Santander UK Plc · DRN-6243812

The complaint Mr and Mrs D’s complaint is about a mortgage they have with Santander UK Plc. They are unhappy with how Santander has administered overpayments they made between July 2024 and March 2025. What happened Mr and Mrs D took out their mortgage with Santander in 2002 for £104,000 over a term of 30 years. In 2004 they took a further advance of £10,000 for some home improvements over a term of 22 years. In 2007 they then took further borrowing of just over £50,000 to allow them to do some building works. This advance was arranged over a term of 19 years. I will hereafter refer to the subaccounts by their year of advance, to avoid any confusion. In July 2024, the 2004 and 2007 subaccounts reverted to Santander’s follow-on rate of 3.25% above Bank of England base rate. The 2002 advance was transferred onto a new fixed interest rate of 5.14%, which will expire in October 2026. In May 2024 Mr and Mrs D wanted to make an overpayment of £500 and spoke to Santander. It was decided that reducing the balance on the 2007 subaccount, which would shortly be charged interest at a variable rate, would benefit them most in the form of reducing their monthly payments (CMP). The overpayment was made and Mr and Mrs D were assured that any future overpayments would also be used to reduce the balance of that subaccount. A further overpayment made at the beginning of July 2024 was also paid off this subaccount. Due to when the overpayment was made, a refund of interest from the CMP that had already been collected was due. Santander incorrectly credited this to the 2002 subaccount because it had changed the numbering of the subaccounts. At the end of July 2024 another overpayment of £350 was made and one of £150 was paid in August 2024. These payments were allocated to the 2002 subaccount, as was the interest that the overpayment saved. This meant that the reduction in the CMP Mr and Mrs D were expecting didn’t materialise. In March 2024 Mr and Mrs D made an overpayment of £1,500. Santander paid £982.64 toward the 2004 subaccount, which repaid the outstanding balance. The remainder of the payment was paid to the 2007 subaccount. Mr and Mrs D spoke to Santander about the allocation of the payment shortly thereafter. Santander then appears to have reversed the overpayments and the 2004 subaccount closure. However, the payment then made to the 2007 subaccount was only for £606.61 as Santander used the remainder of the £1,500 to cover the May 2025 mortgage payment. Mr and Mrs D contacted Santander in the middle of May 2025 as they realised that the whole overpayment had not been allocated to the 2007 subaccount. Mr and Mrs D complained about the situation on 16 June 2025. Santander issued a final response letter on 7 July 2025 stating that it was unsure of what Mr and Mrs D had wanted to do with the overpayments, and asking them to call it, as the number it had on file for them didn’t work. It subsequently confirmed in a letter of 12 August 2025 that all of the overpayments had been applied to the 2007 subaccount.

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Mr and Mrs D weren’t happy with Santander’s responses and asked us to look into the situation. Santander made an offer after the complaint came to us. It said that it would have the overpayments and interest refunds allocated to the correct subaccounts as at the time they were made. It also said that if Mr and Mrs D wanted the amount of the May 2025 CMP that had not been collected from their bank account credited as an overpayment, they could make a new overpayment of that amount, and it would be backdated to March 2025. Santander also confirmed that any overpayment of the CMP identified by the rework, would be refunded to Mr and Mrs D’s bank account. In addition, Santander offered £500 compensation for the upset and inconvenience they had experienced. One of our Investigators considered the complaint. She concluded that the principle of the offer Santander had made to rework the subaccounts to correctly allocate the overpayments was appropriate. However, she didn’t think that it was reasonable for Santander to expect Mr and Mrs D to pay the amount of the May 2025 CMP if they wanted the whole £1,500 of the March 2025 overpayment to be included in the rework. In addition, she concluded that the compensation amount should be increased to £750. Santander partially accepted the Investigator’s conclusions. It agreed to the increase in compensation, but it didn’t accept that it was not reasonable for Mr and Mrs D to pay the amount of the May 2025 CMP if they wanted that sum credited to the mortgage. It said that Mr and Mrs D had had the benefit of that money remaining in their bank account. Mr and Mrs D accepted what the Investigator had said, but they asked that the Investigator require the rework to be overseen by this Service to ensure that the calculations were correct. Mr and Mrs D said that until the Investigator told them, they had been unaware that part of the March 2025 overpayment had been used to cover one of the contractual monthly payments. The Investigator considered what Santander had said, but she was not persuaded to change her conclusions. She said the amount of the May 2025 CMP should be treated as underfunding, with Santander responsible for the amount, as Mr and Mrs D could not reasonably have been aware of the mistake. Mr and Mrs D remained dissatisfied with the offer that Santander had made and asked that the complaint be passed to an Ombudsman for consideration. They also confirmed that they had queried in the middle of May 2025 the fact that the full amount of the March overpayment had not been credited to the 2007 subaccount. Mr and Mrs D said that they did not agree to pay the amount of the May CMP to Santander. Santander remained of the view that it should not be responsible for the amount of the May 2025 mortgage payment, as Mr and Mrs D retained that sum in their bank account. I issued a provisional decision on 18 March 2026, in which I set out my conclusions and reasons for reaching them. Below is an excerpt. ‘Santander has accepted that it made mistakes regarding the allocation of overpayments and associated interest. As such, I don’t need to consider whether Santander did something wrong; I only need to decide what it needs to do to put things right. The principle of the redress Santander has offered is entirely appropriate – reworking the balances of the subaccounts to establish what they would have been, had it not made the mistakes it did. It has also confirmed it will refund any amounts of the CMP that should not have been collected, had the balances been correct. The sticking point here is the matter of

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the amount of the March 2025 overpayment Santander incorrectly directed to pay the May 2025 contractual payment. The Investigator explained that where a mortgage has been underfunded due to a mistake by a mortgage lender, we would expect the lender to take responsibility for the shortfall in payments until the point where the borrower should reasonably have realised there was a problem. It is correct that less money was paid to the mortgage than should have been, but I don’t think it would be reasonable to require Santander to make up that shortfall, given the specific circumstances of this case. I say that as it is clear that Mr and Mrs D were monitoring their mortgage account, both in respect to how overpayments were being allocated and the impact that was having on their monthly payment. They flagged with Santander that it had made a further mistake with the rework of the account in the middle of May 2025, less than two weeks after the payment for that month should have been taken from their bank account. In the circumstances, I find it very unlikely that Mr and Mrs D would not have noticed that the May 2025 CMP had not been collected from their bank account. While I accept that they may not have linked the shortfall in the amount of the overpayment being allocated to the missed CMP, I do think they would have known that the CMP had not been collected and they had more in their bank account than they expected. As such, reasonably, Mr and Mrs D would have been aware that they should not spend that sum and it would not be reasonable for me to require Santander to make that amount up. As such, I consider the offer Santander made in respect to the amount of the May CMP is reasonable. This being that if Mr and Mrs D want to pay that sum to the mortgage, Santander will backdate its allocation to the mortgage to March 2025 when the original overpayment was made. It is clear that this situation caused Mr and Mrs D a lot of concern and inconvenience. Santander initially offered £500 and, having considered the matter carefully, I think that is an appropriate and proportionate sum in the circumstances. I note that Mr and Mrs D have asked that this Service oversees and checks the rework of their mortgage. It’s not the role of the Financial Ombudsman Service to provide an auditing service or carry out a forensic analysis of mortgage accounts. So we will not be overseeing or checking the calculations Santander complete. If Mr and Mrs D feel that the rework has not been done correctly, it’s open to Mr and Mrs D to instruct an independent suitably qualified professional to check the rework. However, that would have to be at their expense – although if errors were found to their financial detriment, they could complain about them and their costs in discovering them could be taken into account in putting matters right.’ Santander accepted the provisional decision. Mr and Mrs D said that they wanted to accept the offer of the rework and highlighted that the first error relating to the overpayments was the credit of interest in July 2024. They confirmed that they were aware that the May 2025 CMP had not been taken from their bank account and said they questioned it – they report that they were told this was because the CMP was being recalculated and the payment would be collected as soon as that was done. Mr and Mrs D repeated that they had not been aware, until our investigation, of why the May CMP was not collected. They said that they find it hard to accept that they have benefitted from Santander not taking the May CMP as over the course of time the CMP they have paid has been higher than it should have been.

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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. I would like to thank the parties for their prompt responses to my provisional decision. I have considered what Mr and Mrs D have said, but I remain satisfied that they were aware that they hadn’t made a payment in May 2025, and so would have known to keep a sum in reserve for that payment. As such, my conclusion that it would not be appropriate for Santander to be asked to pay that sum to the mortgage has not changed. I note that Mr and Mrs D have said that the mistake meant that they made higher payments than they otherwise would have. I would agree that is the case, but the rework that Santander will be completing will establish how much those additional payments were and will refund them to Mr and Mrs D, so they will not have lost out due to the mistakes made. I remain satisfied that the offer made by Santander is appropriate in the circumstances of this case. Putting things right Santander should: • rework the mortgage allocating the overpayments and associated interest to the 2007 subaccount. Any overpayment of the CMP identified by the rework, should be refunded to Mr and Mrs D’s bank account; • credit the amount of the May 2025 CMP to the mortgage as an overpayment backdated to March 2025 if Mr and Mrs D choose to pay that sum to Santander; and • pay £500 compensation for the upset and inconvenience its mistakes caused. My final decision My final decision is that I uphold this complaint and I require Santander UK Plc to settle this complaint as detailed in ‘putting things right’ above. Under the rules of the Financial Ombudsman Service, I am required to ask Mr and Mrs D to accept or reject my decision before 24 April 2026. Derry Baxter Ombudsman

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