Kensington Mortgage Company Limited · DRN-6132091

The complaint Mr H’s complaint is about a mortgage account with Kensington Mortgage Company Limited. Following my decision dated 3 March 2026, the issues I am considering in this decision are as follows: - payments made to the managing agents (a company I’ll call S) by Kensington and added to the mortgage; - the balance of the mortgage account since 2024; - credit file reporting by Kensington from 31 October 2023 onwards; - The interest rate applied to the mortgage for the six-year period from 7 January 2019; - The request for a shortfall sale and the way Kensington dealt with this, from 20 May 2024 onwards. What happened I don’t need to set out the full background to the complaint. This is because the history of the matter is set out in the correspondence between the parties and our service, so there is no need for me to repeat the details here. In addition, our decisions are published, so it’s important I don’t include any information that might lead to Mr H being identified. So for these reasons, I will instead concentrate on giving a brief summary of the complaint, followed by the reasons for my decision. In 2007 Mr H took out an interest-only mortgage of just under £164,000 on an interest-only basis, in order to purchase a property for £189,995. The original lender was a business I will refer to as UH, but the mortgage was later transferred to Kensington. Unfortunately Mr H experienced some financial difficulties and the mortgage fell into arrears. The freeholder’s agents, S, also informed Kensington that there were arrears of service charges owed by Mr H, which Kensington paid in order to avoid forfeiture of the lease. Mr H was trying to sell the property at a shortfall, for which he needed Kensington’s consent. He was unhappy at the way Kensington dealt with this. Mr H is also unhappy about information recorded on his credit file, and he says that the interest rate applied to the mortgage was too high. Kensington didn’t uphold Mr H’s complaints and so he brought them to our service. Kensington didn’t consent to us looking at some issues, saying they were out of time. The Investigator agreed Mr H had left it too late to raise some of the issues he was unhappy about. In relation to the issues he was able to consider (listed above), the Investigator initially didn’t think the complaint should be upheld. He was satisfied Kensington’s terms and conditions provided for payment of the service charges.

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In relation to credit file reporting, the Investigator didn’t think there had been any inaccuracy in the information Kensington had reported to the credit reference agencies. He also didn’t think the mortgage account balance was incorrect either, given the payment history. The Investigator also wasn’t persuaded that the interest rate applied to the account was unfair. He explained that, after the initial fixed rate product had expired, the mortgage reverted to the rate specified in the contract, which was 2.05% above the replacement rate, which was LIBOR (the London Inter-Bank Offered Rate). After LIBOR ceased to exist in 2021, the regulator required Kensington to put in place a replacement rate, and this was the Kensington Synthetic LIBOR rate (KSLR). The Investigator was satisfied the interest rate applied to the mortgage was fair and in line with the regulator’s requirements. The Investigator looked at what had happened in relation to the shortfall sale. He noted that there had been no agreement reached on how the remaining balance would be repaid after a shortfall sale, and so Kensington wasn’t able to agree to it. The Investigator didn’t think Kensington was being unreasonable about this. The Investigator noted that Kensington had acknowledged a delay in dealing with matters between December 2024 and February 2025, but he thought the £180 compensation offered by Kensington was fair and reasonable. Mr H didn’t agree and asked for an Ombudsman to review the complaint. Before doing so, the Investigator reconsidered, and after doing so, didn’t think Kensington should have paid the service charges or added them to the account. Kensington responded by providing both court orders and confirmation signed by Mr H that he agreed to the charges being paid. In the face of that evidence, the Investigator conceded that Kensington had been entitled to pay the service charges. The case was then passed to me for review. On 3 March 2026 I issued my decision about which parts of the complaint we are able to consider – the issues listed in the first section above. I will now give my decision on those matters. 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. Service charges: I’ve reviewed the documentation provided by Kensington. I see from these that there are invoices for outstanding ground rent and service charges which were sent to Kensington by S’s solicitors. There is also a court order dated 9 October 2025 where the court has given judgement against Mr H for outstanding service charges and ground rent totalling just over £7,000. I’ve also noted letters provided by the freeholder’s solicitors and signed by Mr H confirming that he agrees the sums claimed for outstanding ground rent and service charge are due, and that they can be paid by Kensington and debited to the mortgage account. Mr H’s position is that he only signed them because Kensington told him that if he didn’t his home would be repossessed. However, those documents didn’t originate from Kensington – they were from the freeholder’s solicitors and had already been signed by Mr H when Kensington received them.

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My review of the documentation persuades me that Kensington acted fairly in paying the outstanding ground rent and service charges and adding them to the mortgage account. There are both court orders and signed confirmation from Mr H that he agrees to this. I’m therefore satisfied that Kensington acted fairly; had the charges not been paid, the freeholder would have been entitled to take action to forfeit the lease, and their solicitors made this clear in the correspondence sent to Kensington when it provided them with Mr H’s signed authority to pay the outstanding charges. I don’t uphold this part of the complaint. Mortgage account balance: I’ve reviewed the payment history on the account, and noted the increase in the balance due to Kensington paying the service charges and ground rent as detailed above. Mr H says the mortgage balance is too high – and that this is because Kensington paid those charges. However, as I’m satisfied Kensington was acting within its rights in doing so, it follows that I’m also satisfied the mortgage account balance is accurate. I don’t uphold this part of the complaint. Credit file reporting: Given the payment history and the arrears on the account, Kensington has recorded adverse information on Mr H’s credit file, which he is unhappy about. However, Kensington is required to provide the credit reference agencies with an accurate report of the position on the account. After reviewing Mr H’s credit file, I’m not persuaded Kensington has acted unreasonably in reporting the correct position to those agencies. I appreciate this may have an adverse impact on Mr H’s ability to raise credit elsewhere in the future, but lenders are entitled to have an accurate portrait of a potential customer’s payment history in order to decide whether or not to advance any new credit to that customer. I don’t uphold this part of the complaint. Mortgage interest rate since 2019: Prior to 31 December 2021 the mortgage operated at the contract rate, which was 2.05% above LIBOR. This was the rate Mr H agreed to when he took out the mortgage. Although LIBOR may from time to time have been higher than mortgage interest rates offered by other lenders, it was not in itself inherently unfair or excessive. When LIBOR ceased to exist, It was reasonable for Kensington to substitute a replacement reference rate. The Financial Conduct Authority (FCA) issued guidance about what a fair replacement rate for LIBOR was likely to be. The FCA’s guidance is one of the things I must take into account in deciding what, in my opinion, is fair and reasonable in the individual circumstances of this complaint. I’m satisfied that KSLR is a reasonable substitute for LIBOR. It’s correct that the mortgage interest rate has increased since 2019, but that reflects general interest rate trends. Rates remained historically low since the financial crash in 2009, but in recent years have increased in line with market conditions. Kensington has no influence over the increase in the reference rate, and has applied the margin of 2.05% on KSLR in line with the mortgage terms and conditions and the mortgage offer. Overall I’m unable to find Kensington has done anything wrong in relation to the interest rate applied to Mr H’s mortgage. I don’t uphold this part of the complaint.

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Delays in the request for a shortfall sale from 20 May 2024: I can see from the contact notes that Mr H was frustrated that the sale of the property didn’t progress as Mr H had hoped. However, the notes also show that Mr H refused to agree to a plan to pay off the shortfall debt, because he was disputing the balance on the account, which had increased due to payment of outstanding ground rent and service charges. I don’t think Kensington acted unreasonably here; it was Mr H who was refusing to agree to a plan to repay the shortfall. I appreciate he had his reasons, because he wasn’t happy about the service charges and ground rent demands from S. However, as I’ve found earlier in this decision, Kensington acted fairly in paying those. Notwithstanding this, Mr H could have agreed to a plan for repaying the shortfall without prejudicing any dispute he had with Kensington or S about the charges. I’m not persuaded, therefore, that Kensington was at fault in refusing to allow the shortfall sale when Mr H wouldn’t put forward proposals to repay the remaining debt. Kensington has acknowledged there was an administrative delay between November 2024 and February 2025, and has offered compensation of £180 for this. I think this is fair, because I’m not persuaded this delay actually prevented the property from being sold during that period. I therefore don’t consider Kensington to have acted unreasonably, nor do I require it to do anything further. I don’t uphold this part of the complaint. Conclusion: I know this isn’t the outcome Mr H wanted. I can see from what he’s told us and Kensington that he’s been through a difficult time over the last couple of years, and I have some sympathy for him. However, I have to put aside my natural feelings of empathy, and decide the case on the basis of the evidence. Having reviewed the evidence, I’m not persuaded, other than the delay for which Kensington has offered £180 compensation, that Kensington has acted unreasonably or treated Mr H unfairly. Mr H said that he has been begging Kensington to take possession of the property. I note that on 24 September 2025 a possession order was made by the court in favour of Kensington. It will now be able to sell the property as mortgagee in possession, without needing Mr H’s consent. Mr H will be responsible for any shortfall debt, so I would urge him to speak to Kensington about this. Mr H might find it helpful to speak to one of the free debt advisory services such as Citizens Advice, StepChange or Shelter. We can provide Mr H with contact details for those agencies if he would like us to. My final decision My final decision is that I don’t uphold this complaint. This final decision concludes the Financial Ombudsman Service’s review of this complaint. This means that we are unable to consider the complaint any further, nor enter into any discussion about it. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr H to accept or reject my decision before 7 April 2026. Jan O'Leary

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Ombudsman

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