Remortgage advice negligence claims

30th January 2015 by

An independent financial adviser (IFA) has strict professional obligations to a client. In the event that the IFA advises a client to remortgage and this advice turns out to be negligent or inappropriate and later results in financial loss, it may be possible to pursue a negligent remortgage advice claim.

Making good loss

There is a long established legal principle which holds that where people receive bad advice which leads to financial loss, they should receive compensation sufficient enough to restore them to the position they would be in had they not received the negligent legal advice.

In effect, this is about providing redress for any “mischief” caused to client by bad financial advice – a principle which also applies, as we shall see in a moment, in a negligent remortgage advice claim.

Important 2012 case

In 2012 the High Court made a ruling in the case of a woman who had remortgaged her £110,000 home on an interest only basis in order to invest £70,000 in a Spanish holiday property – an action undertaken entirely under the recommendation of a specialist broker.

However, when the Spanish property bubble burst, the woman was left with a property which had only nominal value – in addition, she no longer had any way of meeting her interest-only remortgage payments.

In 2010 the Financial Services Compensation Scheme (FSCS) ruled that the advice the woman had received was negligent but awarded her only £11,500 compensation, saying that it could compensate her for the bad mortgage advice but not the bad investment advice.

In 2012 the High Court ruled that the FSCS should have extended its decision to include sums for the full amount of loss sustained by the claimant. In short, it said that the £11,500 sum did not do enough to restore the woman to the position she would have been in had she not received the negligent advice. The judge said that the initial ruling was “drastically incorrect” and “in no way represented fair compensation”.

It was thought that the case would have important implications for IFA clients in similar positions. “This case raises issues regarding the approach taken by the Financial Services Compensation Scheme to assessing claims for compensation,” said the judge.

“This case may have implications for other similar cases.”

Help with IFA and remortgage advice negligence claims

If you have suffered financial loss as a result of unsuitable advice, misrepresentation, IFA conflict of interest, unrealistic guarantees, or other substandard or negligent reasons, Healys LLP professional negligence partners may be able to help you proceed with a claim for compensation.

We provide clear and in-depth advice with both IFA claims and negligent remortgage advice claims. Talk to our partners in London or Brighton for more information.