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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:
sparechange · 06/10/2017 14:45

God there are some very smug and sanctimonious people on this thread.
The OP has stated that she will be OVERPAYING her mortgage and therefore will be REPAYING the capital

At least they've gone to the trouble of reading the thread though.

The OP has said it is an interest-only mortgage.

The capital isn't being touched by her overpayments

existentialmoment · 06/10/2017 14:46

God there are some very smug and sanctimonious people on this thread

Smug and sanctimonious because we did very basic research for ourselves, didn't throw thousands and thousands of pounds away on interest unnecessarily and aren't complaining about the bank not spoonfeeding us?

That's not smug, that's basic adulting.

RandomlyGenerated · 06/10/2017 15:30

The OP has said it is an interest-only mortgage.
The capital isn't being touched by her overpayments

That’s not correct - overpaying on an interest only mortgage will reduce the final lump sum owed.

Witsender · 06/10/2017 15:32

I was referring to her last post where she says she is complaining that no-one explained what an interest only mortgage entailed.

treaclesoda · 06/10/2017 15:38

The OP has said it is an interest-only mortgage.
The capital isn't being touched by her overpayments

If she's paying more than the interest being charged then where else would they be going? Banks may have a bad reputation when it comes to how they treat customers but they're not so bad that they just take overpayments and make them disappear into thin air.

SandyDenny · 06/10/2017 15:43

Genuine question for those saying you can't pay off capital on an interest only mortgage - where do the overpayments that the bank have said the OP can make go?

treaclesoda · 06/10/2017 15:45

and did not contain anything about the implications of staying on an interest only mortgage.

There would be no need because the implications would be the same as when you took it out. I've been a homeowner (with a mortgage) for 20 years and this has always been covered in my paperwork, no matter what lender I've been with at the time.

Oysterbabe · 06/10/2017 16:12

I don't understand all the people saying you can't reduce the capital on interest only. We have one on our BTL and over pay 10% per year to reduce the capital.

AccrualIntentions · 06/10/2017 17:34

*God there are some very smug and sanctimonious people on this thread.

The OP has stated that she will be OVERPAYING her mortgage and therefore will be REPAYING the capital. She will be doing this with the difference between her old rate of £1,200 per month and her new rate of £200 per month so a £1,000 per month payoff of the capital.*

She's also stated 10% overpayments are permitted. So I'm not convinced it's being sanctimonious to wonder how the fuck those two things go together.

sparechange · 06/10/2017 17:35

There is some serious confusion here on interest-only mortgages!

This gives quite a good explanation: www.theguardian.com/money/2005/aug/17/expertsproperty.property

But in summary, when you take out an interest-only mortgage, you owe the bank a total amount of interest on the amount they've lent you.

They divide this amount into nice equal monthly payments, and that is what you pay them to say thank you for lending you the money. This is NOT paying back the money they lent you though. That's still sat there, to be paid off by whatever other plan you have to pay it back.

If you overpay, they work out what that does to the total balance, and work out a nice new equal monthly payment for you, which is lower than before.
If you carry on overpaying, they keep working out what your equal monthly payment is.

Eventually, you'll get to a point where you've paid them all the money back and you can consider your interest-only mortgage to be paid back.
HOWEVER, this doesn't mean you don't still owe them the original amount.
There is no mechanism within an interest-only mortgage for them to suddenly start taking the capital amount into account with your payments. For starters, most people will have a separate investment vehicle used for the capital repayment

If PPs think they are paying back the capital by overpaying their interest-only mortgage, they urgently need to get in touch with their lender(s), as this isn't the case unless you've got a very unusual multiple-mortgage set up

thatmakesmehappy · 06/10/2017 17:36

You should write to the Money Supermarket guy, I think his name is Martin Lewis, he might pick it up! You might be able to make a case about being mislead like in the PPI scandal. You could also contact one of the financial advice columns in newspapers to see if they know of anything you could do.

ilovesushi · 06/10/2017 17:44

Gutting! Flowers

grannytomine · 06/10/2017 17:46

When I talk about rate changes, I mean asking the bank to be switched onto another product. I have just done this, and it was as simple as choosing one of their deals, and requesting it. There were no questions asked or affordability/credit checks etc carried out. I am wondering why I wasn't offered this in 2009 and advised the SVR was my best option? I am surprised that you haven't had an questions or affordability checks. I enquired with my mortgage lender about changing to another deal and I had to go in and go through affordability checks, they said it was standard with the tightening up on lending. I said it seemed odd as I moving to a cheaper deal so if I could afford the dearer deal then obviously I could afford the cheaper deal but they said thems the rules.

treaclesoda · 06/10/2017 17:47

spare change that article is the exact opposite of your own explanation. The overpayment reduces the amount owed i.e it is paid off the overall balance.

grannytomine · 06/10/2017 17:47

If you carry on overpaying, they keep working out what your equal monthly payment is. Depends, my mortgage lender asks if you want to continue to pay the same or reduce payments when I do an overpayment.

Martinachick · 06/10/2017 17:48

Hello, it may also be possible that in 2009 , at the height of the financial crisis there wouldn’t be any new desks available for interest rate mortgages so the only option may have been to go on the SVR. Also, you should always use a mortgage broker as they are aware of new deals and change in legislation

Mummadeeze · 06/10/2017 17:49

I had the same thing happen to me with NPower. I came to the end of my discounted term and they recalculated my monthly payments but failed to tell me I was on a really expensive standard tariff. Six months later they told me I was £260 in debt even though I had been paying more each month than I had before. When I queried it they said it was because I didn't ask for a new discounted deal. They argued that they aren't allowed to tell you about better rate deals, you have to request them. It seemed unfair and wrong to me too as why would you ever want to pay more when you don't have to. I obviously then signed up to a new discounted tariff but I couldn't get any compensation for those 6 months where I essentially felt I was massively overcharged.

Pollaidh · 06/10/2017 17:49

Haven't RTFT, but moneysavingexpert have a super and easy to understand mortgage and remortgage guide. They also recommend speaking to brokers London and Country, who are all of market. We have used them a few times now, and so have family, and service has been very good.

But you really need to read up on things in the future. No one else has your best interests at heart, you have to take responsibility for researching, asking friends, etc...

WeLikeLucy · 06/10/2017 17:54

You have been quite naïve I'm afraid. Information about mortgages is quite easy to find on the net. I'm quite surprised you stuck with a 5% mortgage when banks are always advertising their rates and trying to persuade you to switch. Just put it down to experience. Never trust companies/banks who want something from you (your money). Always be very suspicious of everything they claim - do you own comparisons.

If your interest-only mortgage allows you to make over-payments then make full use of that capacity, or you will not be paying your mortgage off. We overpay the maximum amount we can every year (usually 10% of the total debt is allowed per year). When your mortgage is due to expire, you should make plans to switch it to a more competitive deal. Another option is to let it sit at SVR for a week-or-so, as you can pay a further lump sum overpayment at that point, with no restrictions, then switch it to the best deal you can find.

Hillingdon · 06/10/2017 17:54

I also havent RTFT. I cannot believe that your payments go from £1200 to £200 with just a 4% interest rate drop but by the by.

I used Which Mortgage Brokers and they were very good if that helps.

wevegottobeathemdown · 06/10/2017 17:54

If you were paying 1200 in interest a month your mortgage must be mahoooosive.

Hillingdon · 06/10/2017 17:56

Am I allowed to laugh at Treacle's post! I agree banks don't just take overpayments and make them disappear.

Hillingdon · 06/10/2017 17:57

We - yes, that is what I was thinking...but how can it now go down to £200. That is a tiny amount!

valeview · 06/10/2017 18:05

I think your intention to ask them to review the 2009 call is a good one, and hope they keep recordings. I would also strongly advise you contact the Financial Services ombudsmans office to ask for their advice. They are nice people, well used to receiving such enquiries, and that is what they are for!
www.financial-ombudsman.org.uk/contact/index.html

wevegottobeathemdown · 06/10/2017 18:06

300K at 5% is about 1200 quid a month dropping to 250 at 1%
I would be gutted