Clydesdale Bank Plc trading as Virgin Money · DRN-5975366

The complaint Mr B and Ms H’s complaint is about a mortgage they hold with Clydesdale Bank Plc trading as Virgin Money (VM). The essence of the complaint is VM’s policy on allowing access to beneficial interest rate products to borrowers who have consent to let (CTL) on their otherwise residential mortgage. Mr B, who has presented the complaint on behalf of himself and Ms H, believes that VM is in breach of the Financial Conduct Authority (FCA)’s high-level principles and the Consumer Duty. What happened The broad circumstances of this complaint are known to both parties. I’m also aware that the investigator issued detailed responses to the complaint, copies of which has been sent to both parties, and so I don’t need to repeat all the details here. Our decisions are published, and it’s important that I don’t include any information that might result in Mr B and Ms H being identified. Instead I’ll give a brief summary of the key events, and then focus on giving the reasons for my decision. If I don’t mention something, it won’t be because I’ve ignored it. It’ll be because I didn’t think it was material to the outcome of the complaint. The mortgage started in 2022; it was arranged via a third-party intermediary whom I’ll call C. It was C’s responsibility to ensure the mortgage was suitable for Mr B and Ms H, and that they understood the terms they were agreeing to. In making that observation, I imply no criticism of C, and none should be inferred. The mortgage was on a fixed interest rate product which was due to expire on 1 April 2024, at which point it would revert to VM’s standard variable rate (SVR) unless a successor product was agreed and provided. In June 2023, Mr B and Ms H applied successfully for CTL; they were moving abroad due to what they have said is a permanent employment change. On 31 July 2023, the FCA’s Consumer Duty took effect. In April 2024, the initial fixed rate product expired and the mortgage reverted to SVR. Mr B and Ms H asked for a new interest rate deal but were turned down. When they complained, VM told them they were ineligible for two reasons. Firstly, because the mortgage was subject to CTL, and secondly, even if the CTL ended, VM’s policy requires borrowers to have three years’ consecutive UK address history. It said no exceptions could be made. Mr B and Ms H referred the complaint to us, arguing that the combined effect of the two separate policy elements – the CTL restriction and requirement for three years’ consecutive UK residency – was unfair and in breach of FCA principles and the Consumer Duty, as it provided them with no pathway to a beneficial interest rate deal. During the course of our investigation, VM confirmed that the three-year continuous UK residency provision only applied to new mortgage applicants, and not to existing borrowers. With the residency element no longer applicable to Mr B and Ms H, our Investigator concluded that the CTL restriction wasn’t in breach of FCA principles or the Consumer Duty.

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As for VM having misled Mr B and Ms H on the residency element, the Investigator didn’t think the mistaken statement had changed Mr B and Ms H’s situation, but he recommended VM pay them £200 compensation for their time, trouble and upset. VM accepted the Investigator’s proposed settlement; Mr B and Ms H did not. In a detailed response, Mr B asked for the case to be reviewed by an Ombudsman, arguing that the Investigator had made multiple errors in his assessment. He also argued that they were still blocked in two ways from gaining access to lower rates; the CTL barrier and the fact that the three-year residency policy would apply if they wanted to change the mortgage to a buy-to- let (BTL). In a follow-up view, the Investigator explained that as they are unregulated, BTL mortgages aren’t subject to the Consumer Duty, and if Mr B and Ms H were to apply for a BTL, it would be an entirely new mortgage contract, rather than a variation to the existing one, hence the three-year UK residency policy element would apply. Mr B has rebutted this, saying that in his and Ms H’s circumstances, theirs would be a Consumer BTL (CBTL) hence still a regulated mortgage subject to the Consumer Duty. What I’ve decided – and why I’ll start with some general observations. We’re not the regulator of financial businesses, and we don’t “police” their internal processes or how they operate generally. That’s the job of the FCA. We deal with individual disputes between businesses and their customers. We’re impartial, and we don’t take either side’s instructions on how we investigate a complaint. We conduct our investigations and reach our conclusions without interference from anyone else. But in doing so, we have to work within the rules of the ombudsman service, and the remit those rules give us. Having no regulatory power means that it not in my remit to second guess what VM’s lending policy should be. That is a matter for VM’s commercial judgement, and it’s not for me to impose my own (or Mr B’s) judgement in its place. So when Mr B points to other lenders having a more flexible approach on who they will lend to and on what terms, that isn’t a matter for me to take into account here. Every lenders has its own appetite for risk and return. I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. That includes Mr H’s detailed submission received on 7 and 28 November 2025. Having read and taken account of everything that both parties have said and provided, it seems to me that the complaint has somewhat evolved in nature whilst it has been with us. The complaint, as addressed by VM in its final response and referred to us, was about the perceived effect of two policy elements combining together to restrict what Mr B and Ms H could do with their current mortgage. Since VM clarified the position and admitted having given incorrect information to Mr B and Ms H about the three-year residency component, the complaint has effectively become about how the CTL policy element applies to the current mortgage and then separately how the three-year residency policy element would apply to an entirely different mortgage, assuming Mr B and Ms H were to apply for it. Despite that shift, the complaint overall is, in my view, simpler than it’s been made to look. I take Mr B’s point that any BTL mortgage they applied for would most likely be a CBTL. The mortgaged property is in the UK, Mr B and Ms H are consumers, they previously bought their

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property for residential purposes, they have no other rental properties (that I’ve been made aware of) and they are renting the property out after moving out of it. However, I don’t think anything turns on that, because the Consumer Duty does not apply to CBTLs. Consumer Duty only applies to "retail market business" in accordance with the Regulated Activities Order (RAO) pursuant to the Financial Services and Markets Act 2001. CBTL is not an RAO regulated activity; it was introduced via a different regime, the Mortgage Credit Directive Order 2015. What this means is that for any BTL mortgage, including CBTL, the Consumer Duty is not a relevant consideration. All of that aside, however, I think the greater issue here is that Mr B and Ms H’s expectations of what the Consumer Duty requires financial business to do are a little unrealistic. As a starting point, it’s important to remember that the original premise of the complaint, that two policy elements were combining to prevent access to better rates, has been shown not to be the case. So it is entirely right that the fairness or otherwise of VM not allowing borrowers with CTL on their residential mortgages access to lower rates once any rate in place when the CTL begins has run its course should be assessed independently. First of all, I agree with the Investigator when he said that CTL enhances rather than limits borrowers’ options. Without it, borrowers in Mr B and Ms H’s situation would not able to retain a residential mortgage on a property they were no longer residing in, which was the basis on which VM had agreed to lend to them in the first place, on terms which Mr B and Ms H agreed to when they borrowed the money. That, in itself, is a good outcome. For a lender, having a security property let out to tenants represents a different risk profile from having it occupied by its borrowers. For that reason, CTL is regarded as a concession that lenders can chose to offer, but aren’t obliged to. If a lender does offer CTL, then it can reasonable limit access to beneficial interest rates, to reflect the aforementioned change in risk assessment. Again, that was the basis on which VM agreed to provide a CTL concession, and again Mr B and Ms H agreed to this when they took CTL. All of this took place before the Consumer Duty came into effect; that said, the CTL agreement was renewable annually, so it will have been relevant to subsequent renewals. But on that, I agree with the Investigator when he said, in his follow-up view dated 25 November 2025, that whilst the Consumer Duty obliges VM to avoid foreseeable harm, provide good outcomes and help them achieve financial goals, that doesn’t mean that VM’s policies must be designed in such a way that every customer will always be able to have the outcome they desire. That’s what I meant earlier when I said that Mr B and Ms H are, in effect, asking a bit too much of the Consumer Duty. Separately, I’ve considered VM’s policy requirement that for any new BTL (or CBTL) mortgage application, the applicants must be able to show evidence of three years’ consecutive residency in the UK. As I’ve already explained, I have no power to say that this policy requirement shouldn’t exist, or that VM can’t impose it generally. All I can consider is whether it would be unfair of VM to impose it on Mr B and Ms H. The point is to some degree moot, because at the time of writing, Mr B and Ms H haven’t yet made an application to VM for a BTL or CBTL mortgage. It’s not the job of this service to future-proof consumers against the possibility of dissatisfaction arising from something that may happen but as yet hasn’t. But in general terms we expect lenders to assess any request for borrowing by applying its lending policy fairly and consistently. A lender can choose to waive a policy requirement if it chooses to, where that would be beneficial to the customer(s) and where the waiver is within the lender’s risk appetite. But it is not required to and it would be wholly inappropriate for me to say VM must set aside its residency requirement when

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assessing any BTL or CBTL application it received from Mr B and Ms H, assuming they were to make one. That brings me to the question of the misinformation Mr B and Ms H received from VM about the residency restriction. There’s no doubt it shouldn’t have happened, but the available evidence doesn’t give me any reason to conclude that it fundamentally changed Mr B and Ms H’s situation. All it did was give them a reason to bring a complaint based on a mistaken premise, which I agree is irksome and deserving of compensation for its ‘nuisance value’. When assessing fair compensation for people’s time, trouble and upset there’s no specific calculation to work this out; everyone perceives things, and reacts to them, differently. One person’s minor annoyance is another significant and stress-inducing inconvenience. It’s all about the individual, and their personal circumstances. That’s why the guide we publish on the subject incorporates ranges rather than tariffs. In all the circumstances of this case, I agree with the Investigator that £200 is fair overall. That begs the question of what happens next. Clearly, Mr B and Ms H can’t have the outcome they want; that is, a lower interest rate on their current mortgage all the time it is subject to CTL. So, if they do want a lower rate, and resuming occupation of the mortgaged property isn’t a viable option for them, they will need to arrange a new mortgage, either with VM or a different lender, and accept the associated transaction costs that would come with that. For completeness, any such transactions costs would not include an early repayment charge for redeeming the mortgage they have now. VM is not placing any financial barrier in the way of Mr B and Ms H ending the current contract early. It’s not my place to tell Mr B and Ms H what they should do next. But it may well be helpful for Mr B and Ms H to seek specialist advice on the most suitable of the options available to them, much as they did when they consulted C on taking the mortgage out in the first place. My final decision My final decision is that I uphold this complaint in part only. In full and final settlement, I direct Clydesdale Bank Plc trading as Virgin Money to pay Mr B and Ms H £200. I make no other order or award. My final decision concludes this service’s consideration of this complaint, which means I’ll not be engaging in any further discussion of the merits of it. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr B and Ms H to accept or reject my decision before 7 April 2026. Jeff Parrington Ombudsman

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