Openwork Limited · DRN-5995727

The complaint Mrs F complains about advice to take an equity release mortgage provided by Openwork Limited trading as The Openwork Partnership (Openwork). Mrs F’s complaint has been brought on her behalf by a representative. However, for ease, I’ll mainly refer to the complaint as if it’s been brought by Mrs F throughout this decision. What happened Mrs F met with Openwork in 2022, with her son present at this meeting. Her mortgage, with another lender, was reaching its end and needed to be repaid, and she was looking into equity release. Openwork’s suitability letter notes that as well as repaying her existing mortgage, Mrs F wished to gift some money to her children, complete a number of home improvements and have a lump sum left for her peace of mind. It was also recorded that Mrs F wished to make payments towards the interest of the mortgage rather than have the interest added to the loan and “rolled up” as is often the case with equity release mortgages. After Openwork assessed Mrs F’s situation and needs, she was recommended borrowing of £350,000. This was to be used as follows: • £87,000 to repay the existing mortgage • £113,000 for home improvements • £50,000 for family gifts • £100,000 for “lifestyle” Following the valuation of the property coming in at less than was expected, the amount of borrowing applied for was around £320,000- the maximum the lender would allow. The mortgage completed and Mrs F drew down £300,000 of the total borrowing. Mrs F has been making monthly payments, as well as lump sum overpayments towards the borrowing as she’s realised she borrowed more than she needed. In late 2024, Mrs F’s representative reviewed the documentation from the sale of the equity release mortgage. He didn’t think the advice was suitable for Mrs F, so raised a complaint to Openwork on her behalf. The complaint said that total amount recommended was excessive, and the amount drawn down at the start was more than Mrs F required. Openwork maintained that the advice was suitable and didn’t uphold the complaint. So, Mrs F referred the complaint to our Service. Our Investigator thought the complaint should be upheld, and he set out how he thought Openwork should put things right. Mrs F accepted the outcome the Investigator reached, but Openwork didn’t agree. Openwork maintained that it had discussed drawdown options at length with Mrs F, in the presence of her son, but she preferred the funds to be taken up front. It said the amounts borrowed for home improvements were not unreasonable.

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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. Openwork has told us that Mrs F said she preferred to have the funds available rather than needing to draw them down, and this is why she borrowed the full amount up front. It may be the case that Mrs F thought that was best. But Openwork was the expert here, not Mrs F. And she was relying on its advice, and I think it should’ve made her aware of the risks associated with this, which have borne out in her situation. Drawing down all the funds at the outset would cost Mrs F more money than if she just took what she needed to. Openwork has said it advised against taking all of the funds at once, but Mrs F was insistent. To support this, Openwork has provided us with an undated memo which notes the discussion its advisor had with Mrs F and her son. This memo said, in relation to Mrs F drawing down the full amount of borrowing at the start of the mortgage: [Mrs F] wanted the security of having the funds now and not having to worry about rate rises and how much it might cost her in the future. (as opposed to a drawdown) In addition to support this she didn’t want to keep reviewing things and having to do more work to get the funds in the future. However, the suitability letter doesn’t reflect this. And this doesn’t suggest Mrs F was made aware of any of the downsides to taking all of the funds up front. Furthermore, if Mrs F was going against Openwork’s advice, I’d expect this to have been very clearly documented at the time and noted within the suitability letter which makes no mention of this. I understand Openwork’s point that rates could increase, however, equally, they could decrease. And, as this is a mortgage that doesn’t require payments (although I note Mrs F has chosen to make payments), this wouldn’t necessarily mean Mrs F couldn’t afford to borrow further funds in the future. I also have concerns about how the amount Mrs F needed was calculated. Whilst the fact find does set out what the money is for, it is light on details on exactly how the money will be spent and why such significant amounts were needed for certain things. For example, £113,000 was allocated for home improvements. Given the significant amount being allocated to home improvements, and what Mrs F said she was going to be having done, I would’ve expected further challenge from the advisor. In addition to this, £100,000 was initially allocated to “lifestyle”. Following the property being down valued, the total borrowing was reduced by £50,000. There was no follow up suitability letter from Openwork to address the reduced borrowing, but I’ve assumed that the £50,000 reduction was taken away from the funds allocated to “lifestyle”. This is very broad, and it’s unclear exactly what this money was to be used for. Again, I feel this warranted further challenge from the advisor at the time and, if there were no immediate plans for the funds, they shouldn’t have been draw down at the time. It’s not unreasonable to want to retain a lump sum in cash for emergencies and unexpected expenditure. But this appears to be a very large amount for that purpose – particularly where further drawdowns would be permitted. And it’s unlikely that any funds held on deposit, or invested, would grow by enough to cover the interest charged even if it wasn’t rolled up and compounded. Openwork has provided its pre-sale checking notes which appears to be questions it asked of its advisor. It seems to me that whoever was completing this pre-sale checklist also had

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concerns. One of the questions asked about the £113,000 allocated for non-essential home improvements. The advisor answered as follows: [Mrs F] is looking to improve her bathrooms, ensuite, main bathroom along with the shower room downstairs. Also she would like to get a new front drive and new area in her garden to replace the old decking. In addition she feels a new roof will be needed, re tiled. She may look to just generally update the place with new paint and potentially carpets. Given this talks about what she may or may not do, including potentially just a general update with new paint and carpets, it seems Mrs F’s plans were far from set in stone. So I think £113,000 was a significant overestimate and certainly wasn’t needed to be taken up front. Later in the pre-sale check, it says: There does not appear to be a foreseeable need for the £100k ‘other’ funds that the client has requested, the client has sufficient income and a healthy bank account. As the £100k is something that may or may not be required in the future we would expect to see this recommended as a potential drawdown fund which would help to limit costs or possibly a further advance in the future. The advisor replied to this to justify the amount by saying: I should have been more specific with the £100k other funds; [Mrs F] would like access to the funds to potential gift the family more funds, possibly 50k each as opposed to 25k each (£50k) – plus she would like some surplus in case the home improvements overrun (£20k). Furthermore the 7k in current savings will be absorbed with fees for the lifetime mortgage (circa £2k) and she would like to pay off the current finance she has for the front door and garage door (circa £5k) so she would like to top this back up from the funds and have a emergency /float. A total of £20k. The remaining 10k would be available for a holiday and any luxuries she sees fit. It feels to me that the advisor here was trying to make the funds being borrowed fit Mrs F’s needs, rather than the other way around, as they should’ve done. Overall, I think that Openwork should’ve worked with Mrs F to decide in more detail how much she needed at the time, and then to have advised her why she should only borrow that lower amount at the time. It should’ve also set out the disadvantages and risks of taking all of the funds up front. As Mrs F was seeking advice from Openwork, had it done this and explained the reasoning behind its recommendations, I think it’s more likely than not she would’ve followed this advice and only borrowed the amount she needed up front, retaining access to the remainder via the drawdown facility. I now need to decide what I think Mrs F should’ve been advised to borrow at the time. I need to decide, based on the information that Openwork knew at the time, what a reasonable level of borrowing would be. Of course, there’s no exact science here, so I’ve thought carefully about what both sides have said, when reaching what I consider a fair and reasonable outcome. Mrs F had a mortgage of £87,000, and this needed to be repaid. So, I’m satisfied that this was reasonable borrowing. Mrs F told Openwork she wished to gift £50,000 to her children. Whilst I can see the advisor noted she may increase this to £100,000; this was a “may”, not certain, so again, I think this she should’ve been advised not to borrow the full amount right away. I understand she’s now

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changed her mind on giving any funds to her children; however, Openwork couldn’t have foreseen for this. So, I think £50,000 of borrowing for this purpose was a reasonable amount to have recommended. This accounts for £137,000 of borrowing that I find was suitable and necessary. I do need to take into account what Mrs F has left as well. My understanding is that she has already repaid £66,000, and has a further £90,000 she’d like to repay, but for the ERC. I also need to take into account that £50,000 of this is what she had planned to gift but has now changed her mind. It would seem to follow that she’s spent around £57,000 on home improvements, which seems a much more realistic figure to me than £113,000. I can’t be certain what Mrs F would’ve spent had she been advised to use the drawdown facility rather than taking all of the funds upfront. But I think using what she has spent, in addition to the £50,000 she was going to gift to her children and the redemption of her mortgage is fair. Based on this, I think she was advised to take £106,000 more than she needed. This is the same amount our Investigator reached, and I agree with him. The loss to Mrs F is two-fold, if she repays the money now, she will incur an ERC. But she’s also being paying interest on money that she should’ve been advised not to take. So, the redress I’m going to tell Openwork to pay will reflect this. This has also caused Mrs F distress and inconvenience. She’s found out, with the assistance of her representative that she’s borrowed more than she needed to and is unable to repay this without penalty. Our Investigator suggested £200 compensation for this. I agree this is a fair amount in the circumstances. Putting things right To put things right: • Upon receipt of evidence that Mrs F has made a further lump sum overpayment and incurred an ERC, Openwork should pay Mrs F the amount charged as an ERC. If the ERC is not refunded within 28 days of the day Mrs F pays it, it should add simple annual interest of 8% from the date of payment to the date of refund. Openwork should also calculate the interest Mrs F has been charged from the date she borrowed the funds to the date she makes the redemption and refund this to Mrs F. • Upon receipt of evidence of the previous overpayments Mrs F has made, Openwork should calculate the interest Mrs F has been charged on the amount of borrowing she repaid from the date she borrowed the funds to the date she made this redemption and refund this to Mrs F • The above calculations are subject to an overall maximum of £106,000, which is the amount I’ve found Mrs F ought to have been advised not to borrow. Openwork will not be required to refund interest on overpayments above that overall total. • If mortgage interest was rolled up and compounded, the above calculations will cover the full loss. But if Mrs F paid the accruing interest, Openwork should also pay simple annual interest of 8% on the monthly interest payments she paid on the surplus borrowing, running from the date of each interest payment to the date of refund. Mrs F will need to provide evidence of the monthly interest payments she made. • Openwork should pay Mrs F £200 compensation for the distress and inconvenience this matter has caused. I’m satisfied this would put Mrs F back in the position she would’ve been in had she been given correct advice, in as much as I can in this situation. If the final redress includes an 8%

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interest element, Openwork may deduct income tax from the 8% interest element, as required by HMRC, but should give Mrs F a tax deduction certificate so she can reclaim the tax if she’s entitled to do so. I don’t think it would be fair to Openwork to keep this offer open ended, so this will apply to any overpayment Mrs F has already made or that she makes within three months of her accepting our decision, subject to the overall cap of £106,000 (excluding any ERC charged). The £200 compensation is payable whether Mrs F makes the part redemption or not. My final decision I uphold this complaint and direct Openwork Limited trading as The Openwork Partnership to put things right as set out above. Under the rules of the Financial Ombudsman Service, I’m required to ask Mrs F to accept or reject my decision before 23 April 2026. Rob Deadman Ombudsman

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