Paying off Cheltenham & Gloucester Mortgage

georgeandjacobsgrandad

Hi Everyone, this my first post.

I have had a 8 year £45000 mortgage where 7 years has been a fixed (capped) rate of 4.99 % and have been paying £569.48 a month for the last 7 years.

This 7 year capped mortgage has come to an end and has reverted to the Standard Variable rate mortgage which is currently 2.5% which i will be paying for a further 1 year before it comes to an end.

I am puzzled because i have been paying £569.48 @ 4.99% and now its £594.70 @2.5%- an increase of £56.48 per month when it should have neen reduced!

How do they work this one out?.

What are the pitfalls of paying this amout off early as there are now no penaltys and i can pay this amount off in full as i now have some spare cash.

thanks

anselld

It is a repayment mortgage, so most of your monthly payment is for repayment of the original capital, not interest.
I'm not sure exactly how C&G calculate the repayment element on this mortgage, but the £594.70 must be what is needed to repay the remaining capital by the end of the term.

TrickyDicky101

I suggest you get them to check their figures and make absolutely sure that your payments up to now have gone through correctly as you should be paying pretty darn close to what you are paying now (due to the short term, interest rate changes won't have a major impact on what you pay as you are paying almost wholly capital with your monthly repayments). Something definitely looks wrong - it shouldn't have gone up.

luckyfool

You say your deal was a 7 yr capped rate at 4.99%. A capped rate is NOT fixed, i.e. it may have been 4.99% when you took it out (and capped at 4.99% or a higher rate than that), but it would also have had a tracker margin over base rate .... e.g. 1% 1.5% over base rate. While your original mortgage documentation will talk about a 4.99% capped rate, you may find you have actually been paying 1% or 2% recently while base rate has been 0.50%, and as such have been paying a lower rate than the SVR. This would make sense if your new payment is going up.

georgeandjacobsgrandad

HI,

For the last 7 years I have been paying the same fixed/capped rate of £569.48 @ 4.99% every month and it has not gone up or down at all.

Now it has increased to £594.70 at 2.5% variable for the next year.

Thanks

TrickyDicky101

luckyfool wrote: »

You say your deal was a 7 yr capped rate at 4.99%. A capped rate is NOT fixed, i.e. it may have been 4.99% when you took it out (and capped at 4.99% or a higher rate than that), but it would also have had a tracker margin over base rate .... e.g. 1% 1.5% over base rate. While your original mortgage documentation will talk about a 4.99% capped rate, you may find you have actually been paying 1% or 2% recently while base rate has been 0.50%, and as such have been paying a lower rate than the SVR. This would make sense if your new payment is going up.

Not based on the amounts quoted: £45k for 8 years at 4.99% nominal paid monthly in arrears equates to exactly £569.48 (by my reckoning using Excel's PMT function, anyhow).

Assuming the payments made monthly for the past 7 years have all been the same (at £569.48 pm) then reversion to an SVR in year 8 of 2.5% implies a new monthly payment for the remaining 12 months of £561.92 (again using Excel).

anselld

Do you have any of the original offer documentation? What does it say?

dunstonh

For the last 7 years I have been paying the same fixed/capped rate of £569.48 @ 4.99% every month and it has not gone up or down at all.

Is it fixed or capped?

They have different meanings and implications.

georgeandjacobsgrandad

The Documentation says 'Fixed at 4.9%'.

I still have all the original documents.

Thanks

anselld

Presume you mean 'Fixed at 4.99%'.
OK, it certainly looks wrong then. Suggest you ask them for an explanation in writing.
Do you have a statement for the balance at the end of year 7? - should be about £6653.
Have there been any fees added on top of the £45,000?

TrickyDicky101

Fees could definitely be the cause - especially if round about the £500 mark and it was added to the mortgage at the start.