Interest only mortgage - current lender won't give me a new deal and can't remortgage

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?

MonkeyMad

Which part of Santanders unethical lending made you accept the offer they very quickly made you for a sum which way 6 times your income? You will get short shrift with an opening gambit like that. I almost expect your next post to be 'was my mortgage mis-sold?'

dazza.mk

You might get more appropriate advice on the Mortgages & Endowments forum rather than the Credit Cards forum.

thenudeone

Unless you have a lifetime offer, every mortgage offer will revert to SVR once the deal expires. That's pretty universal.

When the deal expires, you can apply for any deal that's currently available to you from your existing lender (which might be limited) or another lender, if you don't want to stick with SVR.

The fact that mortgage lenders have different offers available with different lending criteria at different times shouldn't be a surprise. In some cases this is very prudent considering what's happening in the economy and the housing market at the time.

If you want a lifetime deal then you should have applied for one. (For example I am on a lifetime deal on an interest only mortgage of Base Rate + 0.5%:))

I can't see that Santander have explicitly promised or even suggested that a similar deal would be available to you at the end of your deal. I can't really see why you think they have such an obligation.

Why don't you just see what's available elsewhere as a re-mortgage offer? Your LTV isn't excessive and it shouldn't be too difficult, although the days of interest-only mortgages are probably numbered.

TadleyBaggie

hoggiebear wrote: »

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?!!!!

Possibly because on a repayment mortgage your monthly repayments would be higher perhaps?

hoggiebear

Thanks dazza.mk, I have added it to the mortgages forum.

MonkeyMad - I hope you never find yourself in this position. I thought this site was for support and advice not lectures and judgement. As I said in my original post; I was not financially savvy when I took out the mortgage and these companies are great at making you think you can afford more than you need so they can make a quick buck. I've not gone down the mis-sale route nor do I intend to however I do feel that banks should not get away with this sort of thing. I don't see why it's always the customer in the wrong. It's easy to say 'you agreed to take the money they offered you' but shouldn't we also be asking 'how did they justify lending you so much?'. They too have be held responsible for their actions and not just leave the customer high and dry once they've gotten what they wanted!

udydudy

Surprising that the banks lent and it was their mistake!! Now they do not give and it is still their mistake!!!

hoggiebear, I am also a santander customer and also took out a mortgage around the same time and similar multiples of salary as you did, but a simple calculation of how much we could afford to pay told me not to buy a expensive house. So we settled for a cheaper property with a bit of work to be done. The only diffrence was that we went the interest only way rather than repayment as you did. Even though every time we remortgaged with them we were offered more borrowing limits(once nearly £40000) over our mortgage, we always refused, not because we were financially savvy but it seemed common sense not to go beyond our means. Infact we did not do up the house until after 3 years of taking the mortgage so as not to increase our outstanding debt.

It unfortunate that bank lending has tightened to such an extent that it is stiffling many peoples finances and does not seem to be a wise decision but then banks have no option, especially since they are the favourite punching bag of everyone. If they lend they are being reckless and if they do not then they are unjust.

I would say the best way for you forward would be cut down on all expenses as much as possible and start repaying some portion of your mortgage principal. Slowly but surely then you mortgage will go down lowering your monthly payments and also will give you some cushion when interest rates creep up.

As both of us are form financial background it does help. fortunately, We anticipated a tightening of lending and interest rates, hence went for a 5 year fixed rate last year even though it cost a bit more. Though we were asked for 5% repayment of capital which we borrowed from other sources to pay.

geoffky

Another who needed to get on the ladder..another zombie mortgage from a zombie bank..There are millions of you out there. A ticking timebomb but i doubt the bailout will happen..low interest rates have kept you out of the crap for the last four years at the expense of me getting nothing for the savings i live on..

ticktack_2

hoggiebear wrote: »

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.

Two points.

1. You say your combined salaries equal about one-sixth of £196,000. I make that about £32,000. Why did you have child benefit removed if your income is so low? Shouldn't you appeal against that decision?

2. If Santander didn't give you full information about the deal, the mortgage might have been mis-sold. If it was me -- well, if it was me I would never have borrowed six times my income, but since you did, if you can make a case for mi-sselling you should do so, IMO. Agree with you that the banks have got away with murder in not being held accountable for irresponsible lending, but that's life, and that's why you should look after your own interests and not expect a bank of all people to do it for you.

Rupert_Bear

I do not think it is fair to lay the blame with the lending instituation. Ok they may give you 5 x your annual income but you know much this would stretch you. Its a question of taking responsability instead of blaming others. We could have borrowed alot more than we wanted but liked to stay in our comfort zone.

udydudy

geoffky wrote: »

.......low interest rates have kept you out of the crap for the last four years at the expense of me getting nothing for the savings i live on.....

Well why did you not go on 5 yr fixed saving rates @6% in 2007-2008 then?? eh?? are you not being in the same boat whining about the OP not taking care of their finances, how prudent have you been if your savings are on low interest rates.
I personally am in both boats(saving and mortgage) even in todays low interest rate scenarios my savings pay me a lot more than my mortgage and hence I see no reason to reduce my mortgage. Its called a simple thing which this website promotes....prudent money management.

Stop whining...its not the borrowers fault ...We savers would not have got the high interest rates of 2005-2007 of 6% plus when borrowers were paying higher as well... you did not complain then that you were getting extremely high interest rates on your savings.