One of the first trials related to alleged interest-only mortgage mis-selling has been dismissed with the judge finding in favour of the mortgage broker.
The case, brought by Pure Legal, was dismissed on the basis that it was out of time, with the claimants having all requisite knowledge of the material facts of the damage from the outset of taking out the mortgage.
The claim related to advice given in March 2006 on a mortgage completed in June of that year. At the time of the advice, the couple who took out the mortgage were living in rented accommodation and had several unsecured debts.
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The borrowers indicated that they wanted an interest-only mortgage for the first three years to allow them to pay down those debts before converting to a repayment mortgage.
The broker provided the borrowers with standard documentation, including a Key Facts Illustration, a Mortgage Suitability Report, and an application form.
The borrowers signed the application and Mortgage Suitability Report, both of which reflected their needs and circumstances. They then accepted a mortgage offer from their lender and entered into the interest-only mortgage.
After several years had passed, the borrowers had taken no steps to convert the mortgage into a repayment mortgage and were regularly in arrears on their repayments, resulting in possession proceedings being issued against them.
They eventually sold the property in 2018, redeeming the mortgage in full, and moved into rented property.
The case saw the claimant claim that it was negligent of the broker to recommend an interest-only mortgage without there being a repayment vehicle or viable repayment strategy in place, and that switching to a repayment mortgage and overpaying towards the capital were not viable repayment strategies.
Damages of £41,138.85 were sought, comprising the difference in interest between an interest-only mortgage and a capital repayment mortgage and the amount of capital that would have been paid off under a repayment mortgage.
The judge dismissed the claim on the basis that it was statute barred by virtue of the Limitation Act 1980. The judge also found that in view of the borrower’s objectives the broker acted reasonably in recommending the interest-only mortgage.
Over the past 18 months brokers have been inundated with litigation related to mis-selling. The verdict should see off many claims that fall within the framework set out in the case.
