TSB Bank plc · DRN-6129523

The complaint Mr D and Mrs R are unhappy that TSB Bank plc agreed to lend to them, when it knew of an issue with the warranty on the property they’d decided to buy. Mr D and Mrs R are concerned the property has reduced significantly in value and that they’ve lost out. What happened In 2018 Mr D and Mrs R applied for a mortgage with TSB through a broker. Mr D and Mrs R wanted to buy a new-build property (office building conversion to flat) using the Help to Buy scheme. Following a mortgage valuation arranged by TSB – which valued the property at £342,000 – TSB issued a formal mortgage offer. TSB subsequently realised the property warranty fell outside of its lending criteria. However, it decided to proceed to lend. The mortgage was for around £188,000 on repayment terms, over a 25-year term. The initial interest rate was 2.04% fixed for around five years. At the end of that original term, Mr D and Mrs R applied for a Product Switch. As part of this process, an indexed valuation of around £374,000 was used. In 2024, Mr D and Mrs R applied via a broker to TSB for additional borrowing and to change the mortgage to Buy-to-let (BTL). Another mortgage valuation was arranged by TSB, this one valued the property at £270,000. The valuer also recommended that an additional structural survey be carried out. The application didn’t proceed. In March 2025, Mr D and Mrs R complained to TSB that it had mis-sold the mortgage. They said it was wrong of TSB to have approved the mortgage given the warranty issue. They also said that the shifting valuations of the property and the second valuation suggesting a structural survey was necessary, raised serious concerns about the accuracy and reliability of TSB’s original due diligence. TSB didn’t uphold the complaint. It said it had agreed to make an exception in terms of the warranty issue, so that the purchase could proceed. It said the mortgage valuation report included wording to make it clear that the valuation was solely for mortgage purposes, and that it was recommended that Mr D and Mrs R obtain their own full report, to protect their own interests. TSB provided details of how Mr D and Mrs R could challenge the latest valuation if they wished to and provided referral rights to the Financial Ombudsman Service. TSB later offered to arrange another valuation by a different company, to establish if there were any different opinions on the valuation, which Mr D and Mrs R said they would like to happen. This returned a valuation of £280,000, although Mr D and Mrs R later said TSB didn’t get back to them about this other valuation in a timely manner. Mr D and Mrs R referred their concerns to the Financial Ombudsman Service.

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An Investigator here issued an assessment, not upholding the complaint. Mr D and Mrs R disagreed. They emphasised that TSB hadn’t disclosed the warranty issue to them as first time buyers, and provided evidence that other lenders weren’t prepared to lend on the property. They also said TSB hadn’t gotten back to them about the updated valuation. The Investigator recommended that TSB pay Mr D and Mrs R £100 in compensation as it looked like Mr D and Mrs R had been chasing TSB for an update about the valuation, and hadn’t received one. The Investigator’s opinion otherwise remained the same. TSB agreed with the recommendation to pay £100. As the matter is unresolved, it’s been passed to me to make a decision. 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’ve reached the same overall outcome as the Investigator. Before I explain why, I want to set out the purpose of my role. It isn’t to address every single point that’s been made to date. Instead, it’s to decide what’s fair and reasonable given the circumstances of this complaint. For that reason, I’m only going to refer to what I think are the most salient points when I set out my conclusions and my reasons for reaching them. But, having considered all of the submissions from both sides in full, I will continue to keep in mind all of the points that have been made, insofar as they relate to this complaint. I consider the following to be the key issues in this case: - Did TSB make an error when it decided to continue to offer Mr D and Mrs R the lending, after it realised the warranty provider didn’t fall within its own lending policy? - Was TSB obliged to inform Mr D and Mrs R about the issue to do with the warranty provider, and any potential impact on the future mortgageability (and possibly value) of the property? - Has TSB made any errors, or otherwise acted unfairly, in terms of the valuations that were carried out in relation to both the original lending and the BTL further borrowing application? This is what I’ve considered. TSB’s decision to agree the original lending Mr D and Mrs R have said that TSB shouldn’t have agreed the original lending, because the warranty provider was excluded from the Council of Mortgage Lenders (CMLs) list of acceptable warranty providers. They also point to the fact that the warranty provider fell outside of TSB’s own lending policy. TSB agrees that the warranty provider fell outside of its lending policy. However, it decided to continue to agree the lending, notwithstanding this. A warranty provider not appearing in CML’s list of acceptable warranty providers, doesn’t mean that a lender wasn’t allowed to provide mortgage finance on a property with that warranty provider. In terms of the warranty provider falling outside of TSB’s own lending criteria, ultimately this is a commercial consideration for TSB, in terms of its own appetite for risk. TSB was entitled to decide to make an exception and to continue to agree to offer the lending, in accordance

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with the offer it had made to Mr D and Mrs R. With this in mind, I don’t find that TSB continuing to agree the lending in this instance, means that it made a mistake, or otherwise acted unfairly. Did TSB need to inform Mr D and Mrs R about the warranty issue? Mr D and Mrs R say that TSB didn’t warn them, as first-time buyers, of the potential impact of the warranty issue, on the future marketability and mortgageability of the property. It’s important to note there were a number of parties involved in the original transaction. Mr D and Mrs R applied for the mortgage through a broker. It was the broker’s responsibility to make sure the mortgage was suitable for Mr D and Mrs R’s needs, and to explain key information. There was a conveyancing solicitor, whose role would be (amongst other things) to carry out legal checks on the property, conduct searches and raise queries. There was a surveyor who carried out a valuation on TSB’s behalf, providing a report to TSB to help it decide if the property in question represented adequate security for the proposed loan. What’s crucial here, is that TSB’s role was limited to deciding whether it was prepared to lend the money. It wasn’t providing any advice to Mr D and Mrs R about the mortgage, or indeed whether the property represented a good investment. With this in mind, I don’t find that TSB was obliged to provide any kind of warning to Mr D and Mrs R about the warranty issue. Do the shifting valuations mean TSB has made an error? Mr D and Mrs R are unhappy that the property valuations have fluctuated so much. Understandably they point to the difference between the valuation at the point of the Product Switch in late 2023 (around £374,000) and the mortgage valuation in 2024 when they were seeking to increase the borrowing and switch to BTL (£270,000). TSB says it believes the 2024 valuation was in line with market conditions, and reflected things like the property no longer being new. It also though said that Mr D and Mrs R (or their broker) could challenge the valuation and it set out what they’d need to do and provide if they wanted to do that. TSB subsequently offered to obtain another valuation from a different company, which they did and which resulted in a slightly higher valuation of £280,000. I can completely understand why Mr D and Mrs R are concerned about the fluctuating valuations. And why they would be concerned at what they perceive to be a decrease in value of over £100,000 in a relatively short space of time. I do think it’s important to note that the valuation at the point of the Product Switch was done on a simple indexing basis. This will have taken the original valuation figure and applied an uplift based on data such as the general value changes for properties of that type and location. This isn’t an uncommon approach for lenders to take, particularly for matters such as a Product Switch. And, it’s not generally unfair or unreasonable either. It’s important to note that each of the valuations carried out here was for the purpose of TSB deciding if the property represented adequate security for the proposed lending - and therefore whether it was prepared to lend and if so on what terms. I can see the valuations contained wording setting this out and encouraging Mr D and Mrs R to obtain their own full survey, to protect their own interests. With that said, TSB did need to appoint a suitably qualified surveyor for the mortgage valuations, and the surveys carried out in 2019 and 2024 were carried out by RICS qualified surveyors, which is what I’d expect. TSB was entitled to rely on each of the valuations it received, unless there was a clear reason to believe there were any material flaws. I can’t see that was the case here.

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After TSB had agreed the original mortgage, it wasn’t under any obligation to automatically agree to a request for further borrowing and/or to change the mortgage to BTL. TSB was entitled to obtain an updated valuation to inform its decision and, as above, I consider it was reasonable for TSB to rely on what that valuation said at that time. A lender is expected to communicate an appeals process for a valuation where that’s relevant, and I can see TSB did that here. I also consider TSB acted fairly in asking Mr D and Mrs R if they wanted it to get another valuation done with a different company (which Mr D and Mrs R said they did want, and which TSB arranged). Taking everything into account, I don’t find that the shifting valuations means that TSB has made an error, or otherwise treated Mr D and Mrs R unfairly. Finally, Mr D and Mrs R have provided evidence indicating that TSB did not communicate the outcome of the 2025 valuation in a timely manner. And that they spent time and effort chasing TSB for an update. TSB has agreed to pay £100 in compensation for this and I consider that’s a fair amount in the circumstances, and in line with our approach to compensation awards. In conclusion, I haven’t found that TSB has made an error or otherwise treated Mr D and Mrs R unfairly in terms of the substantive issues raised. However, I do require TSB to pay some compensation for causing some unnecessary distress and inconvenience. My final decision My final decision is that to settle this complaint, TSB Bank plc needs to pay Mr D and Mrs R a total of £100 in compensation. If TSB Bank has already paid some or all of this amount, it can deduct this from what it still needs to pay. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr D and Mrs R to accept or reject my decision before 15 April 2026. Ben Brewer Ombudsman

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