Two ads for Habito, a mortgage broker, seen in April 2021:
a. The TV ad depicted an animated setting with cartoon characters. A woman was shown gardening while a newspaper was thrown into her garden. The headline read “% INTEREST RATES RISE! Homeowners could get stung”. The ad then cut to a wasps’ nest with wasps buzzing around it. Wasps were then seen to fly towards the woman and sting her. When they stung her, large pus-filled boils appeared on her skin and burst. She screamed and ran towards the house, but a wasp stung her through the heart, piercing it on its sting. The voiceover then stated, “Don’t get stung by rising interest rates. With Habito One, repayments are fixed for the life of your mortgage to give you ultimate peace of mind.” A force field then appeared around the house and the woman and the wasps were blocked from stinging her. The voiceover said, “It’s either hell”, while large, animated text stating “HELL” in wasp-like colours appeared on-screen. Then the voiceover continued “Or Habito”, while a key with wings flew upwards into a colourful sky. On-screen text stated “Habito One” and “One mortgage for life”.
b. The video on demand (VOD) ad was the same as ad (a).
Ten complainants, who variously understood that interest rates in general were very low at the time the ad was seen and that Habito’s were high by comparison, and that the ad exaggerated the likelihood of mortgage rates rising and customers risking financial detriment if they did not opt for a lifetime fixed-rate mortgage, challenged whether the ad’s depiction of the wider market as “hell” and consumers being “stung by rising interest rates” was misleading.
Hey Habito Ltd t/a Habito said that the dominant emotional state of consumers in the home-buying process was the fear of getting ripped off. Describing the mortgage market as “hell” was designed to express how getting a mortgage felt for consumers. The complexities of arrangement fees, early repayment charges, and fixed versus variable rates were beyond most consumers’ expertise. The ad conveyed the very real fear of interest rates rising, making mortgages unaffordable. The Habito One mortgage product had a fixed interest rate for the length of the mortgage term, meaning that consumers always knew how much they were going to pay. If interest rates rose, consumers had the benefit of a guaranteed low interest rate and the additional protection of being able to leave at any time without early repayment charges or exit fees.
They said that they researched the script of the ad and monitored reactions to the advertising concept. They said that there was consistent understanding of the central message delivered by the ad that interest rates could be fraught with danger and that if they rose, consumers were at risk of getting ‘stung.’ They provided two quotes from the reactions “Too late for me this time, but hopefully it will be available in five years when I'm due to remortgage” and “I suppose I shouldn't ask this but is there a sneak peek on timelines, because this is actually really interesting”. They said their research showed that the ability to balance stability, flexibility and a good deal was the fundamental appeal of the product, with 59% of customers saying they would choose the product in order to protect themselves from rising interest rates in the future. They also cited an independent poll of mortgage worries, which showed that 26% of customers expressed fear of interest rates rising – the fourth-highest-ranked issue in the poll.
They said that 45% of their customers chose security over price and selected a five-year fixed mortgage over one that was a two-year fixed mortgage.
Habito said that the ad did not state that interest rates would rise, but rather raised the question of what would happen if they did, using a mythical animated style to illustrate that. The product was designed for people who were worried about rising interest rates and/or wanted certainty and stability in the lifetime of their mortgage.
They said that Bank of England interest rates fluctuated a great deal – they were as high as 10% in the 1990s, dropping to 5% in 2008 and stood at 0.1% at the time the ad was seen. A longer-term fixed mortgage could be cheaper overall than a series of short-term mortgages, due to the fees involved in refinancing, even if the interest rate at times was higher. Based on UK finance data on interest variance over the previous 25 years, they believed that most borrowers were unlikely to experience interest rates being as low as they were at the time the ad was seen over the lifespan of a mortgage.
Habito said that the product specifications for the Habito One mortgage were available on their website and shared a link to the page. They said that they were Fairer Finance accredited and prided themselves on using language that was easy to understand. Habito provided a breakdown of the interest rates for the Habito One mortgage. They also said that in the FAQs section on their website, they explained why their interest rates were higher than other short-term mortgage products. They provided an example of current and future pricing of a mortgage based on a £200,000 loan, comparing a Habito One mortgage against a five-year fixed-rate mortgage.
They said that the Habito One mortgage was only available to customers who had received regulated mortgage advice in line with the Financial Conduct Authority’s handbook and conduct rules. In order for a customer to receive a Habito One recommendation they were required to complete a “Fact Find” so that a qualified Mortgage Advisor had the necessary detail to assess a customer's situation and preferences to find the most suitable product for them. Customers supplied information about their personal financial situation, lifestyle and preferences pertaining to product length and interest only versus repayment. They were provided with detailed review of all the products available in the current market that they would be eligible for.
Clearcast said that they had thoroughly considered the ad before approving it. The ad explained that with Habito, consumers could buy a product that provided them with certainty about their future interest rates, and that they did not need to worry about being stung by possible rate rises. The ad did not comment on the current interest rates or state that Habito had low or the lowest rates. While complainants might be correct that interest rates were currently low and that Habito’s in comparison were higher, Habito’s product was for a lifetime mortgage where the rate was fixed for between 15 and 30 years. There were no early redemption fees and no cost for moving between lenders which typically occurred every 2 to 5 years. Consumers could be secure in the knowledge that the rate they had been offered would not be exceeded and if rates dropped they could swap to another mortgage without leaving penalties. They said that given the uncertainties about finances due to Brexit, the Covid-19 pandemic and employment, the ad offered a mortgage with a lifetime fixed rate. They said that for those reasons they did not believe the ad was misleading.
The ad featured the claims “% INTEREST RATES RISE! Homeowners could get stung” and “Don’t get stung by rising interest rates. With Habito One, repayments are fixed for the life of your mortgage to give you ultimate peace of mind”, together with scenes of a woman initially being stung by a wasp and screaming, then a force field subsequently protecting her, and the voiceover stating “It’s either hell or Habito”. We considered that consumers would understand from the ad as a whole that interest rates were rising significantly and/or were likely to rise significantly in future, leading to a risk that rates across the mortgage lending market could increase to an extent that was unaffordable for many consumers. The ad implied that the Habito One mortgage would protect consumers from rising interest rates and resulting financial detriment because it offered a fixed interest rate for the lifetime of a mortgage - in contrast to all other types of mortgages on the market, which would leave consumers immediately exposed to a significantly heightened level of risk.
While the ad stated “homeowners could get stung” (emphasis ours) as a result of a rise, there was nothing to indicate that while it was likely that rates could rise in future, the fact of interest rates rising significantly was only a small possibility, not a given. That was underlined by the use of the slogan “It’s either hell or Habito”, which, in this context, presented a definite, binary choice between Habito and the rest of the market with regard to guarding consumers against unplanned payment increases.
We acknowledged that the customer research cited by Habito suggested that many of the respondents found the attributes of the product appealing. However, we did not consider that was sufficient to demonstrate that the ad was not misleading.
We looked at mortgage rates at the time and we understood that interest rates for a £200,000 loan on a house value of £250,000 (80% loan-to-value) over a 25-year mortgage term started at 1.64% for a five-year fixed rate. In 2019, the interest rates for an 80% loan-to-value mortgage varied between 2.51% and 2.92% for a five-year fixed rate. In 2018, the interest rates for a five-year fixed rate varied between 2.87% and 2.93%. We therefore understood that interest rates at the time the ad was seen were low compared to recent years.
We considered the evidence provided by Habito. It showed a comparison of Habito’s Habito One mortgage based on a £200,000 loan on a house value of £250,000 with an 80% loan to value over a 25-year fixed term, against a selection of hypothetical future interest rates based on a five-year fixed mortgage. The figures showed an initial interest rate of 3.84% for the Habito One mortgage and an initial interest rate of 2.19% for the five-year fixed rate mortgage. The refinance or remortgage interest rate stayed the same for the Habito One Mortgage, while projections for the five-year fixed rate mortgage showed increases in interest rates to 3%, 4%, 5% and 7%. However, those projections were speculative and we had not seen any information from Habito about the basis on which they had been made.
We acknowledged that uncertainty around future changes in interest rates was a concern for some consumers when selecting a mortgage, particularly at the time the ad was seen. However, while interest rates might well rise, future trends could not be predicted with any certainty. Taking into account the imagery in the ad illustrating potential consequences in extreme terms and the sense of certainty with which they were presented, we considered that the impression created by the ad misleadingly exaggerated the likelihood that future rate rises would be significant compared to current rates and the risks of the rest of the mortgage market compared to the Habito One product.
We therefore concluded that the ad breached the Code.Ad (a) breached BCAP Code rules
Advertisements must not materially mislead or be likely to do so.
Advertisements must not mislead consumers by omitting material information. They must not mislead by hiding material information or presenting it in an unclear, unintelligible, ambiguous or untimely manner.
Material information is information that consumers need in context to make informed decisions about whether or how to buy a product or service. Whether the omission or presentation of material information is likely to mislead consumers depends on the context, the medium and, if the medium of the advertisement is constrained by time or space, the measures that the advertiser takes to make that information available to consumers by other means. (Misleading Advertising), 3.9 3.9 Broadcasters must hold documentary evidence to prove claims that the audience is likely to regard as objective and that are capable of objective substantiation. The ASA may regard claims as misleading in the absence of adequate substantiation. (Substantiation), 3.1 3.1 Advertisements must not materially mislead or be likely to do so. (Exaggeration) and 3.33 3.33 Advertisements that include a comparison with an identifiable competitor must not mislead, or be likely to mislead, consumers about either the advertised product or service or the competing product or service. (Comparisons with identifiable competitors) and ad (b) breached CAP Code (Edition 12) rules 3.1 3.1 Advertisements must not materially mislead or be likely to do so. 3.3 3.3 Ofcom must ensure that the standards from time to time in force under this section include:
a) minimum standards applicable to all programmes included in television and radio services; and
b) such other standards applicable to particular descriptions of programmes, or of television and radio services, as appeared to them appropriate for securing the standards objectives."
Section 319(5). (Misleading Advertising), 3.7 3.7 Advertisements must not falsely imply that the advertiser is acting as a consumer or for purposes outside its trade, business, craft or profession. Advertisements must make clear their commercial intent, if that is not obvious from the context. (Substantiation), 3.1 3.1 Advertisements must not materially mislead or be likely to do so. (Exaggeration) and 3.33 3.33 Advertisements that include a comparison with an identifiable competitor must not mislead, or be likely to mislead, consumers about either the advertised product or service or the competing product or service. (Comparisons with identifiable competitors).
The ads must not appear again in the forms complained about. We told Hey Habito Ltd t/a Habito to ensure that their ads did not exaggerate the likelihood of future significant interest rate rises and the risks of the rest of the mortgage market compared to the Habito One product.