Active discussions

Meet the Other Phone. Only the apps you allow.

Meet the Other Phone.
Only the apps you allow.

Buy now

Please or to access all these features

Talk
AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Original poster

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

306 replies

highlandtime · 05/10/2017 14:11

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

OP posts:
Mummyoflittledragon · 05/10/2017 17:09

How have you got an interest only mortgage on the property? If you live in it, you are no longer allowed to get interest only. It has to be capital repayment unless it’s a btl.

You would be much better off to get capital repayment and reducing the number of years you have to pay the mortgage off perhaps to an amount of £1.2k pcm and perhaps going on a new fixed rate once this expires. As pps have said, you can only ever over pay by 10% pa when on a fixed rate.

You sound very financially green. Have you signed the agreement?

Original poster
highlandtime · 05/10/2017 17:10

I think my question to the bank in 2009 was along the lines of "what are my options when my deal expires in a couple of months' time?" I would have asked if I needed to reapply for a mortgage

OP posts:
Original poster
highlandtime · 05/10/2017 17:10

Yes, interest only and I live in it. I can make overpayments of 10% a year without penalty.

OP posts:
InvisibleKittenAttack · 05/10/2017 17:12

OP - do you have a plan for paying back the debt, not just the interest on it?

If your plan is to sell the house/flat, think carefully if you are certain that at that point you would want to downsize/leave London.

(This might seem patronising, but as you seem a little muddled about the mortgage rates you might not have a plan in place)

I would really consider looking at a repayment mortgage if you can afford an extra £1k a month.

Mummyoflittledragon · 05/10/2017 17:15

But you can’t change onto a new interest only product on a property you live in. My ifa advised me the government no longer allows interest only products for properties you live in.

Have you signed the documents? Can you agree to go onto capital repayment? Then you can do capital repayment AND overpay by 10%

Deemail · 05/10/2017 17:16

When you come off a certain rate the lender has to provide you with details of all your options.
There's been a huge fallout for banks here in Ireland who didn't offer customers the tracker mortgage rate they were entitled too.
I know you're probably not in Ireland but check out the site askaboutmoney loads info there on people taking on the banks and getting compensation.

HazelBite · 05/10/2017 17:18

DH and I took an interest only mortgage in the 1990's with a view that his pension pot (self employed) on maturing with provide a cash lump sum sufficient to pay the principal sum loaned.
Well guess what there was not sufficient and we had several very "lean" years where every spare penny went to the Bank. Retirement had to be deferred until it was paid off.
The amount owed was approx 70,000K not much considering what the property is now worth, but we didn't want to be forced to sell up and move (which in itself would be costly) in order to pay the bank.

My advice to anyone is only take an interest only mortgage if you are a) young and b) this is not your forever home.
(At the time it was the only mortgage we could get)

Skittlesss · 05/10/2017 17:19

I don't want to sound mean, but this is how banks make money... from folk who don't research and learn before they make financial decisions.

Ah well, it's done and you now know better and hopefully you can make it work better for you.

Original poster
highlandtime · 05/10/2017 17:20

Thank you Deemail.

Littledragon, I have confirmed the transfer onto this new mortgage and I assure you it is interest only and the bank checked with me that I live there. Perhaps no 'new' interest only products are allowed?

OP posts:
Flyingflipflop · 05/10/2017 17:22

OP. Forget all the pseudo financial advice you've been given here, or the sly digs about your naivety.

The only one that has it right is Aridane.

pullingmyhairout1 · 05/10/2017 17:23

Not true Mummy if a client product transfers with the same lender they are still able to retain intetest only. If they change lender that is when the client would have to go repayment due to a change in FCA guidance.

Also not all lenders allow a 10% overpayment. Some only allow £500 or £1000 pcm. Somd none at all. Every single lender has different criteria and different quirks. Hence why knowledgeable brokers exist to walk you through the minefield.

Quartz2208 · 05/10/2017 17:24

Do you know what an interest only mortgage is because surely rather than overpaying the 1000 should be saved to pay the loan off

pullingmyhairout1 · 05/10/2017 17:30

Quartz if you pay more than the monthly payment on an interest only it reduces the capital.

RedBlu · 05/10/2017 17:33

Its pretty well known that the SVR is usually higher than fixing.

We are now fixing again on our shared ownership mortgage, we were paying just over 4% and will now be paying just over 3% (always higher rates with SO properties) and the SVR is over 5% so it’s obvious fixing is the better deal.

I don’t think you can say you didn’t know, no one told you, as lenders make it clear it’s your responsibility to ensure you choose the correct product as they only offer advice

Original poster
highlandtime · 05/10/2017 17:34

I was told that if I make overpayments my usual monthly repayments would in turn go down, so rather than go through a 2-3 week application process I chose to do the product transfer. If I change the type of loan I have (from IO to CR) I would have to apply again.

Is there a difference in the way overpayments are applied to the loan vs capital repayment? Imagine this varies between lenders

OP posts:
DearTeddyRobinson · 05/10/2017 17:34

Wait...you have been paying a mortgage for 11 years and still haven't touched the capital?? So you still owe the original amount borrowed?

DearTeddyRobinson · 05/10/2017 17:36

Also don't forget the mortgage market almost collapsed in 2009 so you wouldn't have had many options regardless. So you weren't necessarily misled.

Original poster
highlandtime · 05/10/2017 17:36

Teddy, yes that's right. But the property is 4 x the original purchase price.

OP posts:
SunWindSun5 · 05/10/2017 17:36

Here is another example I know someone who said that they were paying x(huge amount) for their house insurance and had paid the same for years. We looked on some comparison websites and found that they could get the same insurance with another company for a tenth of the price. The moral of the story is that it is your choice who you wish to bank with or pay your bills. It is your responsibility to search out the best and cheapest deals. Have a look on moneysavingexpertcom website to save money on everything. Your bank will only ever sell their own products, you need to look at other banks to get the best deals

Sukistinks · 05/10/2017 17:37

It may be worth reading up about mis-sold mortgages.

DearTeddyRobinson · 05/10/2017 17:39

I realise that (I'm in London too and bought in 2005, on an interest only deal btw). It's just a real shame that you could have paid off a significant part of the capital by now and yes I do think that morally, your bank should have advised you of that.
Sadly though I'm not sure if they were, at the time, legally obliged to clarify this. All the banks were in dire straits at the time and thus not necessarily thinking of the long term best interest of their customers.

MumsOnCrack · 05/10/2017 17:40

You can try complaining. Go through their complaints process and then go to the financial ombudsman

DrunkOnEther · 05/10/2017 17:43

Overpaying on an interest-only mortgage is still not going to change the amount you owe at the end of the term though? You'll still have to pay the lump sum of what you borrowed in the first place?

allthgoodusernamesaretaken · 05/10/2017 17:47

They said that when my deal ended I would automatically go onto the standard variable rate

Well, that was true. So you weren't misled. I think lenders are now required to advise you that you may get a better deal if you shop around, but that's come in fairly recently

existentialmoment · 05/10/2017 17:50

There's been a huge fallout for banks here in Ireland who didn't offer customers the tracker mortgage rate they were entitled too. I know you're probably not in Ireland but check out the site askaboutmoney loads info there on people taking on the banks and getting compensation

Ireland is a different country with different laws and banking regulations, so how would that be in any way helpful? You might as well tell her to read up on mortgages in Azerbajin.