Active discussions

Meet the Other Phone. Flexible and made to last.

Meet the Other Phone.
Flexible and made to last.

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:
DuckbilledSplatterPuff · 05/10/2017 17:53

I wouldn't give that bank another penny. Why are you still on one of their mortgages and asking them for advice?. They are supposed to say very clearly what kind of advice they can and cant offer.

Some have given good advice on here but please don't just take anyone else's word for it, without double checking on the correct channels. Their information may not be current and you need to do your research. Please Please do that before you make any more costly decisions.
You could do worse than reading up on the whole subject on this website www.moneysavingexpert.com/mortgages/mortgage-guide. and learn what all the different financial terms mean so that the next "expert" cant drown you in terminology.
They have one function - to sell sell sell - so don't trust them.
As others have said Get independent financial advice and even then don't just jump in without double checking. Find out what your options are before you have any further dealings with that bank. Ask the Ombudsman about legal advice. www.moneysavingexpert.com/reclaim/fight-back-fos. Best of luck.

Allthebestnamesareused · 05/10/2017 17:54

Of course overpaying on an interest only reduces the capital amount owed - as long as the OP makes sure the lender knows that the extra is being paid to reduce the capital rather than on account of future interest payable! Hmm

DearTeddyRobinson · 05/10/2017 17:58

Um does it seem likely to you that the OP did specify that was what the overpayment was for @Allthebestnamesareused ?

existentialmoment · 05/10/2017 18:00

I wouldn't give that bank another penny

Well then if you were OP you would lose your house, wouldn't you?

SteampunkPrincess · 05/10/2017 18:10

So ... how much is the mortgage for and over what period ?

As a payment from 1200 to 200 based on a rate change from 4/5 % to 1% seems strangr

anothermalteserplease · 05/10/2017 18:12

Please seek some financial advice when your 2 years fixed rate is up. I’m nervous that you still don’t fully understand overpayment caps and repayment loans so you can pay off the debt when it’s owing. You cannot rely on the market holding value. Maybe in London you believe you can but it’s too risky for the most.

RaspberryPi1 · 05/10/2017 18:19

Ignorance isn't any excuse. You wanted a house and were offered a remortgage that you happily accepted.

If you had no ideas about mortgages then owning a property wasn't the widest thing to do!

BatBelle · 05/10/2017 18:22

I work in the mortgage processing centre of a high street bank and I would also suggest writing in to them to make a complaint on the basis that you do not feel they gave you adequate advice on the best product available when you came to the end of your mortgage product.

It’s quite possible they may decide to provide you with monetary compensation or adjust your account accordingly. There have been many similar situations in the company I have worked for. Rules and regulations are much tighter these days.

Migraleve · 05/10/2017 18:23

I wouldn't give that bank another penny

Some have given good advice on here

Indeed. It’s a shame you are not one of them!

OP please please please DO give the bank more pennies. The last thing you need is to lose your home fgs.

Deemail · 05/10/2017 18:33

existentialmoment
Both the UK and Ireland are part of the EU and will be governed to some extent by EU banking laws.
Clearly there's a huge difference between the banking laws of two EU members and an Arabic state. I wouldn't have expected to need to point that outHmm

SilverySurfer · 05/10/2017 18:39

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

It was your responsibility to gather sufficient information and I think you have zero hope of compensation. Assuming the bank provided information about their services, either online or leaflets in bank, it was 100% your responsibility to make an informed decision.

Paying an interest only mortgage is a really bad idea. Say your house cost 500,000, after paying for 25 years it will rise in value but the bank still owns the property and you will be presented with an invoice for 500,000. If you fail to pay, the house will be repossessed and sold for a pittance, wiping out any increase in value and leaving you with very little or nothing.

I also don't believe a 4% drop would result in you only paying 200 a month.

It's time to wise up and talk to a financial adviser

PoppyPopcorn · 05/10/2017 18:40

Of course overpaying on an interest only reduces the capital amount owed

Now maybe I'm being really dense, it has been known, but sure with an INTEREST ONLY mortgage, you NEVER touch the capital? So, for example, you borrow £200k and your payment is whatever amount, say £500 for simplicity over 20 or 25 years. If you over pay and send them £750 a month, you have the choice of either reducing your monthly payments, or reducing the term. So either your payment goes down to £480 a month, or you pay for 19 years 10 months instead.

But at the end of the period, once you've paid off all the interest, you still owe £200k to the bank.

Isn't that how it works with interest only?

existentialmoment · 05/10/2017 19:09

Both the UK and Ireland are part of the EU and will be governed to some extent by EU banking laws

To a lesser extent than their own banking laws, actually. There are numerous important differences.

Sunbeam18 · 05/10/2017 19:20

Poppy Yes, that's my understanding too

Autumnchill · 05/10/2017 19:28

I feel it's somewhat pointless typing this but I can't help myself! I'm going to repeat what everyone else has said and you don't seem to want to do......speak to a financial advisor. Ring London and Country now and get a mortgage broker to go through your options. If your LTV is good (what the house is worth versus outstanding mortgage), you can get a repayment mortgage and reduce your capital.

5rivers7hills · 05/10/2017 19:31

This thread makes no sense.

Someone financially astute enough to buy an expensive property in London has no clue about mortgage SVR....

Right.

SilverySurfer · 05/10/2017 19:31

existentialmoment
Both the UK and Ireland are part of the EU and will be governed to some extent by EU banking laws

To a lesser extent than their own banking laws, actually. There are numerous important differences.

Not for much longer, the UK will be out of the EU and making their own laws.

5rivers7hills · 05/10/2017 19:32

Now maybe I'm being really dense, it has been known, but sure with an INTEREST ONLY mortgage, you NEVER touch the capital?

You can make add hoc capital payments as well

squishysquirmy · 05/10/2017 19:42

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.

op, I don't want to come across as condescending/patronising, but given that you admit to being seriously financially naive in the past, please please look into this and make sure that you have a plan for paying it off. Get some financial advice - it will be worth it long term, and there are lots of free resources online too like: www.moneysavingexpert.com/mortgages/.

Yes, it is annoying that you have "lost" money by being on a crap interest rate, but as consequences go it is not the worst thing that can happen as a result of a financial mistake. Plus, it is probably not as much money as you think as interest rates have not been as low as they are now for all that time.
But if you don't have the money you need at the end of your mortgage, you will have to sell your house (or the bank will sell it for you). If your house has increased in value you will at least have some equity, but you may struggle to get another mortgage depending on what age you are when this happens. If you don't mind the risk of losing your house at the end of your mortgage, fine. Otherwise maybe consider this a wake up call.

NorthernLurker · 05/10/2017 20:00

I don't understand why the op talks about continuing to overpay when if it's been interest only from the start she has never paid any of it.

I took out a mortgage when I was 21. Dh and I understood about endowments, svr and fixed dates. I fail to see how the op can actually have failed to acquire this knowledge in 2006.

PoppyPopcorn · 05/10/2017 20:00

To be honest, all of this is like my ISA with the Halifax. They offer you a special rate of 2.5% or something for the first year, then it reverts back to their standard rate of 0.00001%. But it's MY responsibility to notice when that year is up and contact them to get a better rate, or they'll just keep me on their standard rate.

ProlificLurker · 05/10/2017 20:03

OP, you have still not confirmed the term of your new mortgage (the length of time till it is paid off). Are you sure that you are still just working to the original timescale, eg 25 years minus the 11 years you have already been paying for =14 years left to pay?

Or has the new mortgage started again with 25 years still to pay?

I'm just worried for you as you said you don't really understand. I echo other posters in saying you could really do with some financial advice.

Luckymummy22 · 05/10/2017 20:21

We stupidly fixed to a 5 year deal thinking interest rates would go up. I think our rate was ~ 4.5 % in 2012 so actually at the time rate might not have been too bad.
Biggest chunk of our mortgage was on a bloody good tracker got just before financial crash. Still got that one now 😃

We have now fixed for another 5 years as accept our tracker will probably go up at some point but too good to get rid of still but our new fixed rate is around 2%. We could have got cheaper but we took a lot of factors into consideration.

Don't beat yourself up too much. It is what it is. And hindsight is a wonderful thing

Sunbeam18 · 05/10/2017 20:22

5rivers The OP is not talking about ad hoc extra payments though, she wants to overpay by £1000 per month.

SilverySurfer · 05/10/2017 20:34

*ProlificLurker+
OP, you have still not confirmed the term of your new mortgage (the length of time till it is paid off). Are you sure that you are still just working to the original timescale, eg 25 years minus the 11 years you have already been paying for =14 years left to pay?

The OP has not been paying off her mortgage, she has been paying interest only. I would be worried enough to find a financial advisor asap but then I would never have taken an interest only mortgage. If she doesn't overpay or re-mortgage soon, after 25 years she could end up with nothing.