When is a 2-year fixed rate not a 2-year fixed rate?

gardnose

Hi everyone,

Just two small pieces of small print to be aware of if you're considering paying a booking fee for a fixed-rate mortgage.

When you pay for a two-year fixed rate mortgage, the "two years" does not start from the moment you draw the mortgage - it starts from some arbitrary date after you pay the booking fee.
This is usually ok - unless the house you are purchasing falls through for some reason.

At this point the small print (if you can find it, and if your mortgage adviser is even aware of it) kicks in. You actually only have 6 months to 'draw' your mortgage from the time you pay your booking fee. If your house purchase falls through, this gives you just 6 months to find a new house. If you take longer than 6 months, then the bank *could* choose not to give you the mortgage. And of course,the booking fee is non refundable.

The second piece of small print is really amazing. If your original house sale falls through, and then you do purchase a new house 6 months later, the 2-year fixed rate still only applies from your original booking-fee date. So you may find that you actually only have an 18-month fixed rate, or less.

The banks' reasoning is that they have to borrow the money at the time when you book it (something to do with a 'common expiry date'), not at the time when you decide to take out the money.

So, please take note and ask questions up front about what happens if your purchase falls through before you splash out on any kind of booking fee for a mortgage!

(You may have guessed this has happened recently to me - I'm considering what to do next as the official complaints route with this particular bank hasn't got me anywhere.)

Wutang_2

gardnose wrote: »

Hi everyone,

Just two small pieces of small print to be aware of if you're considering paying a booking fee for a fixed-rate mortgage.

When you pay for a two-year fixed rate mortgage, the "two years" does not start from the moment you draw the mortgage - it starts from some arbitrary date after you pay the booking fee.
This is usually ok - unless the house you are purchasing falls through for some reason.

At this point the small print (if you can find it, and if your mortgage adviser is even aware of it) kicks in. You actually only have 6 months to 'draw' your mortgage from the time you pay your booking fee. If your house purchase falls through, this gives you just 6 months to find a new house. If you take longer than 6 months, then the bank *could* choose not to give you the mortgage. And of course,the booking fee is non refundable.

The second piece of small print is really amazing. If your original house sale falls through, and then you do purchase a new house 6 months later, the 2-year fixed rate still only applies from your original booking-fee date. So you may find that you actually only have an 18-month fixed rate, or less.

The banks' reasoning is that they have to borrow the money at the time when you book it (something to do with a 'common expiry date'), not at the time when you decide to take out the money.

So, please take note and ask questions up front about what happens if your purchase falls through before you splash out on any kind of booking fee for a mortgage!

(You may have guessed this has happened recently to me - I'm considering what to do next as the official complaints route with this particular bank hasn't got me anywhere.)

Are you saying then, that if you are going to make a massive financial commitment that you should read all of the terms and conditions?

opinions4u

gardnose wrote: »

(You may have guessed this has happened recently to me - I'm considering what to do next as the official complaints route with this particular bank hasn't got me anywhere.)

Nothing to complain about.

Your Key Facts and mortgage offer documents tell you all the information you need is reasonably explicit terms.

While you could go to the FOS with your complaint, they won't uphold it.

Next step will be the courts, who will order you to pay the lender's legal costs as your case would be considered a waste of time.

Just read the paperwork you're issued with when taking out any financial product. Especially one that will cost you tens of thousands of pounds over a couple of decades.

Look in the mirror on this one and learn from it.

beecher2

I really do find it incredible that people don't read their documents carefully. It couldn't be clearer and certainly isn't in small print.

kai666

If what you say about your advisor is true, you need a new one

And you don't want to be reading the terms and conditions of about the biggest financial decision of your life do you. That would just be a boring waste of time

gardnose

Thanks for your comments - I too like to read all the small print, but in this case there was nothing referring to this particular situation. Sorry, I should have made it clear - it's presumably small print that is only available internally to the bank - it isn't mentioned by mortgage advisers or in any of the documentation that is actually sent to the consumer, or mentioned on this particular bank's website.

The only reference in the small print within the documentation that I was sent says that you have to draw the mortgage within six months of the application. There's absolutely nothing to suggest that the time period of two-years begins at some arbitrary date and does not begin when you draw the mortgage.

I'm interested to see if anybody else has been in the same situation.

beecher2

Look at your key facts. Under 6. it'll say "6. What you will need to pay each month" :"24 Payments at a fixed rate of x%" Then it'll say 'this assumes a start date of...'

No 2 year fix ends after exactly 2 years. Anyone who gets this particular product from Halifax

http://www.halifax.co.uk/mortgages/existing-customer-fixed-75ltv.asp#2_year_fixed

will find their deal ends on 30 June 2012, not 2 years after they start paying it.

JimmyTheWig

If there honestly isn't anything in the small print about when the fixed period starts (or, more relevantly, when it finishes) then I do think you have a case.

I would be shocked if that was the case, however. It is a standard practice and so if you weren't given the info about it then it would have been a mistake on the bank's part.

I suggest you go back to the bank and ask "how should I have known that the fixed rate would end on this date?". If they don't know then you have a case. If they point you to a piece of information that you have and, for one reason or another, it doesn't say it then you have a case. If they point it out to you and you do have the info then I think it is one to chalk up to experience.

JimmyTheWig

Incidentally, however, I think that it is a shame that they are refered to as "2 year" products. I would be most put out if I bought a 2 litre bottle of coke to find it only had 1800ml in it - and told that if I had bought it on Monday I would have got the full 2l.
I think the conversation should go "Can I have a 2 litre bottle of Coke, please?". "We haven't got 2 litre ones, but we've got a 1.8 litre you can have." "That's fine, I have that one then, thanks."

ILW

JimmyTheWig wrote: »

Incidentally, however, I think that it is a shame that they are refered to as "2 year" products. I would be most put out if I bought a 2 litre bottle of coke to find it only had 1800ml in it - and told that if I had bought it on Monday I would have got the full 2l.
I think the conversation should go "Can I have a 2 litre bottle of Coke, please?". "We haven't got 2 litre ones, but we've got a 1.8 litre you can have." "That's fine, I have that one then, thanks."

Think this is more a matter of buying a 2 litre bottle, but 200ml has evaporated by the time you get round to drinking it.

JimmyTheWig

ILW wrote: »

Think this is more a matter of buying a 2 litre bottle, but 200ml has evaporated by the time you get round to drinking it.

Oh, I take your point.
You're saying that you "buy" a mortgage at the time that you book it. Hadn't really looked at it like that. I wonder, then, if this is the point that needs to be made clearer?