A couple signed up to a 10-year fixed-rate mortgage contract in 1994. Three-and-a-half years later when they wished to sell the house they were told it would cost £12,000 to break the fixed-rate contract with the lender.

The couple told the ombudsman they were vaguely aware that breaking the contract would lead to a penalty fee but they were unaware of the potential amount. They complained to the ombudsman that £12,000 was an unreasonable charge.

The ombudsman found the terms and condition of the contract clearly stated that the amount of the fee would be the amount of loss incurred by the lender as a result of the termination of the agreement. However, nothing in the contract prepared the couple for a cost as much as £12,000.

The ombudsman found the lender gave the couple ample notice and that the onus was on the borrower to find out the potential costs.

The borrowers had not made such a query and the ombudsman ruled that they were bound by the contract and therefore the complaint was not upheld.