To have been this stupid about my mortgage? Huge financial loss

[highlandtime]

Hello

I bought a house and took out a mortgage in 2006 when I was very young, and didn't really understand much about mortgages. The bank offered me a rate of 4.8% which was fairly typical at that time, and 3 years later when my deal expired I called the bank and asked what my options were. They said that when my deal ended I would automatically go onto the standard variable rate, which was only marginally higher than the rate I was on, and represented an increase of £7.65 to my monthly repayments. I understood that was a good deal, and was not told about any other options that might be available to me. I decided to let my deal expire and then go onto the SVR.

I had no idea that I could have chosen from the other deals they had on offer, I don't know why other than I was young and green and naive. During my phone call, the bank the didn't mention this either. I came away with the understanding the SVR was my best option and I was lucky it was only a small increase. I also thought that I now was stuck on the SVR unless I wanted to remortgage with another bank.

Today I was prompted to phone the bank following a chat I was having about mortgages with a friend. I asked for a 'rate change' and opted for a deal which brings my rate down from nearly 5% to just over 1% !!!!! My monthly repayment has changed from £1200 to £200. Great! But I cannot reconcile how I have been paying an interest rate of nearly 5% for the past 8 years.

I will call the bank and ask for the 2009 phone call to be reviewed (I took quite extensive notes and have kept them). I will also tell them I think I was misled. Does anyone have any advice or been through a similar experience and was anyone successful in recouping anything?

Thank you

[FenceSitter01]

Are you paying back any capitol? Because that £200 sounds interest only.

[Papafran]

Not sure you will get anywhere I am afraid. It will be hard for you to show that they misled you. The bank's job is not to get you the best possible rate. They are not allowed to mis-sell though so if they said to you they had no other products available and this was a lie, that would not be right of them. However, as this was 8 years ago, I am not sure what you can do now. 2009 was in the middle of recession as well, so I don't know how many great deals they had at the time.

There are so many adverts and so much information about mortgages though- I have only been a home owner for a few years, but have always been roughly aware of mortgage rates because they are all over the press.

It's annoying but it's likely you will have to chalk it up to experience and bad luck. At least you know now though for the future. Must say I am surprised that your payments reduced by such a huge amount though- 1200 to 200. Is that a repayment mortgage or interest only?

[5rivers7hills]

Wow yeah that's kinda bad! illustrates why you need to take some responsibility for becoming financially literate.

[highlandtime]

It is interest only. I will now be making overpayments with my lowered monthly repayment, to repay capital. I could not afford to before!

[emma8t4]

We had a similar scenario however when our deal finished we went to the SVR as our house was in negative equity and we couldn't remortgage therefore had no other option. Could this have been the case for you?

[5rivers7hills]

Agree £1200 to £200 didn't sound like a pure rate change from 5% to 1%.

Have you changed (extended) the remaining repayment term? Or moved to interest only?

[Oldie2017]

I would be interested in whether the loan is interest only or repayment because repayment is better and then at least half of what you pay eventually is capital repaid so whatever the interest rate remains high as it were - it is not simple as in the early years of a repayment loan you mostly pay interest not capital back.

I have always paid the variable rate over 30 years by the way. You did not necessarily make a bad choice. Rates go up and down and being on the variable rate can sometimes get you the best deal.

I can also depend on your situation. Lots of people currently pay a lot more than 1% because they have a higher loan to value which you amy have had at the start but not now or your earning may be higher now than then and lots of other factors but I can see how you are kickgin yourself - ditto me - when I was paying £1800 from inertia for house insurance and now only pay £400 because I forced myself to shop around! I am paying £5k a year less on work insurance too because I gave myself a kick up the bottom and made the effort to switch.

[FenceSitter01]

If you go to interest only - you are going to have one hell of a surprise 25 years down the line. You havent paid back any of the amount you have borrowed.

Banks dont generally allow interest only unless you have reserve capitol or an endowment (or similar) maturing

[highlandtime]

I wasn't in negative equity. The value of the house had gone up significantly. Even if I had been in negative equity though, banks offer a 'rate change' when you come to the end of your deal (I have only just learned about this). You don't have only one option of the SVR. To have a rate change you do not need to go through a credit check, income check, etc.

[highlandtime]

RiverHills it is purely a rate change. The mortgage has always been interest only and that hasn't changed, nor have I changed the loan amount.

[britbat23]

Your mortgage arrangements in general and your understanding of them sound muddled. I'd see an independent broker ASAP. Stop relying on your bank's advice. Be very wary about your new low rate, interest rates are quite likely to return to 5% or higher in the near future. And almost certain to rise in the coming months.

[Papafran]

We had a similar scenario however when our deal finished we went to the SVR as our house was in negative equity and we couldn't remortgage therefore had no other option

Yeah, could have been something like that. 2009 was not a good time property-wise and in a lot of areas of the country there would have been in negative equity. Especially as you were on an interest only mortgage. The bank may not have been prepared to offer you any other products.
It does sound like you knew you could remortgage with another bank though. That would have been the best option. I moved lender as soon as my fixed term deal was up and will do again in a few years.

[2014newme]

You need independent advice don't rely on your bank you've got yourself into a right mess

[highlandtime]

This mortgage was taken out in 2006 when mortgages were being handed out left, right and centre. It was usually enough to say the repayment vehicle was to sell the house and downsize in later years.

[greendale17]

I fail to see how you were misled.

[highlandtime]

I honestly wasn't in negative equity. House in London and value had increased by a large %

[PoppyPopcorn]

You really are financially clueless if you've been paying SVR on an interest only mortgage - do you understand what interest only means and the implications of that??

Whether there was mis-selling or not who knows. But you need to take some responsibility for this too - all the "I didn't know" or "nobody told me" doesn't wash - there is SO much information out there on mortgages and other credit on things like Moneysavingexpert and This is Money and mortgages are constantly in the press. To not have it even cross your mind to check/find out/ get advice in 11 years isn't the bank's fault.

[existentialmoment]

You've got a 1% interest rate on an interest only mortgage?


chinny reckon.

[highlandtime]

I think I should have been made aware there were options other than the SVR. Ie: another fixed 2 year deal for example, which would have had an interest rate attached to it that was likely to be lower than the SVR.

[Oldie2017]

I don't think they have a legal duty to offer you the best deal. You have to root it out which is why people use mortgage brokers or buy Which magazine or ask around. However it can't do any harm to have a go at claiming the difference.

If you can move now to repayment not interest only however particularly as you are used to higher payments that would be a very good idea indeed financially. So if you can afford £1200 a month and have been offered £200 a month interest only then go for a repayment loan with the same rate and repay £1000 capital a month or over pay that which will be £12k a year repaid, £60k repaid over just five years plus add on the interest you will save on the £60k etc etc. You might be mortgage free before not too long whereas interest only is not quite the same.

[highlandtime]

Yes, existential. Just over 1%. Barclays, Santander, and others offering similar at the moment.

[Wontbedoingthatanytimesoon]

Sorry not the banks fault.

They won't side with you if you complain.

I would advise you to get help with your finances. You don't seem to be financially savvy.

[highlandtime]

I absolutely had no idea about mortgages and didn't question what the bank told me during my call with them.

[RosyPony]

Speak to an independent mortgage advisor and get a new deal worked out. We do this every couple of years to make sure we always get the best deal.

I have a relative who has an interest only mortgage and with only a couple of years left asked what happened at the end of the term (and then frittered away their inheritance on cars 🙄)

[Papafran]

This mortgage was taken out in 2006 when mortgages were being handed out left, right and centre. It was usually enough to say the repayment vehicle was to sell the house and downsize in later years

That's true but by 2009, things had changed massively and that was no longer the case. I am also not 100% sure about what you mean by 'rate change'. In my experience, you take out a mortgage for a 30 year term or whatever. You are given the terms (mine was 2.5% fixed for 2 years and then the SVR whatever that was). Once the fixed period was up, I was told what the SVR was and I then opted to switch providers to get a better rate. If you wanted the bank to adjust the interest rate, were you not asking to switch to a different product? You may not have needed a new credit check and valuation etc as it was the same provider, but surely it would still be a different mortgage product? So it could have been that in 2009, with the recession and restrictive lending practices and the demise of interest only products that there simply was not anything else you were eligible for with that bank.

Oh and definitely go onto a capital repayment product ASAP.