In May 2021, Keiko purchased her first home. Keiko contacted a mortgage adviser for help to get finance and to fix her loan. The adviser recommended that Keiko fix for 12 months at 2.6% interest per annum with Bank A. Keiko agreed. Because Keiko had a low deposit when she bought the house, the lender had to apply a low equity premium on the interest rate.
A year later, in April 2022, Keiko contacted the adviser again for help to refix her loan. Keiko provided screenshots of the different interest rates and terms offered by Bank A and was given advice on each option. Keiko refixed for another two years at 5.15% per annum. Two years later, in April 2024, Keiko refixed again for 18 months at 7.24% per annum.
Keiko said that when she first fixed her loan in 2021, the adviser should have given her all interest rate options from 6 months to 5 years, but they hadn’t.
Keiko complained to FSCL.
Dispute
Keiko complained that the adviser only told her about the 12 month interest rate. She said that if she had been given all interest rates and terms, she might have decided to fix for longer. Keiko said that the 12 month rate would disadvantage her by about $75,000 over the five years that she had the loan because every time she had to refix, her interest rate had increased and she was paying more in loan payments.
The adviser was adamant that Keiko had been advised on all interest rates and terms available in 2021. The adviser provided us with copies of emails with Keiko from 2021 and 2022 to support their view.
Review
We found that the adviser’s advice to Keiko in 2021 to fix her interest rate for 12 months was suitable. The emails clearly showed that Keiko agreed to using a ’12-month strategy’. As Keiko had a low deposit when she bought her house, a shorter term meant that she might be able to remove the low equity premium she was paying sooneras house prices may have risen. The 12-month strategy was successful, and the premium was removed when Keiko refixed in 2022.
We considered whether Keiko understood that there were different interest rates and terms available in 2021. We decided that it was likely she did know, because she had provided the adviser with screenshots of different interest rates and terms available in 2022 and hadn’t raised any concerns that she wasn’t advised on them in 2021. We could also see from the emails that Keiko had been provided with all interest rates and terms for Bank B in 2021, but had decided to go with Bank A.
We decided that the advice was suitable and that it was likely that Keiko knew that there were different terms and interest rates available when she fixed in 2021.
Resolution
We suggested that Keiko discontinue her complaint. She did not agree with our suggestion, but her further submissions did not change our view.
Insights for advisers
Advisers must make sure that they properly record, in writing, all advice given to borrowers.
