A spokesman from the Financial Ombudsman Service (FOS) said: “A lot of people are saying they are keen to move, but are no-longer eligible after they took the temporary decision to step back to interest-only. But now, after a few years they can’t move back to a capital and repayment loan, so feel excluded from the market.”
Much of the regulator’s work on interest-only, including research and a consultation issued on 2 May, has focused on struggling borrowers and treating customers fairly, but it won’t be drawn on ‘commercial lending decisions.’
In its annual review, FOS also confirmed it receives roughly 10 complaints a month about interest-only, with the majority focusing on administration issues and not mis-sales at all, as many in the industry fear.
However, overall, complaints about the mortgage industry have risen 25% year-on-year in line as overall industry complaint numbers broke new records.
A total of 11,920 mortgage complaints were received by the ombudsman, of which the majority related to administrative errors. FOS said that in many cases there was an ‘absence of clear communication from the lender’ and that borrowers felt they were not given enough help to work through their problems.
FOS also reported a dramatic increase in the number of complaints made by borrowers who felt their lender had made a mistake with their mortgage account but were unable to say exactly what had gone wrong.
Many complaints about mortgages were remedied informally, FOS said. Many of the cases simply required greater explanation to the consumer about how their mortgage worked.
In total, FOS opened 508,881 new cases in 2012/13, which is a rise of 92% on the previous year and the Ombudsman received over 2 million enquiries, almost doubling last year’s tally.
Payment protection insurance (PPI) made up 74% of all cases, rising to 378,699 – more than double the previous year.
Natalie Ceeney, chief ombudsman, said: “We have seen a much stronger consumer voice in the last year – with people becoming more aware of their rights and less willing to put up with poor customer service.
“As levels of confidence in financial services have eroded, it is disappointing that we still haven’t seen any significant improvement in complaints handling. Too many financial businesses still seem unable to sort out problems themselves, without the ombudsman having to get involved.”
Four of the UK’s largest banking groups accounted for 62% of all complaints, up from 52% last year. Overall, the Ombudsman compensated consumers in 49% of cases.
The Ombudsman also said the number of cases brought by Claims Management Companies had fallen 12%.