The Mortgage Works (UK) Plc · DRN-6209743

The complaint Mr K complains that The Mortgage Works (UK) Plc behaved unreasonably when calculating an early repayment charge when he repaid the mortgage held with it. What happened Mr K told us: • He had a mortgage with The Mortgage Works (TMW) which he’d repaid in November 2024. However, the redemption figure charged by TMW at that time had been incorrect as it hadn’t taken into consideration that he was able to make a 10% overpayment in the same period. • He’d been a loyal customer of TMW for over ten years for various properties, but he felt the early repayment charge term was unfair here and a breach of contract law as he wasn’t able to calculate the early repayment charge which would be applied. • TMW’s terms allowed for an annual 10% lump sum overpayment without penalty. However, it says this benefit cannot be applied if the loan is being redeemed in full, which is unfair and wasn’t clear at the outset. This also appeared to be inconsistent with other lenders. • He’d had a previous case upheld by our service regarding early repayment charges when the calculations hadn’t been disclosed and this was a similar situation. TMW told us: • It didn’t think it had done anything wrong as the early repayment charge terms had been clear in the mortgage terms which Mr K had applied for. • Mr K had two parts to his mortgage. The annual overpayment allowance for part one ran from August to August, and part two ran from October to October. As Mr K had used his annual overpayment allowance for part two in October 2024, it wasn’t available for him to use again as he’d repaid the mortgage in full in November 2024. • As a business, it needed to ensure its products were appropriately priced to avoid losses in the event of customers exiting their products early. Our service’s technical guidance said lenders could calculate early repayment charges as pre-estimate of loss when the agreement was entered into, and it could be set in the context of the product without the requirement for an individual calculation to be provided. • It had calculated the early repayment charge on a portfolio basis, rather than individual customer level, which was in line with the rules set out in the Mortgage Conduct of Business Rules (MCOBS), so it hadn’t made a mistake. And although it had resolved a complaint for Mr K previously by refunding the early repayment charge, that didn’t mean it needed to do so here as those circumstances were

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different. Our investigator didn’t recommend the complaint be upheld. He thought the early repayment charge terms were clear and noted the redemption statement sent to Mr K in November 2024 said what the early repayment charge would be. He said TMW was entitled to set the early repayment charge terms based on the reasonable pre-estimate of costs on mortgage groups, it didn’t have to do this on an individual basis. He thought it was reasonable for TMW to provide the pre-estimate on what Mr K would pay if he redeemed his mortgage early and he was satisfied the figure provided by TMW was reasonable and a fair reflection of what had been considered by TMW based on the evidence it provided. Mr K didn’t agree and asked for an ombudsman to review his complaint. He said there were inconsistencies with TMW’s early repayment charge structure which is why he’d had a complaint upheld. He felt the redemption statement had been based on the figure before his overpayment had been made in October 2024. He also said the overpayment in October 2024 had been before the annual allowance had reset on 31 October 2024, and therefore he should have been able to use the new October 2024 to October 2025 annual allowance. 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 done so, I’m sorry to disappoint Mr K but there’s not much that I can add to what our investigator has already said. I’ve noted Mr K’s comments about the previous decision which was upheld by our service. However, I do just need to make clear that our service investigates each case on its own merits. Although a previous case has been upheld, that doesn’t mean a precedent has been set and our outcome will always be the same as circumstances differ in each case. Mr K says the terms of the mortgage with TMW were unfair and has referenced the law he feels hasn’t been met. It’s not for me to say whether a business has broken the law, only a court can do that. My role is to consider whether a business has acted unfairly or unreasonably, but I’m not persuaded that’s the case here. I’ve reviewed the mortgage offer which was provided to Mr K, and I can see there were dedicated sections regarding early repayment charges and overpayments. I think they were clear, and prominent and in plain language. I’m satisfied they were transparent and that Mr K was adequately informed of these terms by TMW, so I don’t think its behaved unreasonably. I recognise Mr K says other lenders don’t apply the same restriction to the 10% early repayment restriction, but that doesn’t mean TMW has behaved unreasonably. It’s a commercial decision TMW is able to make on the terms it offers its customers, and provided its clear about these terms, and they aren’t fundamentally unfair, it’s not something our service would interfere with. It also doesn’t mean TMW is undertaking an unfair practice because it has decided not to offer the same options or benefits other businesses have chosen to. There is no regulatory requirement for businesses to offer the exact same benefits in the same way there is no expectation for them to offer customers the exact same product. I’m satisfied TMW terms were sufficiently clear that Mr K could have compared this with other lenders to decide whether or not he wished to proceed. Mr K has asked that TMW provide a detailed breakdown of how the early repayment charge was calculated, including the methodology and justification this was a pre-estimate of loss rather than a penalty. As our investigator has already explained, the Mortgages and Home Finance: Conduct of Business sourcebook (MCOBS) sets out the requirements for lenders regarding early repayment charges. Those requirements say lenders must be able to show

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early repayment charges as a cash value and that they are a reasonable pre-estimate of the costs incurred if a customer repays a mortgage early. It also says a lender may choose the method it uses for calculating early repayment charges and it can calculate the same level of early repayment charge for mortgage contracts of a similar type. TMW has provided our service with evidence of how its early repayment charges were estimated along with an explanation for its calculations. I’m satisfied based on the evidence provided TMW has acted reasonably here. I recognise Mr K says the 10% overpayment allowance should have reset for him on 31 October 2024 as his previous overpayment was made before this. However, whilst I agree Mr K’s allowance for part two would have reset for the year on this date, I don’t think TMW’s calculation was incorrect. Mr K made an overpayment in October 2024, and £3,500 was applied to part one of his mortgage. The 10% overpayment terms for this part wouldn’t reset until 31 August 2025. This means regardless of the mortgage being repaid in a different month to the overpayment, there was no remaining allowance for future overpayments for this part. Therefore, the full early redemption would have been payable on the outstanding balance of this part in November 2024. However, for part two of Mr K’s mortgage, he’d made an overpayment in mid-October 2024 and therefore used the 2023-2024 overpayment allowance. In theory this would mean the overpayment allowance would have been available from 31 October 2024, but Mr K didn’t use the overpayment in October 2024 when it reset. He actually redeemed the whole mortgage in November 2024. Although Mr K feels fully redeeming the mortgage should take into account the 10% allowance, the overpayment terms say this does not apply if the whole balance was being repaid in the same month – as it was here. Therefore, I think it was fair for TMW to apply the early repayment charge to the full outstanding balance in November 2024. I can also see this figure was confirmed to Mr K before he redeemed the mortgage in full, so I don’t think TMW has acted unfairly here. Mr K told our service he thinks TMW calculated the early repayment charge incorrectly when he redeemed his mortgage in full. He thinks this was based on the outstanding mortgage balance before he’d made the overpayment. I can understand why Mr K believed this was the case as the redemption statements were being produced by TMW around the time the overpayment was credited and I can see these balances didn’t take into account the overpayment. However, TMW has shown it applied the 3%-tiered early repayment fee, which I can see was set out in Mr K’s mortgage offer. It says the 3% fee was applied on a balance of £32,126.70 for part one of the mortgage and £13,027.18 for part two of the mortgage - which were the outstanding balances as of 1 November 2024. So, I’m satisfied the early repayment charge was applied to the lower balance correctly. I recognise my decision will likely be frustrating for Mr K as I know he feels strongly about this complaint. However, having considered all the evidence from both parties, I’m not persuaded TMW has acted unreasonably and I won’t be asking it to do anything further. 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 K to accept or reject my decision before 19 April 2026. Jenny Lomax Ombudsman

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