Interest only mortgage - current lender won't give me a new deal!! Help!!!

hoggiebear

Hi

I will give you the full picture of the service I have received from my current mortgage provider (Santander) from when I first took out the mortgage over 4 years ago.

My partner and I applied for a mortgage of £156,000 in October 2005. Santander approved our application within just a few minutes and only asked a couple of questions with regards to income/expenditure. There was no in-depth application process and they in fact offered us a further £35,000 on top of what we requested.

The advisor then proceeded to confirm that once we receive the documentation just sign it and send it back to us with the requested information as highlighted on the covering letter. The application was completed on the Monday and we received the documentation on the Wednesday. The covering letter did not provide details of what documentation we needed to supply and I therefore contacted Santander and an advisor told me that we were not required to provide anything, just sign it and send it back. I was a bit dubious about the way this was being handled but was so caught up in the moving process that I never really questioned it with them at the time.

My solicitor called me the following Monday to confirm he had received the money from Santander. It therefore took only 7 days to get hold of £156,000 without our income and expenditure being checked. The mortgage amount was around 5 times our combined salaries and I was surprised we were even allowed this much and even more surprised that we were offered more than this.

Around 9 months after moving into our new home we had completed various home improvements totalling around £40,000 which we had paid for using loans, credit card etc. We therefore decided that since the debt was due to home improvements it may be worth checking if we could increase our mortgage to cover this amount - seen as we had already been offered more than we originally asked for.

Santander approved our request quickly but this time did check some of our income details. They never questioned where the £40k debt had come from. This meant that they had approved a mortgage of approx 6 times our income.

For a time we were able to comfortably afford the repayments however neither of us have been given a pay rise over the last 4 years, we have had all child benefit removed due to the new pay scales and had to pay for an unexpected funeral for which there was no insurance/life cover. These factors plus the rising cost of living hit us hard.

We therefore called Santander to see if they could give us a better deal etc and they said no. We then enquired as to what our options were with regards to other lenders but by this time the recession had hit and affordability had drastically reduced so remortgaging to another lender was impossible.

As things got tighter we decided that it may be worthwhile changing to an interest only mortgage for the short term until things got a little easier. We contacted Santander who agreed to this without requesting documentation regarding as to how we would repay the capital at the end of the term. In fact they never even questioned this.

Upon the end of our fixed rate deal I contacted them again to see if a new fixed rate was available. They agreed a new deal and then the advisor asked about how we intended to repay the capital at the end of the term. I was not financially savvy with mortgages at the time and I vaguely mentioned that we had shares and some savings but they never asked for proof of these nor did they ask their value. Nothing more was mentioned and we continued with our fixed rate deal on interest only terms.

Our deal is due to end in July 2012 so I contacted Santander in March 2012 to see if I could agree a new deal. I was advised that a 2 year fixed rate at 3.99% was available but that I wouldn't be able to take it up until April 2012 (3 months prior to the current deal ending). I was therefore told to call back.

Well I called them today only to be told that there are no deals available due to the way my mortgage is being run (interest only, high ltv - my house was recently valued at £270,000 and our current outstanding mortgage is £175000!! I can only assume they have reduced the amount of ltv on interest only to 50% in line with other lenders). This meant that they would automatically transfer us to their standard apr which I believe is 4.99%!!

We are still unable to remortgage to another lender and I feel that we have been trapped by Santander and their unethical lending.

I enquired what deals would be available if we go back to a repayment mortgage and they said they would have to do a full affordability check before they could even check if a deal was available. Emmm, I already have the mortgage which I am paying and have never missed a payment so why do they need to check affordability now?!!!!

They don't seem to want to help and are forcing us into a corner which could make us unable to afford the mortgage long term.

Can anyone give me some advice or even their opinion regarding this matter?

thanks

Hovel_lady

You might be better posting this on the Mortgages and Endowments board

http://forums.moneysavingexpert.com/forumdisplay.php?f=15

skintmummy

Hello, I am sorry but I cannot offer any help, just wanted you to know you are not alone. Me and my husband have a interest only mortgage and have done for the last 4 yrs at £171k with the cost of everything and the ltv we cannot remortgage so are stuck where we are with GE Money, they also approved a second mortgage for us at £27k so we are well and truly stuck with them for ever.

Good luck for the future hope something works out for you and us.

Skintmummy

hoggiebear

Thanks for your support Hovel Lady and Skintmummy.

I've posted this on a couple of forums and some people seem to just want to judge and birate me for accepting the mortgage in the first place. I personally don't see why every financial decision is solely the customers fault and not the banks but hey ho, let them have their opinions.

bertman

hoggiebear wrote: »

Thanks for your support Hovel Lady and Skintmummy.

I've posted this on a couple of forums and some people seem to just want to judge and birate me for accepting the mortgage in the first place. I personally don't see why every financial decision is solely the customers fault and not the banks but hey ho, let them have their opinions.

I wouldn't bother about being judged - people do judge and post comments on forums where they can remain anonymous - they wouldn't say these things to your face.

You are not alone, we are in a similar situation with the Halifax, we had to move to an interest only mortgage for 2 years, but we did manage to go back to a full repayment a couple of months ago - trouble is its variable and they have just informed us its going to go up by 0.5% in May - we have no way of getting a different mortgage anywhere so we are stuck with this.

I hope that you find a way out of this.

Best of luck..

Stewart_78

Can you not just pay back yourself without a formal repayment arrangement? Just pay any spare cash into the mortgage. Or are you hoping to get a better rate on a repayment mortgage?

alison39

I second what stewart says start to pay down your actual mortgage, at least that way you're paying off some of the capital.

camuk81

http://www.moneysavingexpert.com/news/mortgages/2012/04/is-the-interest-only-mortgage-market-dead?utm_source=forum&utm_medium=sidebar&utm_campaign=box

Is that apt. The story about interest only mortgage pops up on MSE news

FireWyrm

Hoggiebear, welcome to the forum.

I'm getting the feeling from your initial post that you are looking for advice or building a case regarding mis-selling. I'm afraid that this won't work. Your initial borrowing was much more than you could possibly afford over the long term and then you added another 25% on top. The fact that Santander were lazy in the beginning and didn't question affordability or income doesn't absolve you of responsibility for your own financial affairs. This laziness on the part of the banks led to the sub-prime bubble which as well all know, went bang rather spectacularly in late 2008. There were warning signs before this and many were forecasting a sharp correction in the financial markets much earlier than that. Santander actually sound like they were being rather more prudent than some on the high street since they would only lend you five times and not the seven or ten some people were getting. The bottom line is that from your description, you must either increase your income in order to bring the overall mortgage down to a more reasonably multiple, or sell and start again having learnt a painful lesson. If you are trying to go after Santander for mis-selling, you will not get anywhere. Best to work on damage limitation.

This is a debt free board and having seen people on here pay £84K in debt in just over 3 years, I can assure you that no debt mountain is insurmountable, but it will involve pain and trouble. If you would like to post your SOA for us, I'm sure we can probably make some suggestions on how to adjust your lifestyle in order to free up some more money and potentially help pay down you mortgage to a state where you are a more favourable prospect to modern lending rules.