Complaints to ombudsman about mortgages rocket

Complaints about mortgages and endowment policies rose by more than half last year, the Financial Ombudsman Services revealed yesterday.

The authority, which aims to help consumers settle disputes with financial services companies, said complaints about mortgages rose by 55 per cent in the year to March to 3,876.

By far the biggest number of complaints, however, concerned endowments. The FOS received 14,595 complaints about such policies linked to mortgages – an increase of 60 per cent on the previous year. For a second year, these complaints accounted for about half of all the new investment-related complaints. Because of falls in stock markets, many of these policies are not generating sufficient bonuses to repay the related mortgage. In 40 per cent of cases the FOS found in favour of the borrower.

An FOS spokeswoman said: "The general nature of the complaints is consumers saying they were not made aware of the risks. There was no question that these policies would not meet the guarantees, or that they were linked to the Stock Exchange in any way."

There were 5,881 complaints about personal pension plans, an increase of 75 per cent, mainly because of mis-selling. This continues to be the second-largest area of complaint and accounts for 14 per cent of all complaints.

The ombudsman's report also revealed that the Building Societies Association has formally called on the Financial Services Authority to intervene in the row over two-tier mortgage rates. The annual report from the chief ombudsman, Walter Merrick, admits that there was "substantial disquiet in banking and building society circles", culminating in a formal demand from the mortgage lenders for the FSA to become involved. The FOS adjudicates on complaints about financial services companies.