5 year term/ 10 year fixed?? please help

arwalder

I know that’s the thing! It makes no sense.

On my documents it says:
I will make 60 payments at the fixed rate which would take me to 2013 but ERC apply until 2018. The term of the mortgage as stated on Key facts and on my most current mortgage statement is definitely only 5 years. Key Facts also state that I will revert to SVR in 2018 surely indicating the fixed rate applies over ten years.

When I contact the providers all of these facts match up to their records and they admit they do not know how this product can exist!

The mortgage is interest only not sure if that is a factor that affects my concerns and I am looking to pay the mortgage off in full due to the fact I plan to sell up and move into rented accommodation. Apologies for not mentioning this in earlier posts.

I have a horrible feeling I am not going to be able to contact the adviser who set this up: contact numbers down-website down. Checked FSA membership online and it states they are no longer members.

Mortgage provider keep telling me it’s between me and the adviser who set it up but surely I am paying them the mortgage and it is their product that is flawed.

getmore4less

Interest only and selling to redeem removes the option to change the term to a few months not work since there is no money.

getmore4less

Another thought ask the lender if there was bigger commision on a 10y fix over a 5y fix.

Mrs_Bumble

Do you have the official offer as well as the Key Facts?

Who is the Lender?

Most peculiar!

lise61

MarkyMarkD wrote: »

I don't agree with getmore4less at all.

You CANNOT have a mortgage term with a fixed rate period (and ERCs) greater than the term, because the mortgage conditions will impose the ERC if you redeem at the end of the contractual term and that makes no sense.

Lenders are not going to give loans with a longer fixed rate and a shorter term, just to give you the option of extending the term. That is a silly deal for them to get into.

arw - how on earth did you not notice this substantive error when you accepted the mortgage offer?

There is no point at all getting the Ombudsman involved at this stage, as nothing has happened which is worth claiming. If you indeed wish to redeem, you would have to pay the ERC (as demanded) and then complain about it to the Principality, and then go to the FOS if they refuse to do what you believe is fair.

But I'm still not sure what YOU think is fair - are you happy to pay the ERC which would have applied on the 5 year term? In which case, why did you accept a deal with ERCs twice as high?

Granted you cannot have a mortgage rate which extends beyond the term of the mortgage - makes absolutley no sense, but this is for the financial advisor and solicitors to have noticed and for the packager to have contacted the ifa about. It sounds like you have been sold a bum deal here as you would have had penalties regardless to whether you continued for the full 5yrs or not. Contact the lender again and ask to speak to their customer complaints team. If you do not get a satisfactory response - they may require the complaint in writing, contact the FSA as they will need to know if you have followed the correct complaints procedure. Good luck xx

I was a mortgage consultant until December 2008.

opinions4u

Here's a possible scenario (I said possible, not likely).

The lender only had the choice of a 10 year fix and a 2 year fix at the time. The client wanted a 5 yr fix and the broker identified that the 10 yr fixed product/rate would apply even if the mortgage term was less than 10 years.

If you take the 10 year fixed option but repay it within an agreed mortgage term of 5 years the client would effectively have a 5 year fixed rate. The lender cannot apply an ERC against a borrower who has repaid in accordance with the contractual term of the mortgage.

The only problem comes if the borrower wishes to overpay. Then the ERC would apply.

It's a theory, it may be garbage, but it could fit the situation and explain why a 10 year product was sold in this way.

arwalder

Hi just a quick update to those following this post;
I tried to contact the Financial Adviser today their number is no longer available. So I then rang the mortgage providers who now say they will send details of the Mortgage to me so I shall wait to receive them.
I already believe the key facts and conditions of my mortgage match up as when I called the providers they confirm the ERC dates and the term. But as soon as I receive the Terms and conditions of the agreement and have triple checked the wording I will call the Principality’s complaints department.
Thank you for your suggestions and advice.

MarkyMarkD

getmore4less wrote: »

Many ERC are a % of the amount paid off at the time of redemtion.

So Zero ERC there is nothing outstanding.

OK, I agree with that part. But there's still no reason for the lender or the borrower to have a fixed rate twice as long as the declared term.

MarkyMarkD

opinions4u wrote: »

Here's a possible scenario (I said possible, not likely).

The lender only had the choice of a 10 year fix and a 2 year fix at the time. The client wanted a 5 yr fix and the broker identified that the 10 yr fixed product/rate would apply even if the mortgage term was less than 10 years.

If you take the 10 year fixed option but repay it within an agreed mortgage term of 5 years the client would effectively have a 5 year fixed rate. The lender cannot apply an ERC against a borrower who has repaid in accordance with the contractual term of the mortgage.

The only problem comes if the borrower wishes to overpay. Then the ERC would apply.

It's a theory, it may be garbage, but it could fit the situation and explain why a 10 year product was sold in this way.

I agree with your possible scenario. The lender shouldn't have allowed it to happen though - their software should prevent term < fixed rate term.

arwalder

Just a very quick update to say that I sent a letter to the mortgage providers explain that I felt the product was flawed. They have apologized and adjusted the fees to that of a 5 year term! Saved near on £3000!
Thanks to everyone who posted for your help and advice.