When is a fixed rate mortgage not a fixed rate mortgage?

Destined_to_be_skint

When it operates on an annual review basis! Anyone else had this with their mortgage?

We got our ten year fixed rate 4.65% from Leeds BS last year and assumed that the repayments would remain the same for the next ten years. Well, I was shocked to see that they have increased the repayment by the princely sum of £4.00!:eek: I'm sure many of you on variable rate mortgages will be wondering why I am splitting hairs over such a minor amount but I am annoyed that this was not made clear to us when we took the mortgage out.

On looking through the Q & A booklet that came with the annual statement it said that the reason why it might change was because of interest rate changes and also of other products we have purchased (in our case life assurance to cover the mortgage) that might have been on a special discount. I think this is rather cheeky because they pledged not to change the premium of the life assurance for the whole term of the mortgage. I am in two minds as to whether we should cancel the life assurance policy and take it out with another company but this will probably result in an excuse for another increase next year.

Has anyone else had this? What do you think of it? I am worried that because of the interest rate rises they have carte blanche to put our payments up to whatever level they feel like because of this annual review caveat. We have had sooooo many letters from them in the past year urging us to release the equity in our home to spend on improvements so despite making £100k out of us over 20 years they still want more!

kingkano

Forget the interest rate changes.... your extra £4 is going to be down to the insurance. Try not to get those mixed up!!

I'm surprised they promised to not change the life insurance cost for the whole term?? Most insurances do increase year on year (nature of the beast). But you might want to contact them about that side... if you have something in writing saying 'we will not increase the premium during the life of your mortgage' you should have good grounds for an argument. Check some prices with other companies and consider changing

JoeK_3

That's not true about the "nature of the beast"

There are basically two types of life insurance contracts, one that is reviewable and the other being guaranteed.

The reviewable contract is generally reviewed after five years and increased by the insurance company based on their claims history.

The guaranteed contract however never increases their premiums during the term.

It is dangerous to generalise.

JoeK

MarkyMarkD

The £4 increase could be because you chose to add the product fee onto the mortgage?

I would assume that the initial payments would be set on the basis that you were going to pay the fees off in a single payment. If you instead let them be added to the loan, that would slightly increase your payments once they were capitalised at the start of the following year.

Destined_to_be_skint

Well it turns out that MarkyMarkD is correct. I wrote a cheque out for the arrangement fee and they never cashed it, so it's been added to the repayments. Phew! Thanks for all the replies.