally, I don’t think the agro is worth it
Take the money they're offering, use it to pay down the balance on your mortgage.
Get on with your life. Forget ALL about it - apart from remembering not to use that particular mortgage broker again.
The amount of stress, angst, anger, resentment, loss of sleep, plotting scenarios, imaginary executions and other general distractions REALLY aren't worth the money.
Get on with your life. Forget ALL about it - apart from remembering not to use that particular mortgage broker again.
The amount of stress, angst, anger, resentment, loss of sleep, plotting scenarios, imaginary executions and other general distractions REALLY aren't worth the money.
The rate the OP got doesn't seem very good?
With a low LTV surely it's a poor deal in today's market?
A mate has just been quoted 4.45%. (He's whingeing about that TBH).
Is there some other factor pushing up the rate?
If the broker can't organise good deals, it will go bust and there won't be any compo to be had.
It might be wise to take the £2k while it's on the table.
With a low LTV surely it's a poor deal in today's market?
A mate has just been quoted 4.45%. (He's whingeing about that TBH).
Is there some other factor pushing up the rate?
If the broker can't organise good deals, it will go bust and there won't be any compo to be had.
It might be wise to take the £2k while it's on the table.
Some friendly advice. You have clearly invested a lot of time on this and making the posts. The Broker will have used the FCA compensation process which you have not. What you thinking you can achieve is over turn the FCA compensation calculation which is going to be a huge uphill and almost impossible ask.
You should take the money and go live your life before this becomes an obsession.
You should take the money and go live your life before this becomes an obsession.
omniflow said:
Take the money they're offering, use it to pay down the balance on your mortgage.
Get on with your life. Forget ALL about it - apart from remembering not to use that particular mortgage broker again.
The amount of stress, angst, anger, resentment, loss of sleep, plotting scenarios, imaginary executions and other general distractions REALLY aren't worth the money.
This. All day long. The offer is decent.Get on with your life. Forget ALL about it - apart from remembering not to use that particular mortgage broker again.
The amount of stress, angst, anger, resentment, loss of sleep, plotting scenarios, imaginary executions and other general distractions REALLY aren't worth the money.
omniflow said:
Take the money they're offering, use it to pay down the balance on your mortgage.
Get on with your life. Forget ALL about it - apart from remembering not to use that particular mortgage broker again.
The amount of stress, angst, anger, resentment, loss of sleep, plotting scenarios, imaginary executions and other general distractions REALLY aren't worth the money.
From a brief read through ^^^ this. Get on with your life. Forget ALL about it - apart from remembering not to use that particular mortgage broker again.
The amount of stress, angst, anger, resentment, loss of sleep, plotting scenarios, imaginary executions and other general distractions REALLY aren't worth the money.
You've done well to get any offer at all frankly.
I used to take quite a few companies who had let me down to the small claims court and always won.
But the game has changed. Cast iron cases now getting tossed. Dodgy ombudsmen. Companies routinely lying to judges, Jarndice v Jarndice.
Move on or stand for Parliament, the system is corrupt.
OP, refer to the last couple pages here: https://www.financial-ombudsman.org.uk/decision/DR...
SV_WDC said:
OP, refer to the last couple pages here: https://www.financial-ombudsman.org.uk/decision/DR...
Thank you again everyone, especially @SV_WDC.I’ve read through the document you linked, and it really does confirm they’re taking me for a ride.
Before reading it, earlier today I had already calculated the minimum amount they would need to pay to bring my loss down to zero. That figure assumed the payment went straight into the mortgage and even ignored month 30. It also included the D&I element, which really should be separate.
My plan was to put that forward as a final offer and make it clear that if they didn’t accept, I would escalate to the FOS, who I called today to get a sense of the process and to check how the loss should be calculated.
After reading that document, though, I think I’ll just request a deadlock letter and go straight to the FOS. They’ve had more than enough of my patience and goodwill already.
Wackywoo105 said:
Thank you again everyone, especially @SV_WDC.
I ve read through the document you linked, and it really does confirm they re taking me for a ride.
Before reading it, earlier today I had already calculated the minimum amount they would need to pay to bring my loss down to zero. That figure assumed the payment went straight into the mortgage and even ignored month 30. It also included the D&I element, which really should be separate.
My plan was to put that forward as a final offer and make it clear that if they didn t accept, I would escalate to the FOS, who I called today to get a sense of the process and to check how the loss should be calculated.
After reading that document, though, I think I ll just request a deadlock letter and go straight to the FOS. They ve had more than enough of my patience and goodwill already.
You must be really angry, or really skint, to be making such a fuss over what is essentially a trivial sum of money.I ve read through the document you linked, and it really does confirm they re taking me for a ride.
Before reading it, earlier today I had already calculated the minimum amount they would need to pay to bring my loss down to zero. That figure assumed the payment went straight into the mortgage and even ignored month 30. It also included the D&I element, which really should be separate.
My plan was to put that forward as a final offer and make it clear that if they didn t accept, I would escalate to the FOS, who I called today to get a sense of the process and to check how the loss should be calculated.
After reading that document, though, I think I ll just request a deadlock letter and go straight to the FOS. They ve had more than enough of my patience and goodwill already.
Gassing Station | Speed, Plod & the Law | Top of Page | What's New | My Stuff