Northern rock equity release

Gavv8

My grandparents used northern rock to release equity in thier home over 10 years ago, they took a £50000 lump sum then a monthly amount paid in the bank, my grandmother has since passed away and my mother has been granted power of attorney to enable her to manage the care that my grandfather needs in his old age, as part of this she would like to downsize his property which is too large for him and to this end we started going through the paperwork for the equity release and found that they have raised the interest rate from 7.19% 'fixed for life' as stated on the original paperwork to 7.28%.
We wrote to them to request an explanation and they sent back a copy of the credit agreement with 7.28% on the credit agreement.
As the original paperwork says in black and white 7.19% FIXED FOR LIFE do we have grounds for a complaint to the fos/fsa and should we complain to NRAM as they are now called one more time.
Thanks in advance.

bigadaj

You could try but the difference is minimal, either rate is very high to make up for the length of time the bank is going to have to wait for their money.

However wanting to downsize and potentially release funds back to nr now could be very attractive to them, contact them to discuss this and see what they offer.

However be prepared to have to pay a huge amount to get out of this arrangement, the problem is as opposed to investments in this case compounding is working against you, the original £50000 alone will probably have nearly doubled over 10 years.

Gavv8

To be fair, it might not seem like a big difference but we don't see why my grandfather should pay any more than he has to given that northern rock was bailed out by tax-payer money and is now owned by Virgin, its partly a matter of principle but even if its only a few hundred quid, why should they have it?

antrobus

Gavv8 wrote: »

My grandparents used northern rock to release equity in thier home over 10 years ago, ...
As the original paperwork says in black and white 7.19% FIXED FOR LIFE do we have grounds for a complaint to the fos/fsa and should we complain to NRAM as they are now called one more time....

Here's a piece from the Guardian dating back to 2003

Northern Rock has a standard home equity release mortgage (Herm) where the current rate of interest is 7.19% fixed for life.

http://www.guardian.co.uk/money/2003/mar/29/property.homebuying1

If NRAM are now charging 7.28% and you are not happy with that I imagine that the first course of action would be to contact NRAM and ask them for an explanation.

Incidentally NRAM is a different entity from 'Northern Rock'. The former is owned by the UK government, the latter is owned by Virgin.

Gavv8

Thats interesting, so the government must have held on to the mortgage side of things, have contacted NRAM and just received a
Standard 'we are right, your wrong' letter.

dunstonh

Can you clarify something as it is a potentially key thing. Does the change coincide with the repayment of the existing debt throught the sale or a property and the purchase of a new equity release with the purchase of a new property?

I am not a lifetime mortgage expert by any means but I believe that on house moves, these were typically repaid and the option to not take out another or to replace it with another new equity release, subject to lending criteria, was how it was done.

Gavv8

The change of interest rate happened around the time northern rock went in to government ownership, the policy itself is still running on the property it was taken out on but will have to be paid off if either the property is sold or my grandfather dies and seeing as we want to sell the property and downsize we need to know if NRAM/northern rock are legally allowed to change the interest rate or quote 2 different rates.
I'm quite happy to go on the offensive with them providing it seems that there is reasonable grounds for a complaint.

margaretclare

Gavv8 wrote: »

Thats interesting, so the government must have held on to the mortgage side of things, have contacted NRAM and just received a Standard 'we are right, your wrong' letter.

I believe that the mortgage side of the business was sold on to J P Morgan, but correct me if I'm wrong.

Your GPs would have been far better to have had a variable-rate mortgage tied to the Bank Rate, but at the time they probably thought that the fixed rate was a better option in case the Bank Rate went up. We did a similar thing in 2003 and in fact our rate went down with the Bank Rate and has stayed down all the time the BR has been at this low level.

Gavv8

margaretclare wrote: »

I believe that the mortgage side of the business was sold on to J P Morgan, but correct me if I'm wrong.

Your GPs would have been far better to have had a variable-rate mortgage tied to the Bank Rate, but at the time they probably thought that the fixed rate was a better option in case the Bank Rate went up. We did a similar thing in 2003 and in fact our rate went down with the Bank Rate and has stayed down all the time the BR has been at this low level.

I appreciate all the should've/could've/would've but what i need to know is should we persue a complaint against NRAM/northern rock?

Thrugelmir

Gavv8 wrote: »

we started going through the paperwork for the equity release and found that they have raised the interest rate from 7.19% 'fixed for life' as stated on the original paperwork to 7.28%.
We wrote to them to request an explanation and they sent back a copy of the credit agreement with 7.28% on the credit agreement.
As the original paperwork says in black and white 7.19% FIXED FOR LIFE do we have grounds for a complaint to the fos/fsa and should we complain to NRAM as they are now called one more time.
Thanks in advance.

The signed credit agreement is the legal agreement between the parties.

So what do you regard as the original paperwork?

margaretclare

Gavv8 wrote: »

I appreciate all the should've/could've/would've but what i need to know is should we pursue a complaint against NRAM/northern rock?

I doubt if they have any grounds for doing so. They accepted a 'fixed rate' at a time when the BR was much higher than it is now, so having signed on the dotted line, it is assumed they knew what the risks were.