The complainants, referred to as Mr and Mrs T, went to the ombudsman after the mistake made last year, which came to light the day before they were due to exchange contracts.
The clients had wanted to increase the borrowing on their property, and then port this mortgage to a new property, while taking out a buy-to-let loan on the original property.
Mr and Mrs T told the FOS the numbers on the two mortgages had never really made sense to them, and queried them before deciding the broker was the expert.
They had also been told they would be able to raise the money needed without having to pay an Early Repayment Charge (ERC) on the first mortgage.
In the end the complainants took out a new higher mortgage and secured a price reduction on the new property, but incurred an ERC of £5,675, which they wanted L&C to cover.
L&C refunded its fees and offered to pay £300 in compensation.
ERC not fault of L&C broker
The initial FOS investigator ruled that the pair would always have to had to pay an ERC, despite the advice, but said L&C should increase its compensation to £500 on account of the stress caused by the broker error.
However, L&C did not accept this view and wanted to know how much Mr and Mrs T had benefitted after the price reduction on the house.
The final ombudsman decision ruled the price cut was not relevant to the trouble and upset caused by the broker and ordered L&C to pay £500.
In a written decision, ombudsman Belinda Knight said: “Even if they’d been given the right advice from the start, Mr and Mrs T would have ended up paying an ERC to their current lender.
“This means I can’t award them the cost of the ERC.
“But the fact they then suddenly found out they’d have to pay this as well, when the broker had promised they wouldn’t, added to the impact of the broker’s mistake.”
However, the ombudsman said it awarded less compensation than would have typically been the case in the scale of such a mistake, because Mr and Mrs T didn’t push L&C harder for answers when the sums didn’t make sense.
A spokesman for London and Country said: “L&C is committed to ensuring that all our customers benefit from the great service and fee-free advice that we’re well known for.
“That’s borne out not only through our customer feedback but also by an excellent record with the Financial Ombudsman Service.
“However, on occasion we will fall short of our own high standards and mistakes will happen.
“In this case we agreed that our adviser had made an error and were happy to abide by the decision of the Ombudsman.”
