22 May 2024

Mortgage advisor's error causes couple to miss out on 2.55% interest rate

10:06 am on 22 May 2024
A man with a calculator inspects a line of houses stacked on top of gold coins.

Photo: 123RF

A couple who missed out on a 2.55 percent interest rate and had to instead fix their mortgage at a rate of 4.1 percent have been awarded compensation from their mortgage advisor.

The case was dealt with by Financial Services Complaints, an external complaints resolution service that deals with issues that cannot be resolved between a client and service provider directly.

The couple's loan came up to refix in mid-2021, when rates were near historic lows.

They selected a rate of 2.55 percent and told their mortgage advisor, but he failed to pass on the instructions to the lender and the loan was not fixed.

In November of that year they discovered their loan was floating and contacted the advisor.

But by then, rates had risen significantly.

FSCL said the advisor first thought the lender was at fault but then accepted responsibility.

In December, the couple fixed their loan for two years at 4.1 percent.

The advisor and clients agreed in February he would pay them compensation of $12,000 at $500 a month for 24 months. This represented the difference in what they were paying in interest as a result of having fixed in December rather than mid-year.

The advisor made 10 payments before stopping, having paid a total of $5500.

The couple tried to contact the advisor through May and June 2023 but received no further payment.

FSCL said the advisor had breached the agreement with the client and it was reasonable for him to pay another $6500. But he did not make the payment until four weeks after FSCL sent a settlement form.

Financial Advice NZ chief executive Nick Hakes, which represents advisors including mortgage brokers, said complaining to a service such as FSCL was the appropriate response in this situation.

He said the case seemed to be one where something had gone wrong with the advisor's process and he might not have been operating within a broader framework.

People who were considering engaging a mortgage advisor should do some research, he said. The association has a "find an advisor" function on its website, he said, and those advisors would be subject to obligations beyond the minimum requirements.

"Come prepared with questions. It's a two-way relationship when you're sitting down, having to talk about something that can be quite scary initially, talking about your financial situation, goals, dreams and aspirations."

He said people should also ask about an advisor's process, what they should expect and whether the adviser had helped other people in a similar position.

"A lot of advisors would call that a discovery meeting or a fact find, it's about building confidence in each other that we can form a good relationship and drive good financial outcomes in the future."

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