Santander UK Plc · DRN-6086867

The complaint Mr and Mrs C complain about the progress of a mortgage application they made to Santander UK Plc. They say that it caused unreasonable delay and left them paying more interest than they should have done. What happened Mr and Mrs C had an existing mortgage with Santander, secured over their then home. In 2024 they decided to purchase a new home and applied for a new mortgage with a higher balance. Mr and Mrs C also intended to sell their existing property. They planned to pay for the new property using savings and the new mortgage. At the time of their application to Santander their existing property wasn’t sold, though it was on the market. Mr and Mrs C couldn’t sell their existing property before the new purchase completed, as then they’d have nowhere to live. But their new purchase wasn’t dependent on the sale of the old property happening first or simultaneously. Mr and Mrs C’s broker submitted a mortgage application in October 2024. Santander asked some questions – including asking for proof of income and for details of the source of funds to be used as the deposit for the new property. The broker also told Santander that Mr and Mrs C had changed solicitors, though Santander didn’t pick up on this at the time. Santander said that because Mr and Mrs C wouldn’t be selling the old property in order to fund the purchase of the new one, and because the old property and mortgage could still be in place on completion of the new one, it would have to include the costs associated with the old property in the affordability assessment for the new mortgage. As a result, it could now only lend around £270,000 – Mr and Mrs C had been expecting to borrow around £330,000. Mr and Mrs C’s broker said that a sale of the old property had now been agreed, and asked Santander to reconsider what it could offer. Santander said it would require proof that the sale had completed, not merely been agreed, or the lower maximum lending limit would apply. In early December Mr and Mrs C’s broker said that they would consider repaying the mortgage on the old property themselves, before it sold, if that would make a difference to the amount they could borrow on the new property. Santander said it would be able to consider the higher borrowing amount if the old mortgage had been paid off. Mr and Mrs C redeemed the mortgage in mid-December. Because Mr and Mrs C had used around £30,000 of their savings to repay the old mortgage, they now needed to borrow more because they had less funds left to use as a deposit for the new property. Their broker therefore asked Santander to consider lending of £350,000. The seller had also agreed a price reduction since Mr and Mrs C first applied. The lower purchase price and higher balance meant that the loan to value (LTV) on the new property increased. Mr and Mrs C had previously selected an interest rate of 4.04%, based on the

-- 1 of 4 --

LTV being below 75%. With the new balance and purchase price the LTV was above 75% and so the best available rate was 4.95%. Santander agreed a mortgage offer at that interest rate for borrowing of £350,000 over a term of 21 years. I’ve set out an overview of what happened above. Within that time, there were customer service failings. At times Santander asked the broker for information it already had, or for things that had already been clarified. There was a delay while the application briefly went to the wrong department. When processing the finalised application, in mid-December, Santander initially said it couldn’t lend the full amount because it had mistakenly not included all of Mrs C’s income in the affordability calculation. And when it did issue an offer for the full amount, on 19 December, it sent it to the old solicitors by mistake. The offer was only sent to the right solicitors on 6 January 2025. Mr and Mrs C complained. They said the process had been unreasonably long and stressful. They said Santander had forced them into choosing between selling their old property before the new one completed – leaving them homeless for a time – or reducing their deposit and increasing the borrowing on the new mortgage, increasing the LTV and leaving them with a worse interest rate. Santander didn’t initially uphold the complaint. But when Mr and Mrs C brought it to us, it said that on further reflection it agreed that its customer service hadn’t been to the standard it would expect. It offered £300 compensation. Our investigator thought that was a fair offer to reflect the additional delay and inconvenience caused. But he thought Santander had made a reasonable lending decision in the end and that Mr and Mrs C hadn’t lost out on a lower interest rate than the one they ended up with. Mr and Mrs C didn’t agree and asked for an ombudsman to review their complaint. 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. Having considered everything, I’m satisfied Santander made a reasonable lending decision here. Under the rules of mortgage regulation, it’s required to carry out a detailed affordability assessment. That includes taking full account of committed and other expenditure. Usually a residential mortgage application for a home mover (as opposed to a first time buyer) will involve the old property being sold, with the mortgage paid off and the equity used to fund the new purchase alongside the new mortgage. That wasn’t the case here. Mr and Mrs C were buying the new property using a mortgage and savings. They weren’t reliant on the sale of the old property. And, at the time of their application, they hadn’t confirmed a sale of the old the property. That means that there was a real possibility that when the new mortgage completed they would still own the old property, with its mortgage still in place and all the other running costs of a property – such as council tax, utility bills, and so on – also ongoing. In those circumstances, Santander had to take into account the expenses associated with the old property as part of the affordability assessment. Unless there was clear evidence that a sale had completed, and that Mr and Mrs C would therefore not be liable for those costs, then they would still have to pay them after the new mortgage completed. That additional expenditure meant there was less income available to service the new mortgage, which reduced the amount Santander was able to lend. That was a reasonable decision, in line with the rules of mortgage regulation Santander had

-- 2 of 4 --

to abide by. Mr and Mrs C have said that Santander’s online mortgage affordability guide suggests they should have been able to borrow much more. But I don’t think that changes my conclusion. That’s only a guide, and intended for standard circumstances, and subject to an application being fully considered. Mr and Mrs C’s situation wasn’t standard – not only did they have their previous home to be factored in, but some of their income came from buy to let properties, which is assessed differently to employment income. I don’t agree that Santander pressurised or forced Mr and Mrs C into repaying their old mortgage, or selling the old property before the new one completed. It simply assessed their application based on the facts presented to it – that, in the absence of evidence of a sale completing imminently, it was likely that the old mortgage and property costs would continue after the new mortgage completed and therefore had to be factored in. It was Mr and Mrs C’s broker, not Santander, that suggested that repaying the old mortgage might help with the affordability assessment. Santander agreed that if that happened it would be able to lend more – without the old mortgage monthly payments, Mr and Mrs C’s expenditure would go down and they’d have more money available to service the new mortgage, meaning Santander could lend more. This wasn’t a case of Santander forcing Mr and Mrs C to take that step. It simply explained that there was a maximum amount it could lend in their circumstances as they were. And it agreed that, if their circumstances changed, so would the amount it could lend. It was Mr and Mrs C’s choice to repay their mortgage. I understand why repaying the mortgage caused them some difficulty. It meant that they had less savings to put to the new purchase, so needed to borrow more than they had originally applied for. But, in the absence of a confirmed sale of the old property, it was the only way they would be able to raise enough funds on the mortgage to buy the new one. That extra borrowing meant that the loan to value increased from below 75% to above 75%. In common with many lenders, Santander offers interest rates in LTV bands. In general terms, the higher the LTV the more risk there is to the lender, and therefore higher LTV bands have higher interest rates to reflect that increased risk. The increased borrowing amount took Mr and Mrs C above the 75% threshold, which meant they weren’t eligible for the 4.04% interest rate they’d initially applied for. But this wasn’t because of anything Santander had done wrong. It was simply a reflection of the amount Mr and Mrs C needed to borrow compared to the value of their property. Without a sale of the old property confirmed as completing before the new purchase, Mr and Mrs C were never going to be able to borrow the lower amount – because if they didn’t pay off the old mortgage instead that amount wouldn’t pass Santander’s affordability assessment. Putting things right In the end, Mr and Mrs C were able to obtain the mortgage they needed, even though they hadn’t confirmed the sale of the old property. To obtain that mortgage without a sale they needed to repay the old mortgage, borrow more, and move into a higher LTV band. Without a sale, there was no way they could ever have been in the lower LTV band. The 4.04% rate wasn’t one that ever could have been offered to them in their circumstances. So it wouldn’t be fair to require Santander to offer them that rate. Santander did cause delay and there was poor customer service along the way. That’s not in dispute. It’s fair and reasonable that it compensates them for that. I’ve taken into account that Mr and Mrs C actually benefitted financially from the delay, even if it caused them distress and inconvenience, because interest rates reduced. The interest rate in the above

-- 3 of 4 --

75% LTV band, which was the right band for Mr and Mrs C, was 5.32% until 28 November and 5.04% until 12 December. It only reduced to 4.94% on 13 December. So if Santander had issued a mortgage offer sooner, it would have been at a higher interest rate than the one Mr and Mrs C ended up with. That’s saved them around £30 per month (compared to 5.04%) or around £110 per month (compared to 5.32%) for the duration of the fixed rate. Nevertheless, it’s clear that Santander’s delay and poor service did cause Mr and Mrs C much upset, and more inconvenience than should have been the case. It’s offered £300 compensation. I’ve considered our guidance on compensation awards,1 which says that an award of up to £300 is appropriate where there have been repeated errors, requiring reasonable effort to sort out over days or weeks. In all the circumstances, I think Santander has made a fair offer. My final decision My final decision is that Santander UK Plc should pay Mr and Mrs C £300 compensation. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr C and Mrs C to accept or reject my decision before 7 April 2026. Simon Pugh Ombudsman 1 https://www.financial-ombudsman.org.uk/consumers/expect/compensation-for-distress-or- inconvenience

-- 4 of 4 --