Santander UK Plc · DRN-6232739

The complaint Mr and Mrs F complain about action taken by Santander UK Plc following the end of the term of their interest only mortgage. What happened Mr and Mrs F have a mortgage with Santander. In 1997 they borrowed around £30,000 over a 25 year term, which therefore ended in 2022. At the end of the term, Santander asked Mr and Mrs F to repay the outstanding capital balance. Mr and Mrs F complained in 2023. They said that they had taken out an endowment policy, also with Santander, and so they should not owe anything at the end of the term. And they questioned why the mortgage balance was now around £65,000 when they had only borrowed around £30,000. Santander said there had been an endowment policy, but it was with a third party not Santander. And in any case the policy had lapsed some years earlier because Mr and Mrs F hadn’t paid the premiums, so there was no payment due from the endowment to put towards the mortgage balance. The balance had increased over the years because Mr and Mrs F had been in arrears for long periods during the mortgage, so there were missed payments and additional interest as well as charges and legal fees to pay in addition to the original capital. It said a complaint about the sale of the mortgage was out of time. Mr and Mrs F didn’t bring that complaint to us in 2023. In 2025, they made a further complaint to Santander. This time, they complained about the following matters: • There had been an endowment in place, they believe they had been paying the premiums, and the endowment should have paid off the mortgage. They understood that their mortgage payments included the endowment premiums. The mortgage should have come to an end in 2023. • None of the fees and charges added to the balance had ever been explained to them. • Interest had been added unfairly. • The balance was unfairly high based on the amount they borrowed, and the only arrears they believe they incurred, in 2001 – which they have been repaying at £25 per month ever since. • Santander said in late 2024 that there was an arrangement to pay in place, but Mr and Mrs F had never agreed to an arrangement. Santander didn’t respond directly to that complaint. It wrote to Mr and Mrs F referring back to its 2023 final response. However, in the meantime, in 2024, Santander had written to Mr and Mrs F saying that it would refund most of the fees and charges it had charged over the life of the mortgage.

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Our investigator said that offer superseded the 2023 final response, so we could consider that issue – he thought Santander had made a fair offer in 2024 and he didn’t think it should be required to refund the remaining fees. And in respect of the other issues, he said we could consider what action Santander had taken since the 2023 final response. He said Santander had fairly charged interest on the outstanding balance, including missed payments. He said Santander hadn’t written to Mr and Mrs F in 2024 agreeing a new arrangement – it was just notifying them of administrative changes resulting from a migration of its mortgage accounts to a new computer system. He didn’t think the complaint should be upheld, so Mr and Mrs F asked for it to be reviewed by an ombudsman. 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. The rules of the Financial Ombudsman Service say that a complaint should be made to Santander first, and Santander should send Mr and Mrs F its final response. Mr and Mrs F then have six months to refer the complaint to us if they remain unhappy. If they don’t, the complaint is out of time and we can’t consider it – unless Santander consents to us considering it even though it’s out of time (which, in this case, it doesn’t), or unless there are exceptional circumstances which explain the delay. I don’t think there were any exceptional circumstances. Mr and Mrs F say they didn’t receive the 2023 final response at the time. But it was correctly addressed, and in any case they had made a complaint and were expecting a response, so I’d have expected them to follow up with Santander if they didn’t receive it at the time. The time limit runs from when it was sent, not when it was received. That means that we can’t consider most of the things dealt with in the 2023 final response – though we can consider what has happened since. And we can also consider the fees and charges added to the balance. Santander included that in the 2023 final response, when it didn’t uphold the complaint and said the fees were fair. But it changed its stance on that in 2024 when it refunded most of the fees. That means that, in effect, it withdrew that part of the final response and so for that part of the complaint the six month time limit doesn’t apply. Mr and Mrs F say this isn’t an interest only mortgage, it’s an endowment mortgage. But those are the same thing. An endowment mortgage is an interest only mortgage where the borrower takes out an endowment policy, intending the proceeds of the endowment to be used to repay the mortgage at the end of the term. In this case, there were no endowment proceeds, so the capital wasn’t repaid and remains outstanding. Santander says it communicated with the endowment provider at the end of the term to see if there was an endowment in place which could be used to repay. But the endowment provider said the policy had been cancelled in 1998 because Mr and Mrs F stopped making payments towards it. As I say, I can’t consider anything that was covered in the 2023 final response, which includes whether the mortgage should have been paid off by an endowment policy at that time. But I can consider what has happened since. I’m satisfied that this was an interest only mortgage, and that it wasn’t paid off by an endowment policy in 2023. As a result, the capital balance remains outstanding, and it’s fair and reasonable that Santander has tried to engage with Mr and Mrs F to try and ensure the mortgage can be repaid now. Santander sent Mr and Mrs F a letter in 2024 suggesting that they had taken out a new mortgage and enclosing a “mortgage completion statement”. I can see why Mr and Mrs F found this letter confusing. They hadn’t taken out a new mortgage. The completion

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statement confirmed that there was only six months left on the mortgage term. At this time, Santander changed the IT system it used for managing mortgages. Mr and Mrs F’s mortgage was migrated over from the old system to the new system, and the new system automatically generated the “welcome” letter. It didn’t make any actual changes to their mortgage account, but the reason for the letter wasn’t made clear to Mr and Mrs F, and I think it should have been. But I’m not persuaded this caused them any loss, since there were no changes made to their mortgage and the letter didn’t suggest there had been. Nor did the letter suggest that the mortgage term had been extended or that a payment arrangement had been agreed. I’ve already explained that I can’t consider the fairness of what happened before 2023 – other than the fees and charges, which I’ll deal with below. But I can consider whether the amount Santander says is now outstanding, and which it requires Mr and Mrs F to repay, is fair. Mr and Mrs F say that the amount Santander says is outstanding now is much more than they borrowed. But I’ve not seen anything to suggest that Santander is incorrect about that. Mr and Mrs F’s mortgage has been in significant arrears for much of the term – the outstanding balance includes not just the original capital they borrowed, but also the arrears and additional interest charged because of the arrears. The arrears are currently around £36,000. Where the mortgage isn’t paid, the balance is higher than it should have been, which means more interest is charged. Over time, this additional interest mounts up. I don’t think there’s any evidence that the current balance is incorrect or unfair. In 2024, Santander told Mr and Mrs F it would remove £8,082 in fees and charges from the mortgage balance. This includes a mixture of fees charged by Santander directly (such as arrears management fees), and fees charged by Santander’s solicitors for legal action taken in relation to arrears over the years. It said this was because “we didn’t clearly explain the impact of adding these fees and charges to your account”. I think that was fair, and now that those fees have been removed, Mr and Mrs F will not have to pay them. There were some fees that Santander did not remove, so I’ve also thought about whether that was fair – or whether it should remove them now. I’ve also thought about the fairness of fees added more recently. In respect of the historic fees Santander didn’t refund, there’s limited information available. They related to legal action taken between 2009 and 2011. Because there’s limited information available now I can’t know the exact circumstances in which those fees were charged. However, the evidence does show that the mortgage was in substantial arrears at the time. In the circumstances, I don’t think I can fairly find that it was unreasonable for Santander to have considered legal action or charged fees for legal action, and so I don’t think charging those fees at the time – or not refunding them in 2024 – means that the mortgage relationship between Mr and Mrs F and Santander is currently unfair. Much the same considerations apply to the fees charged since the 2024 refund. The mortgage remains in substantial arrears, and so I don’t think it was unreasonable that Santander considered legal action at the time. It’s put legal action on hold while we look at this complaint. Now that the complaint is at an end, Mr and Mrs F will need to get in touch with Santander and discuss any proposals they may have for repaying the outstanding balance. Santander will need to give fair consideration to what they say in deciding what to do next. But, unless Mr and Mrs F are in a position to repay the outstanding balance within a reasonable time, it’s likely that it will resume repossession action. I hope that’s not necessary.

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My final decision My final decision is that I don’t uphold this complaint. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr F and Mrs F to accept or reject my decision before 20 April 2026. Simon Pugh Ombudsman

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