Barclays/Woolwich Tracker Mortgage Interest Problem

FrankinLondon_2

All

I am really unsure that Barclays are charging me the correct interest on my mortgage. I have a Woolwich (now Barclays) lifetime offset tracker which is tied to the Barclays Bank Base Rate at BBBR + 0.17%. I have checked this with the lender and they confirm that the rate is correct.

The way the mortgage operates (which I assume is pretty standard for this type) is that I am debited a payment against the mortgage in mid-month and then a few days later, charged a lesser amount (which I assume can only be the relevent interest charge for that month). The issue/problem I have is that the interest charge seems much higher than I am expecting.

The mortgage is for £225,000 over a 25 year period. I have £210,000 balance owing but approx £30,000 of savings in the offset account. The mortgage has been running for approximately 18 months.

As an example to demonstrate the problem, in the middle of last month my repayment deducted by Barclays was £1350 (I understand that the repayment doesn't necessarily track the rate changes and am not really concerned at the actual level it is set at each month). At the end of the month, they then added an additional £800 to my amount owing.

However, by my calculation (as the BBBR for virtually all of November was 3%), I would expect to be charged a monthly interest of something close to

(3.17/100)/12 * (210,000 - 30,000) = £475.50

which is way lower than the amount Barclays have actually added to the balance. If I am calculating the interest payment correctly, it seems that £800 is close to an equivalent annual interest percentage of 5.5% on my balance (minus offset) which seems excessive.

Now when I look back over the previous months, it seems that the interest charge has always been much, much higher than it should be.

Obviously, I am going to phone Barclays in the week to query this, but before I do, I thought I'd post here and see if

a) My maths is approximately correct

and

b) If anyone else has experienced this problem.

Comments gratefully accepted (especially if I have my maths totally wrong - always a possibility).

Frank

toffifee

Hi Frank,

Your sums look OK to me. They probably calculate the offset on a daily basis so you might want to multiply by 30/365 rather than dividing by 12, but that makes mimimal difference.

We're also with Woolwich/Barclays on an offset tracker and I got a statement this morning for November. I called them because the interest rate had not change in November following the rate cut. I was told that interest rate changes are applied the following month, so the cut that just happened won't take effect until January, and the one before in November will show up from 1st December.

Maybe this is causing some of the difference in your interest charge but the amount they are charging you still seems way too high. I would give them a call. There's a new free number: 0800 022 4022.

Good luck! Let me know how you get on.

(I'm not best pleased about the delay in the rate change.... I'm sure in previous statements I've seen offset mortgate rates go up mid month. They're sending me written confirmation and I'm going to dig through my paperwork to find out whether I've had this in the Ts and Cs somewhere).

FrankinLondon_2

toffifee wrote: »

Hi Frank,

Your sums look OK to me. They probably calculate the offset on a daily basis so you might want to multiply by 30/365 rather than dividing by 12, but that makes mimimal difference.

We're also with Woolwich/Barclays on an offset tracker and I got a statement this morning for November. I called them because the interest rate had not change in November following the rate cut. I was told that interest rate changes are applied the following month, so the cut that just happened won't take effect until January, and the one before in November will show up from 1st December.

Maybe this is causing some of the difference in your interest charge but the amount they are charging you still seems way too high. I would give them a call. There's a new free number: 0800 022 4022.

Good luck! Let me know how you get on.

(I'm not best pleased about the delay in the rate change.... I'm sure in previous statements I've seen offset mortgate rates go up mid month. They're sending me written confirmation and I'm going to dig through my paperwork to find out whether I've had this in the Ts and Cs somewhere).

Hi Toffifee

That is a big help. I have looked at my Ts and Cs and you are quite right, the rate change (which happens early in the month) does not come into effect until the 1st day of the following month. More of a lazy tracker eh ?

THis means that for November, I was charged interest at a rate of 4.5%.

Furthermore, it looks as though (despite being promised by a bank employee that this was not the case) that my Open Plan accounts are not offsetting against my mortgage. Grrrr. This means that I cancelled my ISAs earlier in the year simply to have the cash sat in an Open Plan account doing nothing for me.

If this is the case (and I have some spare time at work tomorrow, so I am going to phone to check), then my actual november calculation is

(4.67/100)*(30/365)*210000 = £806

which is pretty close to what I was actually charged.

If anyone knows how I can get my openplan accounts to actually offset properly, I would be very grateful.

Frank (happy to have this understood - unhappy at the lost offset savings)

chivers1977

Just call 0800 022 4022 tomorrow and ask for your accounts to be linked and backdated. This will be carried out for you and a letter will be sent to confirm the amount of backdated Offset benefit. If you are on a payment reducing Offset, you can have the backdated benefit back and if you are term reducing, the adjustment will sit on the account to reduce the term further.

HTH

toffifee

FrankinLondon wrote: »

Furthermore, it looks as though (despite being promised by a bank employee that this was not the case) that my Open Plan accounts are not offsetting against my mortgage. Grrrr. This means that I cancelled my ISAs earlier in the year simply to have the cash sat in an Open Plan account doing nothing for me.


If anyone knows how I can get my openplan accounts to actually offset properly, I would be very grateful.

If you have access to online banking, I think there's an option in there for you to check which accounts are being offset against your mortgage. Let me know if you can't find it.
At least then you can check that they've linked the accounts properly after they tell you that they've sorted it out.

dewexdewex

I have an Openplan mortgage with the Woolwich. About a year ago I was paying under 300GBP a month when the rate on it was around 6%. About a month ago I significantly increased the amount of cash in the offset account, the base rate was lower at that time and has come down significantly since then, and I'm now being asked to pay more than 400GBP a month. This strikes me as quite wonky. With the balance I have, and should be paying interest on, the ratecurrently looks like 13% where it should be 1.75% over bank base rate, ie 3.25%. I calculate I should be paying about 140GBP. I'm calling them tomorrow.

discoinferno_99

chivers1977 wrote: »

Just call 0800 022 4022 tomorrow and ask for your accounts to be linked and backdated. This will be carried out for you and a letter will be sent to confirm the amount of backdated Offset benefit. If you are on a payment reducing Offset, you can have the backdated benefit back and if you are term reducing, the adjustment will sit on the account to reduce the term further.

HTH

Good advice. We had a similar thing happen to us last year and it was backdated with no problem.

gh14

Hello all, this is the first time I've posted so forgive me if I'm repeating what's already been said elsewhere about this topic and my comments in particular.
I have a Barclays/Woolwich tracker offset repayment mortgage. I love it because, for example, it means that I can offset the VAT I collect (I'm self-employed) against my mortgage. When I took the mortgage out, I made it clear that I wanted the payment reducing option in order to protect my cash flow.
However, there is a problem. I recently noticed that each month more and more money was going out my account each month to service my mortgage. I couldn't work out why. Surely, I thought, if Barclays apply interest rates change on the first of each month and they're falling dramatically, I should be paying less and less each month.
Therefore, I got out all my mortgage paperwork and my calculator and did some sums. It transpired that since October 2007 (when interest rates were the highest they've been during the currency of my mortgage), Barclays fixed my 'contractual payment' at £1023.31 per month. This was the amount that I'd have to pay each month over the remainder of the mortgage term to repay my loan and the interest. That was fine: interest rates had increased since I took out the mortgage and so I expected that my repayments would increase because I had a tracker mortgage. However, I then looked at the payments I'd been making since November 2007. They all added up to £1023.31 per month when you added the amount I saved by virtue of the offset to what was actually taken out of my account each month. To say I was a bit puzzled was an understatement and so I rang Barclays. While hanging on the phone, I heard a pre-recorded message saying that 'contractual payments' are varied by Barclays each October. I remained on the line. Eventually I spoke to someone. They told me that my 'contractual payment' is reviewed each October. Barclays then decide whether, in light of interest rate changes, my ‘contractual payment’ has to increase or decrease. It seems that, with in October 2008, Barclays decided that they’d keep my ‘contractual payments’ at the 2007 rate. The amount I actually needed to pay each month had, of course, fallen dramatically as interest rates had fallen. I asked if something could be done about this. No problem apparently. My ‘contractual payment’ was amended within seconds. My monthly payments have fallen from £1023.31 per month to £640 per month. With my offset, I now only have to pay £440 per month.
Barclays automatically apply interest rate changes to your mortgage and your savings. They don’t change the monthly payments you actually make to reflect interest rate changes though. I think that’s a bit sharp to say the least and it’s meant that my cash flow has suffered, leaving me struggling financially. You have to ring Barclays and ask them to change your ‘contractual payments.’ You can do that each time there’s an interest rate change.
Knowing that friends have the same mortgage as me, I rang them and told them about this. They did the sums and, like me, they’ve been paying Barclays at the October 2007 levels. They’ve now reduced their monthly payments by £1,200 per month despite still going for the term reducing option rather than the payment reducing option. They both said that no-one told them that you had to ask for your ‘contractual payments’ to be varied just as no-one told me that I had to do so.
I think people should be told they need ask for reductions to their monthly payments. Shame on you Barclays for not making that clear at the outset.

Annsdil

I am having the same situation with BB at the moment. I opted to ustilise my offset for repayment reduction. I understand in the T & C you have to contact BB for a reduction to take place, however I take exception to the fact that from the online web page, to my monthly statements it says I have utilised the reduced payment option, but no where does it say that you have to contact them to effect it, which I presume will be on a monthly basis.

What BB have been doing automatically, is reducing the term of my mortgage instead. Even at year end they have taken it upon themselves to maintain the higher payment/lower term even though they acknowledge we requested a lower repayment. This suggests to me that contary to the fact it looks like you can choose to utilise the offset interest to reduce your term OR your mortgage payments, they only in fact have half a system in place to deal with that i.e. the term reduction, and therefore need to reduce monthly payments manually. BB are relying on the fact that most of their customers won't notice this. However, with times being as they are, more and more people may well become aware, as they try to reduce their outgoings.

chivers1977

On your mortgage offer it will state that your payment is only amended once a year if you have a repayment mortgage.

getmore4less

A few point to cover some of the posts in this thread

Barclays tracker offsets.
==================

Allow ISA's to be offset so no need to cash them in just move all you money into a barclays cash ISA.

You can manage which open plan accounts are offset on-line on an individual basis daily if you want.

You get a monthly statements that tell you exactly what is going on and how much you have offset, the interest rate and the interest saved daily(not charged which would be better but you can work it out) and the interest charged that month

Interest gets calculated daily and added monthly(over the end of month)
Mortgage payment is 16th of the month(or next working day).


to GH14

IF you overpay which you have been then the mortgage reserve goes up so you can still get most of the money back(at the same rate) so in effect just moves money around. Check your mortgage reserve account OD limit that should reflect much of the overpayments you have been making.

This annual change method is clear in the T&C you signed up for and is was stated clearly on the annual statement I got that they are keeping the payment at the higher level so I can pay the mortgage off quicker.