Is my mums mortgage company ripping her off!!!!!

lizardking71

My Mum has been paying extra cash amounts to reduce the balance of her mortgage.

Recently she rang to enquire about paying one of these payments and was told that her current low rate deal was about to expire (31/07/08).

Panicking she thought that this meant she would have 'no mortgage'. She asked if they could sort out a new deal the same as the last.

She was asked a series of questions including did she have any savings or endowments that could pay off her current balance (£12,700) in the future.

When she received confirmation of the 'deal' it was for an interest only mortgate not a repayment mortgage like her last one and the total repayable was now £20,000

She was very upset at this and rang to complain that she felt that she had been mis-sold the mortgage as it was not what she asked for. She was told that someone would get back to her.

she later rang up after receiving an answer phone message and spoke to someone who seemed to blind her with jargon and make her believe that what they had done was correct. She was told that as the extra payments she had made meant that she only had interest left to pay on her previous
mortgage therefore an interest only mortgage was right for her.

I told her that i didnt feel that this was right but she seemed so coninvced that that was just the way it works, it was like she had been 'brainwashed'.

I am no expert but surely even with rising interest rates it would not have cost an extra £7+ to pay off her mortgage.

Her mortgage payments were approx £60pcm and the new payments will be approx £65pcm (65x120=7800). This would still leave her with the original balance still to find to finish her mortgage.

I really need to know where we stand on this

EdInvestor

lizardking71 wrote: »

My Mum has been paying extra cash amounts to reduce the balance of her mortgage.

Recently she rang to enquire about paying one of these payments and was told that her current low rate deal was about to expire (31/07/08).

At which point, if she does not sign a new deal she will simply be put on the lenders Standard Variable Rate.This would happen automatically and there would be no fee.

If the rate is higher (likely) and she still wants to pay the mortgage off at the same time, then her monthly payments would go up.

If she is overpaying her existing repayment mortgage she would still be able to do so, so that the loan was repaid earlier.Does this sound like what she wants?

There is no such thing as 'having no mortgage". The above is what happens to everyone when a deal expires and is not replaced by another deal.

Some banks will push people to take out new deals so they can charge large fees but it's not a requirement.The only real issue is to check the interest rate of the SVR vs the interest rate (and fee) on the deal.Often these days the SVR will be cheaper overall because fees have gone up so much.

lizardking71

EdInvestor wrote: »

At which point, if she does not sign a new deal she will simply be put on the lenders Standard Variable Rate.This would happen automatically and there would be no fee.

If the rate is higher (likely) and she still wants to pay the mortgage off at the same time, then her monthly payments would go up.

If she is overpaying her existing repayment mortgage she would still be able to do so, so that the loan was repaid earlier.Does this sound like what she wants?

There is no such thing as 'having no mortgage". The above is what happens to everyone when a deal expires and is not replaced by another deal.

Some banks will push people to take out new deals so they can charge large fees but it's not a requirement.The only real issue is to check the interest rate of the SVR vs the interest rate (and fee) on the deal.Often these days the SVR will be cheaper overall because fees have gone up so much.

This is exactly what she wants to do. she was just frightened into thinking that she would have 'no mortgage'. I have already told her this cannot happen. It would seem the bank are trying to bully her into taking the new mortgage with the extra interest and the endowment style pay off at the end.

When she complained that they had tried to sell her a type of mortgage that she had not asked for, she was told that it would cost £50 to change over, as if this was all her fault. further to which she has now recieved a letter comfirming this.

I have tried to get her to ask the mortgage company (woolwich) how much her payments would be (on svr) but she has been unable to get that information from them, instead they seem intent on trying to justify their actions on selling, what i think is, an unjustified expense.

JayZed

lizardking71 wrote: »

She was told that as the extra payments she had made meant that she only had interest left to pay on her previous mortgage therefore an interest only mortgage was right for her.

??!!!?? This is complete cobblers and makes no sense at all. If this is really what she was told then she's been given advice that is confusing, misleading and utterly nonsensical, and you're on pretty solid ground.

Presumably she signed a document accepting the new interest-only mortgage deal, and the bank will argue that in doing so she understood and accepted the terms of the deal. However, it seems pretty clear that she received misleading advice, was sold a product that was unsuitable for her, and didn't understand what she was being sold.

Dealing with customer service over the phone is not going to get you anywhere. You need to write and make a formal complaint to the Woolwich and/or arrange a meeting with the manager of your local branch, and insist that she be transferred to a fixed-rate or variable rate repayment mortgage product (NOT on the SVR!) with no penalty, and/or switch to another mortgage provider with no penalty. Make it clear from the outset that if you do not receive a satisfactory response, you will take it to the Financial Ombudsman Service. Given the scenario you describe, I suspect that they will back down, waive the £50 fee and allow her to switch to a more suitable product.

If you don't get a satisfactory response through a meeting and a formal complaints process, then as well as filing a complaint with the FOS, you should raise the issue with a consumer champion in the media - someone like Tony Levene of the Guardian. The FOS will take many, many months to even start deal with a complaint - if Levene or someone similar takes up the case, I suspect the Woolwich will backpedal very fast and you'll get this resolved quickly.

In the meantime, your mother should either: (1) pay the £50 fee to change over to a more suitable repayment product, but make it clear that she is paying it under protest and will be seeking to reclaim the fee; or (2) continue to make the payments on the interest-only product until the issue is resolved, and claim them back as part of the settlement.

EdInvestor

lizardking71 wrote: »

She was told that as the extra payments she had made meant that she only had interest left to pay on her previous
mortgage therefore an interest only mortgage was right for her.

It's actually the other way round. With repayment mortgages the interest is "front end loaded" so towards the end of the mortgage term, and particularly if she has been overpaying, there will be little interest left to repay, it will all be capital.

Undoubtedly a misselling situation.

Has the deal gone through yet or is it still in process?