Accord Mortgages Limited · DRN-6086120

The complaint Miss M complains that Accord Mortgages Limited didn’t treat her fairly in relation to the interest rate on her mortgage. What happened Miss M has a mortgage with Accord. She was on a fixed rate which was due to expire on 30 April 2023. The mortgage was due to revert to the standard variable rate (SVR) on 1 May. The monthly payment on the fixed rate was £645.55. Miss M says that she was looking at Accord’s website regularly in late 2022 and early 2023 to keep an eye on available interest rates. She says she made an online application for a new interest rate in early 2023, either January or February, and she thought that the rate application had gone through. But Accord says it has no record of an application being made at this time. Also around this time, Accord sent Miss M her annual mortgage statement. The annual statement included payments made during 2022, and also projected payments for 2023. The statement said that the monthly payment throughout 2023 would be £648.13. In March, Accord sent Miss M a rate switch reminder letter. The letter said that her account would revert to the SVR from 1 May unless she had applied for a new interest rate. On 1 May, the fixed rate came to an end. No new fixed rate was in place so the mortgage reverted to the SVR. The monthly payments increased to £860.35. Miss M was unable to pay the monthly payment in May. She called Accord in June, and Accord told her that the mortgage was now on the SVR with no new fixed rate in place. It said that it couldn’t offer her a new fixed rate because the mortgage was now in arrears – unless she cleared the arrears by the end of the month. Miss M also missed the payment in June. Around the same time, Miss M had problems with her employment, which was the reason she wasn’t able to pay anything in May or June 2023. She also missed some payments in 2024. But since January 2025 she has been paying the mortgage in full and making additional payments to reduce the arrears. Miss M complained about what had happened with the interest rate in 2023. She said she selected a new five year interest rate in early 2023. She thought it had gone through, and when she received the annual statement believed that the payments quoted on it represented the new fixed rate. By the time she realised what had happened, it was too late – and interest rates had increased in the meantime anyway. At the same time, she fell behind on payments because of problems with work. The higher payments made things worse. She agreed a payment plan in late 2024 and has been sticking to it ever since, but it’s been very difficult. Accord said there was no evidence Miss M had applied for a new fixed rate. It said the

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annual statement showed a predicted payment of £643.18 because it didn’t know what rate she would move onto after the expiry of the existing fixed rate. It said it had since made changes to the annual statement to explain this better. It said that in any case it had written to Miss M explaining that her payments would increase to the SVR. It paid £100 compensation. On reflection, when the complaint came to us, it offered to increase that to £300. Our investigator didn’t think that went far enough. He said that it was reasonable for Miss M to have understood that a new rate was in place. He said Accord should backdate a fixed interest rate to 1 May 2023 and re-work the mortgage accordingly, and it should increase the compensation to £500. It should also remove any legal fees if, based on the lower mortgage payments, legal action wouldn’t have been taken. Accord didn’t agree and asked for an ombudsman to review the complaint. It said Miss M had misinterpreted the annual statement and it couldn’t be held responsible for that. It didn’t think it was fair to require a backdated interest rate when there was no evidence Miss M had ever applied for one. I broadly agreed with the investigator’s outcome, but I thought the legal fees should be refunded regardless of the result of the re-calculation. I wrote to the parties explaining that and specifying what interest rate I thought Accord should put in place. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. On balance, I’m satisfied that Miss M did intend to apply for a new interest rate in early 2023, and that she did try to apply for one. Her testimony on this point has been clear and consistent, ever since her first contact with Accord in June 2023. I accept what Accord says that it has no evidence of a completed application ever having been made. But I think it’s most likely that Miss M did attempt to apply for a rate, that the application didn’t go through or complete for some reason – which is why Accord has no record of it, and that Miss M wasn’t aware at the time that her application had failed. I’ve also looked at the communication Accord sent her around this time. Although this was before the Consumer Duty came into force, Accord still had a responsibility to communicate with Miss M in a way that was clear, fair and not misleading. It sent her a letter dated 7 February 2023. This letter reminded her that her existing interest rate would end on 30 April 2023 and that the mortgage would then revert to the SVR, with payments increasing to £860.35. It said “If you’d like to switch to one of our other products, it’s a simple process and we don’t need to do another credit check” and gave a contact number (if Miss M wanted advice) or a web address (if she was happy to select a new rate herself). In the latter case, it said “switch online and that’s it. There’s no need to sign and return any forms.” The 7 February letter said the rates available to Miss M were: • Five year fixed – 4.45% with a £1,495 fee, 4.55% with a £995 fee and 4.79% with no fee • Three year fixed – 5.04% with no fee • Two year fixed – 4.84% with a £1,495 fee, 4.92% with a £995 fee and 5.12% with no fee

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It sent a second letter on 21 March 2023, which said “Just a quick reminder that your mortgage product ends on 30-Apr-2023. If you’ve recently accepted a new offer from us, the good news is that we’re on with processing your application, so there’s nothing more for you to do.” It then went on to say that if Miss M hadn’t accepted a new offer, her mortgage would revert to the SVR. And it reminded her of the options for applying for a new rate. Accord also sent an annual statement. It’s undated, but Accord says it was sent around the end of January 2023. The annual statement included a box, with a heading in bold capitals, at the top of the first page, which said “NEW MONTHLY PAYMENT AND INSURANCE DETAILS FROM MARCH 2023” and then went on “Your new monthly payment from March 2023 is £648.13”. Then on page three, the annual statement repeated this information. It said “The payment shown will be collected automatically from March 2023 by Direct Debit [bank account details]. Below you’ll find a list of your direct debit collection dates until your next statement period”. It then listed 14 monthly payments with collection dates between 31 January 2023 and 29 February 2024. The monthly payment for January and February 2023 was £645.55, and the monthly payment from March 2023 to February 2024 was £648.13. Accord says that this wasn’t intended to be Miss M’s actual monthly payment. It was a projection, and it couldn’t say what the payments would actually be, because it didn’t know what the interest rate would be after the fixed rate ended on 30 April. But there is nothing anywhere on the statement that says this was a projection. To my mind, it’s a definitive statement that Miss M’s monthly payment was currently £645.55, and would shortly increase to £648.13. Yet that wasn’t in fact true. Under the mortgage terms and conditions as they were at that time, the monthly payment would be £645.55 until the end of April – not February – and would then revert to the SVR and be £860.35. It’s not clear to me why the statement couldn’t have said that. I’m satisfied that the annual statement was actively misleading. It told Miss M, definitively and without qualification, what her monthly payments would be over the next year even though the figures quoted – and Accord knew the figures quoted – were wrong. I don’t think this fairly communicated the position of Miss M’s mortgage to her or gave her the information she needed to be able to manage it. I’ve said that I’m satisfied that Miss M did try to arrange a new rate, although she was (unknowingly) unsuccessful in doing so. As the letter said, when applying online there was nothing more to do and no forms to sign and return. So Miss M wouldn’t have been expecting a document that she needed to return to implement the rate. The March letter said that “the good news is that we’re on with processing your application, so there’s nothing more for you to do”, so there was no reason for Miss M to realise she needed to take further action following that letter. And the annual statement actively misled her about her future payments – and, in a situation where she was expecting a fixed rate to end soon and a new fixed rate to be implemented – told her that her payments would increase slightly in a few months. The annual statement therefore would have reassured her that the rate was in place rather than informing her that it was not. In all the circumstances, I think it was reasonable for Miss M to think that she had successfully applied for a new fixed rate. She wouldn’t have been aware that this wasn’t in fact the case until the new, higher, payment took effect in May. I accept that it’s a customer’s responsibility to apply for a new interest rate. But it was Accord’s responsibility to communicate with Miss M in a way that was clear, fair and not misleading. In my view, it failed to do that. The annual statement was actively misleading

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and it’s entirely understandable that Miss M thought, based on what the statement said, that a new interest rate was in place and there was nothing more that she needed to do. Had Accord’s communication been better, Miss M would have understood that this wasn’t in fact the case, and she would have been able to re-apply, successfully this time, for a new rate before the old one expired and before her employment difficulties led to arrears. In the circumstances, I’m satisfied that Accord’s poor communication was the reason Miss M wasn’t able to have a new fixed rate in place in time. To put things right, therefore, it should backdate a new interest rate to the end of April 2023 when it should have been in place. Miss M told us in her complaint form that she intended to take a five year rate, and I have no reason to believe that wasn’t the case. I don’t know exactly what date Miss M tried to apply, or what date she would have re-applied had she understood that her first attempt had failed. I think it’s fair and reasonable to select from the rates set out in the February letter, as it would have been around that time. Miss M said she would have taken a five year rate, so I’ll direct Accord to put the 4.79% fee-free rate in place. I’ve also thought about what happened afterwards. I think Miss M would still have fallen into arrears even if the new fixed rate was in place – she would still have struggled with some of the monthly payments even at a lower amount because of her employment problems. However, I don’t think it was fair that Accord took legal action. Throughout this period Miss M was paying what she could when she could. She only missed six payments altogether – in May and June 2023; and January, June, October and December 2024. But in other months she did make the monthly payments, and often over-paid. She explained she didn’t have a phone at that time and was communicating by email, but Accord said it wouldn’t accept email communication. Accord has said it does offer a secure messaging service Miss M could have used. But I haven’t seen any evidence it told her that at the time. And it did email Miss M without making clear it wouldn’t accept replies that way – for example, when sending her an income and expenditure form on 20 June 2023. Although at other times it did say it wouldn’t accept information by email, it only offered calls – not secure messaging – as an alternative. Even when Miss M emailed to say she didn’t have a phone, on 20 July 2024, Accord’s response was to suggest that she borrow a phone, not to offer secure messaging as an alternative. Accord instructed solicitors to take legal proceedings in late June 2024. By then Miss M had missed four payments sporadically over the last year. The arrears were in total around the equivalent of four monthly payments. Miss M was also making payments in other months. She was in touch with Accord from time to time and had explained her situation and what she was doing to try to get back on track, including telling it that her employment situation had improved and that from July 2024 she hoped to be able to make payments regularly. The rules of mortgage regulation say that repossession should be a last resort, when other forms of forbearance and attempts to get things back on track have failed. I’m not persuaded that when Accord took legal proceedings the mortgage had clearly become unsustainable, or that other forbearance options and attempts to resolve things had been exhausted. I think Accord’s decision to begin possession proceedings was premature and unfair. It should remove the legal fees from the mortgage balance. Finally, this situation caused Miss M a great deal of upset, over a considerable period of time. I agree that £500 is fair compensation in all the circumstances.

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My final decision My final decision is that I uphold this complaint and direct Accord Mortgages Limited to take the following steps: • Backdate the five year fixed rate of 4.79% to Miss M’s mortgage with effect from 1 May 2023 and re-work the mortgage accordingly, using the payments Miss M actually made from time to time. • As part of re-working the mortgage, Accord should also remove any legal fees added as a result of the repossession action it began in 2024, plus any interest charged on those fees. • This will result in Miss M having made overpayments to the mortgage in some months. The overpayments should be used to reduce the outstanding arrears balance from time to time. • If there is still a current arrears balance outstanding after the re-calculation, Accord should notify Miss M of the revised arrears balance and come to an affordable arrangement for it to be repaid, which may – depending on the outstanding arrears balance if any and Miss M’s current circumstances – include consideration of capitalising the remaining arrears. • If, however, the arrears balance has been cleared in full, any remaining overpayments should be refunded to Miss M, adding simple annual interest of 8% running from the date of each overpayment to the date of the refund. Accord may deduct income tax from the 8% interest element, as required by HMRC, but should give Miss M a tax certificate so she can reclaim the tax if she’s entitled to. • Either way, Accord should write to Miss M, setting out the revised balance and revised monthly payments from now on at the fixed rate. • Accord should make any necessary amendments to Miss M’s credit file to reflect the revised arrears position since 2023 following the re-calculation. • Accord should increase the total compensation paid to Miss M to £500. Under the rules of the Financial Ombudsman Service, I’m required to ask Miss M to accept or reject my decision before 22 April 2026. Simon Pugh Ombudsman

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