Fixed rate end date confusion

nervousftb_3

Hi,

We are a bit confused about the end date for the fixed-term of our mortgage, and so we were hoping one of you might be able to explain to us what is going on!

We applied for our mortgage in Feb 2009 and the offer of a 2-year fixed rate was given to us. This offer was valid until the 10th July 2009. The Key Facts document linked to the offer assumed that the mortgage started on 1st July and so stated that we would make 22 payments at the fixed rate taking us up to June 2011 and then move onto the SVR.

In April 2009 we completed on our house, and so took up this mortgage offer and started making payments in May 2009. Fast forward to now, and we have made 22 mortgage payments at the fixed rate, and so we assumed that we were now out of the fixed 2-year term and would move onto the SVR. However, upon phoning the mortgage company they informed us that the term runs until June 2011.

So here is where we are getting confused - our Key Facts document states that our fixed term runs out in June 2011, but it also states that we are to make 22 payments. It's now April 2011, and we have made 22 payments - so why hasn't our fixed term finished? Is our fixed term over yet or not?! And if it isn't and we still have to make two extra payments, doesn't this mean that we are paying more interest than we thought we were? (If the SVR was higher than our fixed rate I realise that we would probably be happy about this but as it is lower we were hoping to move onto it sooner rather than later!)

Obviously if our mortgage company say we are still within the fixed term there isn't much we can do about it but I would still like to understand the reasoning behind it and if this is common practice.

Many thanks in advance!

opinions4u

The Key Facts document has to make an assumption on completion date. It assumed 1st July.

In reality you completed earlier, but most fixed rate products have a fixed end date (e.g. 30th April or 31st May). This date should be clear in the mortgage offer and the key facts document.

If Key Facts document had assumed a completion date of 1st May it would have stated "24 payments ..." instead of 22.

kingstreet

As o4u says, KFIs make assumptions on start dates so you can see the payment levels illustrated both during and after the expiry of any fix, tracker, discount etc.

The important issue is what's written on the top of page two in the box 4 "Description of this mortgage" where the "Interest rate type and interest" section should read something like;-

"fixed rate of 5.0% for two years from completion"

or

"fixed rate of 5.0% until 30/6/2011."

In my experience, most lenders use an end-date approach which may be a few months less than the period you intended by the time you actually complete.

Nationwide tends to be the "stick-out" lender using the full years from completion technique.

nervousftb_3

Thanks to both of you, having read both your posts and the Key Facts document again it is all much clearer!