DRN-6247529

The complaint Mr B and Miss G complain about the way HSBC UK Bank Plc handled their application to port their mortgage. What happened On 8 April 2025 Mr B called HSBC. He specifically wanted to know whether his change in employment would impact his ability to port his mortgage and borrow extra funds. Mr B explained that since he took the mortgage, he’d changed from being employed in a permanent role to now contracting. He discussed the structure of his current employment with HSBC. The agent took Mr B through a Decision in Principle (DIP) and said he and Miss G could borrow up to around £750,000 in principle. The agent said that Mr B’s employment shouldn’t be an issue, he could proceed to application stage and his full employment details would be verified by the mortgage advisor as part of the application process. Mr B says that accepting this information in good faith, he and Miss G accepted an offer on their property on 8 May 2025, and they made an offer on a new property on 11 June 2025. Mr B called HSBC on 17 June 2025 to book a mortgage application meeting. He was given an appointment for 19 June 2025, and he was asked to upload the necessary documents ahead of the meeting. Having considered Mr B’s employment documents, HSBC initially said that Mr B didn’t meet criteria for either its zero hours contracts/agency workers or fixed term contract workers policies, so the application couldn’t proceed. Unhappy, Mr B complained. HSBC considered the application as an exception, but the application wasn’t approved. Mr B and Miss G brought their complaint to our Service. They say that had they been told from the outset that they didn’t meet criteria for a new mortgage they wouldn’t have proceeded with the sale of their property. They ended up taking a mortgage with another lender and incurred an ERC of around £6,000 with HSBC. They want this refunded to them. An investigator looked into things and didn’t uphold the complaint. Mr B and Miss G didn’t agree and asked for their case to be decided by an ombudsman. I issued a provisional decision in which I said: “I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. Porting a mortgage involves paying off the old mortgage and taking out a new one and transferring (porting) the interest rate and terms from the old mortgage to the new. In this way, an ERC can be avoided – because while the old mortgage comes to an end, the interest rate product doesn’t.

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Taking a new mortgage involves a new application. The rules of mortgage regulation, set by the Financial Conduct Authority (the regulator of financial services) say that lenders must carry out an affordability assessment when either varying an existing mortgage or offering a new one – and must only lend where the mortgage is affordable. However, there is an exception in the rules to allow changes to be made for existing customers. This rule allows the need for an affordability assessment to be set aside where the application does not involve further borrowing, or any other contractual change likely to be material to affordability. In this case Mr B and Miss G wanted further borrowing. This is considered a contractual change likely to be material to affordability. So, in these circumstances an affordability assessment was needed. A DIP is meant as an indication of what lending might be possible and isn’t a formal offer. This was made clear during the initial call and in the DIP which was given to Mr B and Miss G. I don’t think the agent Mr B spoke to made any suggestion that lending had been approved or that it was guaranteed. That said, Mr B called asking for very specific information – he wanted to know whether he met criteria for a new mortgage with HSBC. The agent he spoke to wasn’t sure, so she called through to a colleague to check. HSBC’s criteria for fixed-term contracts (including umbrella company workers) says: “applicants must have been working for a minimum of 12 months or more current continuous service in the same type of employment via contracts (including permanent / self-employed contracts) or; If they have not, a minimum of six months or more current continuous service via contracts (including permanent / self-employed contracts), in the same type of employment with at least 12 months remaining on their current contract.” Mr B’s employment didn’t meet criteria because he didn’t meet the minimum contract term requirements. He joined his umbrella company in March 2025, and he started his current assignment in May 2025. His contract was for six months. Whilst Mr B said his contract would likely be extended, that wasn’t guaranteed. HSBC has a defined policy around what it considers to be an acceptable minimum contract term. When Mr B called to ask if he met criteria, I’d expect HSBC to ask the right questions to establish eligibility to properly answer Mr B’s enquiry – but it didn’t do that. Had HSBC asked the right questions it would be clear that Mr B didn’t meet criteria, and he could have been told this during the initial call. Instead, Mr B left the call thinking he qualified to apply for a new mortgage with HSBC when this wasn’t the case. The information Mr B received thereafter was inconsistent too. The mortgage advisor he initially spoke to on 17 June 2025 said that he was considered a zero-hour contracts/agency worker and because he didn’t meet criteria the application couldn’t proceed. HSBC later said that Mr B in fact fell into its fixed-term contracts (including umbrella company workers) category, and whilst he still didn’t meet criteria, it was still willing to consider an application as a way of trying to approve the mortgage for Mr B – who is a longstanding customer of HSBC. But ultimately, the application wasn’t approved.

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Mr B and Miss G were told in mid-July 2025 that their application was unsuccessful. Whilst I appreciate HSBC did what it could to fairly consider the application, I can understand why Mr B and Miss G felt like their time had been wasted and they suffered a loss of expectation as a result of the poor information they’d been given. I think it’s fair that Mr B and Miss G be compensated for this. Overall, I consider an award of £500 to recognise the distress and inconvenience caused by HSBC’s actions to be reasonable and in line with this Service’s guidelines on such compensation1. I know this isn’t the answer Mr B and Miss G were hoping for as they want their ERC refunded. But I don’t think HSBC should be expected to refund the ERC incurred in this case, I’ll explain why. Mr B and Miss G were given a lending decision in mid-July 2025. Although they’d already accepted an offer on their property, they weren’t legally committed to the sale at that point. They’ve told me that they exchanged contracts on their sale and purchase in January 2026. So, at the point they knew they couldn’t obtain a new mortgage with HSBC, they had the ability to pull out of the sale and purchase, as a way of avoiding the ERC. Instead, Mr B and Miss G chose to proceed with the transaction, they redeemed their mortgage with HSBC incurring the circa £6,000 ERC so they could remortgage with a new lender and proceed with their plans. Mr B has explained to me that they felt morally obliged to honour the sale agreement to their buyers and I understand their intentions come from a good place. But Mr G and Miss B did have an opportunity to mitigate the loss they’ve described, but they didn’t do so – and that was their choice to make. But in these circumstances, that means I can’t reasonably expect HSBC to compensate Mr B and Miss G for the financial loss they’ve described. Mr B also says that had he known he had the option of a like for like port without the potential need for an affordability assessment, that’s an option he would have considered – by obtaining a top up loan from another lender. I’ve discussed with Mr B how second charge lending works and why I don’t think this would be a simple solution in the circumstances or a cost-effective option as a way of saving the ERC. I’m not persuaded Mr B and Miss G would have chosen this route – given they had the option to cancel the transaction and remain in their own home to avoid paying the ERC, which I think would have been the more realistic option, but they chose not to. That left the only other option of proceeding with their plans to remortgage entirely with another lender – which is what they did. The ERC forms part of the contract Mr B and Miss G had with HSBC so I can’t reasonably expect HSBC to waive the ERC in these circumstances. My provisional decision My provisional decision is that I uphold Mr B and Miss G’s complaint and I direct HSBC UK Bank Plc to pay them £500 compensation.” Mr B and Miss G responded to say that they still feel the ERC should be refunded in the circumstances. Whilst they didn’t exchange contracts until January 2026, they say that by mid-June 2025 they were already morally and financially committed to the transaction and they were concerned about the implications of withdrawing at that stage – including the fact that in a volatile market, starting the process again at a later stage could expose them to the risk of achieving a lower sale price later on. 1 https://www.financial-ombudsman.org.uk/consumers/expect/compensation-for-distress-or- inconvenience

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They say they were placed in the situation of having to choose between collapsing the transaction or incurring an ERC. They say proceeding with the transaction was a commercially reasonable decision and the least financially damaging option available, given the position HSBC’s earlier guidance had placed them in. They say the loss they incurred by paying the ERC was a direct and foreseeable consequence of HSBC’s actions. Mr B and Miss G say that their key point is that the decision to proceed with the sale and onward purchase was made before HSBC corrected their position, and this decision was made in reliance on HSBC’s confirmation on 8 April 2025 that Mr B’s income would be acceptable. 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. I thank Mr B and Miss G for their response to my provisional decision. I’ve considered their comments and I note that they’ve not made any new arguments, or provided any new evidence, that I’ve not already considered when reaching my provisional decision. Nor have they raised any comments that leads me to depart from what I provisionally decided. As explained already, a DIP is meant as an indication of what lending might be possible and isn’t a formal offer. This was made clear during the initial call and in the DIP which was given to Mr B and Miss G. Whilst I think that HSBC should have given Mr B clearer information during the initial call about his eligibility to submit an application, I don’t think the agent Mr B spoke to made any suggestion that lending had been approved or that it was guaranteed. Each application is subject to full underwriting – and that was made clear to Mr B in the call. Proceeding with a transaction (making an offer, paying fees and instructing a solicitor) based on only a DIP carries risk – as the outcome of a successful application depends on full underwriting. Income may be assessed differently, and property issues can have an impact on mortgage eligibility. Having previously discussed this complaint with Mr B, I’ve already explained to him in my preliminary emails that I can’t reasonably hold HSBC responsible for the steps taken by him and Miss G before they’d received a mortgage offer. On full application Mr B and Miss G were required to verify the information they provided to HSBC to obtain the DIP. The significant information in this case was Mr B’s employment contract. I wouldn’t consider it unusual or unreasonable that a lender changes it position on its willingness to lend based on what it learns from such documents. And it’s because these documents can sometimes reveal information that’s different – albeit subtly different in this case – from what it understood from discussions preceding the DIP, that a DIP does not guarantee a mortgage application will be successful. In any event Mr B and Miss G were first told that Mr B didn’t meet eligibility on 17 June 2025. I appreciate that HSBC went on to further consider the application with a final lending decision being made in mid-July 2025, but any action Mr B and Miss G took after 17 June 2025 was based on the knowledge that they were unlikely to be able to proceed with HSBC. And they told HSBC during the application call in July 2025 that they weren’t expecting their application to be reconsidered – as far as they were concerned the lending decision was already made. As I’ve said, Mr B and Miss G could have withdrawn from the transaction at that initial decision stage in June 2025 which would have prevented them from incurring an ERC, but they chose to proceed with their plans. They’ve told me they weighed-up what would be

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most financially advantageous to them in all the circumstances – so I’ve been mindful that included the knowledge that they may have had to incur the ERC. I accept they’d already incurred some costs by that point, but after getting the lending decision, they were able to make a fully informed decision on the pros and cons of proceeding and they chose to continue with the transaction. For the reasons I’ve explained, I can’t reasonably hold HSBC responsible for that. Mr B and Miss G chose to commit themselves financially to the transaction ahead of making a full application with HSBC. And it appears that from what Mr B and Miss G have said in response to my provisional decision, they’d thought about the impact of delaying their sale amidst concerns about housing market conditions at the time. So, there’s a possibility that even if they’d been given better information from the outset, they would have ended up in the same position they’re in now – by that I mean seeking lending through a different lender, so that they could achieve their plans. I know this isn’t the answer Mr B and Miss G were hoping for, but after careful consideration, I’m satisfied that this is a fair and reasonable outcome when considering all the circumstances of this case. My final decision My final decision is that I uphold Mr B and Miss G’s complaint and I direct HSBC UK Bank Plc to pay them £500 compensation. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr B and Miss G to accept or reject my decision before 27 April 2026. Arazu Eid Ombudsman

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