Complaining about a mis-sold interest-only mortgage

An interest-only mortgage is mis-sold when the lender or broker did not properly check how you would repay the capital at the end of the term, or did not explain that your monthly payments covered only the interest. The Financial Ombudsman Service, which settles disputes between consumers and financial firms, says it will decide whether you received advice and, if so, whether it was suitable, including advice about a repayment plan¹.

You can complain yourself, for free. There is no general deadline based on how old the mortgage is, and the 29 August 2019 deadline that closed PPI complaints does not apply to mortgage complaints². The Financial Ombudsman can look at a complaint once you have complained to the firm and either had a final response or waited eight weeks³.

What a successful complaint can put right depends on who made the mistake. Where the lender is at fault and you could not have known, the ombudsman generally tells it to rework the account as if the correct payments had been made, possibly writing off the extra money or some of it⁴. Where a broker or third party caused the problem, the ombudsman cannot restructure the account but can tell them to pay money into your mortgage account instead⁴.

What counts as a mis-sold interest-only mortgage

An interest-only mortgage is one where your monthly payments cover only the interest, not the capital borrowed. The rules treat the term broadly: a reference to an interest-only mortgage includes any regulated mortgage contract that has an interest-only period, or where part of the sum is advanced on an interest-only basis⁵.

The central rule is that a lender may only enter into an interest-only mortgage, or switch a repayment mortgage onto an interest-only basis, if it has evidence that you will have in place a clearly understood and credible repayment strategy with the potential to repay the capital borrowed and any interest reasonably expected to accrue⁵. If nobody checked that, the sale is open to challenge.

The rules also set out what does not count as a credible strategy. An expectation that the property's value will rise over the term, an intention to use an expected but uncertain inheritance, or a plan to sell your main home without considering whether it would repay the capital and allow you to buy a cheaper property may all be relied upon as tending to show a breach of the rules⁵. For a bridging loan that is interest-only, accepting that your credit status will improve enough to refinance, unless there is evidence of a guaranteed offer, is treated the same way⁶.

There is a separate product called a retirement interest-only mortgage, which requires the interest to be repaid in full over the stated term, is restricted to older customers above a specified age, and does not require full repayment of the loan until a specified life event unless you breach your contractual obligations⁷. Complaints about those work differently from complaints about a standard interest-only mortgage taken out to buy a home.

Signs the broker or lender did not explain the risks

The paperwork a borrower was given should have made the structure of the loan obvious. Under the rules, a mortgage statement must include a clear statement of whether the contract is an interest-only mortgage, a repayment mortgage, or a combination of both⁸. Where all of the mortgage is interest-only, the statement must carry a prominent reminder that the payments do not include any costs of the repayment strategy, that arrangements should be in place to pay off the capital, and that the performance of any investments held for that purpose should be checked⁹. Where only part of the mortgage is interest-only, a similar reminder must appear⁸.

The illustration you received before taking the mortgage should also have been explicit. It must clearly state that the payments cover only interest and not the capital borrowed¹⁰. A key facts illustration would have told you about any fees relating to the mortgage¹¹. Older credit agreements secured on a home had to carry the warning "Your home is at risk if you do not keep up repayments on a mortgage or other loan secured on it"¹².

Warning signs that the risks were not explained include:

• You believed you had a repayment mortgage until you checked recently.
• Nobody asked how you planned to repay the capital, or the only answer recorded was that the property would rise in value.
• The plan recorded was an expected inheritance, or selling your main home, with no calculation of whether that would clear the loan.
• You were not told your payments covered interest only.
• You were not told to review any investment meant to repay the loan.

The ombudsman has published cases that turn on exactly these points. In one, Dominica said she thought she had taken out a repayment mortgage but discovered it was interest only, with no repayment plan in place, and the mortgage was not right for her needs; the lender could not explain why it had recommended an interest-only mortgage, and she had previously had a repayment mortgage that would clearly have been affordable¹³. In another, Carys took out an interest-only mortgage and later began to think it was not right for her¹⁴. In a third, Aleksei complained to his lender that he did not have a way of repaying it¹⁵.

Who to complain to: broker or lender

Start with the firm that sold you the mortgage. The ombudsman's guidance is to talk to your lender or broker first, because they need the chance to put things right⁴. If an adviser arranged the mortgage, the complaint goes to the adviser; if you dealt with the lender directly, it goes to the lender.

If you are unsure which firm is responsible, you do not have to work it out alone. Where a credit broker receives a complaint, it must forward the complaint to the lender and inform you that it has done so¹⁶. That means a complaint sent to the wrong firm in the chain should still reach the right one.

If the broker has gone out of business, the lender may still be the right target, and the ombudsman can consider complaints about the act or omission of a registered consumer buy-to-let mortgage firm as if it were within its compulsory jurisdiction¹⁸. In Northern Ireland, Consumerline can refer a complaint to the Trading Standards Service for investigation or to the Financial Conduct Authority, which authorises lenders²⁰.

Where the sale was made by an independent financial adviser or an insurance broker, the ombudsman may ask them to pay compensation²¹. Where the lender made the mistake and you could not have known, it generally tells the lender to rework the account as if the correct payments had been made⁴.

How to write a letter of complaint

A complaint does not need legal language. It needs dates, names, what you were told, what you were not told, and what you want put right. Put it in writing so there is a record, and keep a copy.

1. Say you are making a formal complaint about how your interest-only mortgage was sold.
2. Give the mortgage account or reference, the date you took out the mortgage, and the firm or adviser involved.
3. Set out what you were told about how the capital would be repaid, and by whom.
4. State what you were not told: that payments covered interest only, that a repayment strategy was needed, or that the plan you had was not credible.
5. Explain the effect: a shortfall, a plan that will not clear the loan, or being unable to move or remortgage.
6. Say what you want the firm to do, such as reviewing the sale, correcting the account, or compensating you.
7. Ask for a final response, and note that you will take the complaint to the Financial Ombudsman if you are not satisfied.

Firms have eight weeks to deal with a complaint about anything other than payments³. If you are not satisfied with the response, or they do not get back to you within eight weeks, you can bring the complaint to the ombudsman³.

What to include as evidence

The ombudsman asks for the documents that show what you were told at the time. For a mis-selling complaint these are the fact-find, which is the lender's summary of your circumstances at the time, the application form, the offer, and any illustrations¹. Dig out anything else that records the conversation: emails, letters, notes of meetings, and the mortgage statement showing the loan is interest only.

If you no longer hold the paperwork, ask the firm for copies. Lenders and brokers must keep records of the sale, and the fact-find and application form are the documents that show what was discussed about repayment.

Where a complaint concerns a Help to Buy equity loan rather than the mortgage itself, the evidence expected is different: proof of how you will pay can include copies of bank statements showing savings, a letter from your mortgage lender about additional borrowing, or a grant confirmation letter²⁴. That is a separate process from a mortgage mis-selling complaint, but it shows the kind of documentary proof that carries weight.

Keep a dated log of every call and letter, and note who you spoke to. If the firm later says you complained late, that log is what settles the point.

If the firm rejects your complaint: the Financial Ombudsman

The Financial Ombudsman Service is free and independent. It can look at complaints about advice you received from a financial business, about mortgage arrears and charges, about not being able to change or move your mortgage or take a payment holiday, and about repossession before possession takes place or after it has happened²⁵.

For an interest-only complaint, the ombudsman will decide whether you received advice and, if so, whether it was suitable, including advice about a repayment plan¹. It will weigh how the mistake with repayments came about and who is responsible, the information you were given about repayments, whether you could reasonably have known you were not paying enough, whether you could have sorted the problem sooner, and whether the lender or broker could have picked up on problems at the time⁴.

The ombudsman also expects lenders to respond fairly to concerns about paying off the capital, even if no advice was given and the mortgage was not mis-sold¹. Where you are in financial difficulty, it will check whether the lender carefully considered whether you could afford the interest rate, since otherwise you would face an early repayment charge if the property had to be sold³.

Mortgage complaints are a large part of the ombudsman's caseload. First charge mortgages were the most complained-about mortgage product in 2024/25, with 5,086 new complaints²⁶. Buy-to-let mortgage complaints, including consumer and non-consumer cases, came to 157 in the first quarter of 2025/26²⁷, and PPI sold with a mortgage accounted for 12 new complaints in the third quarter of 2025/26²⁸. Personal loans complaints, a different product, came to 2,103 in the first quarter of 2026/27²⁹.

What a successful complaint can put right

The remedy depends on who made the mistake and what went wrong.

Where the lender is responsible and you could not have known about the problem, the ombudsman generally tells the lender to rework the account as if the correct payments had been made, possibly writing off the extra money or some of it⁴. Where a broker or third party made the mistake, the ombudsman cannot restructure the account, but it can tell them to pay the money to your mortgage account instead⁴.

In complaints where the lender says you owe the wrong amount, remedies have included waiving interest for a short period or refunding interest applied at the start, extra time to make missed payments, restructuring the loan, and compensation for distress and inconvenience³⁰. Where a lender has not done enough to help, the ombudsman may tell it to pay compensation for any distress or inconvenience¹. Where the sale was made by an independent financial adviser or insurance broker, the ombudsman may ask them to pay compensation²¹.

For comparison, the ombudsman's approach to mis-sold regular-premium PPI is to refund all the premiums paid plus interest at 8% per year simple³¹. That is a different product with its own redress rules, and it does not set the remedy for an interest-only mortgage complaint, but it shows the shape of a typical award: put the consumer back where they would have been.

If a complaint is upheld, the firm should write to you setting out what it will do and by when. If you disagree with the outcome, you can go back to the ombudsman, whose decision the firm is bound by.

Complaining about an old mortgage, and the deadlines that apply

There is no general rule that stops you complaining because the mortgage is old. The ombudsman can consider complaints about advice you received and about how a lender handled concerns about repaying the capital, even where no advice was given¹.

One specific time limit does exist for some older products. For mortgage endowment complaints, the customer must be given a final date to complain by, and notified of it at least six months before the time limit expires; if the firm did not send that notification, the three-year time limit is not valid and the customer may have even longer to complain³². Complaints made after the three-year limit can only be investigated if the business agrees³². That rule is about endowments, not interest-only mortgages generally, but it shows how a firm's failure to send the right notice can extend the time you have.

The PPI deadline is often confused with mortgage complaints. The deadline to complain about the sale of PPI was 29 August 2019, and it is now too late to complain about the sale of PPI². That deadline does not cover complaints about how an interest-only mortgage was sold or how a lender handled repayment concerns.

If you are not sure whether a time limit applies to your case, the practical step is the same: complain to the firm in writing, keep a copy, and if the firm says you are out of time, ask it to explain which limit applies and when you were notified of it.

Where to get free help

You do not need to pay anyone to complain. The Financial Ombudsman Service is free to use², and it can look at complaints from individual customers and from customers who share a product, such as a joint mortgage²².

If you use a claims management company, it will charge a fee. Claims management companies help you make certain types of claims against financial services providers for a fee, such as claims for mis-sold payment protection insurance³³. If you have a problem with one, ask the company for a copy of its complaints procedure or check its website, contact the company with your complaint so it has a chance to put things right, and keep a record of your complaint³³.

For free, impartial help with money problems, including mortgage arrears, MoneyHelper and debt advice charities offer guidance at no cost. If your complaint is about a Help to Buy equity loan rather than the mortgage, that has its own complaints process, and you can complain by email, telephone or in writing³⁴.