Barclays/Woolwich - Mortgage Reserve being Withdrawn

Docklander

Firstly, I am self employed.

6 or 7 years ago I took out an offset mortgage with The Woolwich which gave me a mortgage reserve. That reserve is now around £60-70,000. At the time, it was sold to me as being a way to have a buffer should I not be working at any point in time and need cash.

For the last few years, my interest rate has been 1.09% and I have been overpaying my mortgage by just under double so I estimate that £25-£30,000 of that mortgage reserve exists because I have been overpaying.

Today I receive a letter from Barclays telling me that they are reducing the mortgage reserve to zero and removing rebalancing which means that I will in effect have no mortgage reserve at all.

As you can imagine, this royally screws up any buffer I have had and means my overpayments into that account have been for no reason.

What annoys me most was that the entire reason for taking out that mortgage and overpaying so heavily was that if I ever needed to access the cash, it would be available to me.

Does anyone have any suggestions as to what I can do? I have spoken to Barclays and they have told me that this is a change in the mortgage terms and is coming into effect whether I like it or not. The most they will do is re-evaluate my situation and give me a maximum mortgage reserve of £20,000.

At the moment I have taken 12 months off working so if they re-evaluate I will most likely not qualify for a mortgage reserve at this point in time.

Am I best off taking the overpayments I have made out of the mortgage account and holding them somewhere else before this comes into effect on the 21st October?

Any advice would be appreciated!

jamesd

You can complain about it and take the matter to the FOS which will assess whether it's a reasonable change. You should seek a reserve of all of the amount created due to overpayments. It's not efficient to have this money in the reserve at the moment because you can get higher interest rates from savings than you're paying on the mortgage.

You seem to have no income from employment at present so you probably wouldn't qualify for any new mortgage at present.

When working you might consider an offset mortgage with offset savings account like those from First Direct. In an offset mortgage the ability to withdraw the savings is yours as a right and they aren't part of the mortgage.

vacheron

I know this is said with the benefit of hindsight, but I think the problem is that you have been overpaying the mortgage account (which causes them to increase your available mortgage reserve), however their T's and C's give them the right to withdraw or re-assess the service at their discretion. (it does in our paperwork anyway).

Had you instead paid the overpayment into a linked savings account then you would have been completely protected and had your safety net, but would have been paying exactly the same interest as you do now.

When I was reading your post I considered that I may also have have moved the reserve funds into a savings account while I still can (not an offset though as you will get a better return in a normal interest paying account).
They could still call in the reserve facility, but if your money was with another institution invisible to them it may help you plead your case that you can't pay it all back and they may allow you to retain a higher reserve for this reason.

Morgage_Confused

In a weird way they are doing you a favour. Put as much of the reserve as they will allow into other accounts that pay higher interest than your mortgage at 1.09%.. You shouldent be overpaying the mortgage at this rate.

Isa's for example.

lukegarrett

I'm in the same position as Docklander. What needs to be said is that if you want some sort of reserve back then you need to go through a new mortgage application. This is a very dodgy move from Woolwich which is probably designed to make low mortgage interest owners to expose themselves into re-applications where good mortgage deals can be lost for the sake of regaining a reserve? You may end up with 20k back and a new mortgage with a higher interest rate? Also the letter says this "has happened" and the mortgage reserve account will be zero on the 21 of October. It doesn't say you have up to the 21 of October to use it. If you use it before the 21 of October the bank can still demand any balance back before removing it. When I called them I posed the same question. I asked: will I have the account left up and running if I take some money out of it? The rep said I could only take money out, if I was agreeing to have it "re-assesed". I said yes to this and as a result she removed my account straight away! She said by removing it straight away I would have better chances to succeed in my re-assessment. I wrote a letter of complaint to which they responded. I accused them of being misleading and obstructive, they obviously denied it. So i requested a transcript of my phone call with the rep, under the freedom of the information Acts. They had to agree to it. I want to review the content of the call and submit it to the Ombudsman for an opinion and see if the Bank has been acting in a misleading and obstructive way in respect to the access to my existing reserve account. Any feedback?

Wh05apk

What they are doing is simply to remove the "re-balancing" of reserves, I.e. if you have £100k mortgage and no reserve, then repay £30,000, you would currently have £70,000 mortgage, and £30,000 reserve, in the future this will not happen.

The solution to this, if you have an offset is simply to draw all your available reserve now, and place in an offset savings account, that way you can draw it back at any time, bt whilst in the savings account, you will be saving interest.

chocolady

I have a similar situation to the original poster. I had a mortgage with my ex partner of 100,000 which over the years gradually reduced and rebalanced so that we had a reserve of 70,000 by the time we divorced. The offset was a lifetime tracker of 0.75% above bbbr and currently is 1.25% I think. I took the mortgage over although it was ostensibly a new mortgage they let me take the lifetime tracker rate with me as my ex signed the rate over and gave me a 10,000 reserve. I thought that rebalancing (which was sold to me as a great benefit of the flexibility of offsetting) was still happening and did not receive a letter, as some people did, telling me that rebalancing was no longer a facility. When I took the mortgage out a couple of years ago I thought when my finances were straight again I would make an overpayment as I could always draw down the reserve if I needed it in the future. In January I made an overpayment. At the time I was put through to a call centre rep and asked if it would be possible for me to increase my reserve and he told me that he didnt think that would be possible but nevertheless I thought, with my years of experience of the mortgage, that this was poor advice and made my payment. I recently need to do some works on the house and called barclays to increase the reserve because of my mentioned overpayment only to be told that for the last month they have not increased the reserve and I could borrow other money. I am assuming the borrowing will not be on my preferential rate as my reserve would have been so can only think that Barclays are withdrawing this facility because they can make more interest if you need to borrow elsewhere which is extremely cynical. I rang the complaints department and was told that the Financial Conduct Authority had ruled that Barclays should reduce the reserve facilities on their offset mortgage (which was a lie). I rang the FCA and they said if Barclays have said in the terms and conditions that they can alter the reserve facility when they want then I have no recourse to complain. I havent checked my documents but am sure that this probably is in the terms and conditions as they dont seem to be too worried about letting their customers know what they are doing. Just very disappointed they have sold this product as a flexible mortgage and then are able to start chipping away at some of the benefits in order to make more money. Not sure if there is anything I can do about it though

dunroving

Just wanted to dredge this thread up as I found it while looking for something else. Has anyone had further experience with trying to persuade Barclays/Woolwich to reinstate their reserve account?


I am in a position where this would be ideal for me over a 24-month period to build up a line of credit growing to £25k maximum (I have plenty of capital in my house to cover this) at about the 12-month point, and then pay it all back over the second 12-months period. Although every time I log in, my mortgage reserve account still shows, one of the many Barclays people I spoke with on the phone recently said it no longer exists and the only reason it is showing is because I haven't closed it(!)


As people have said elsewhere, it seems to be a cynical way of Barclays wriggling out of a previous contractually-agreed arrangement because the interest rate no longer suits them. The explanation of another Barclays person I spoke with (they were passing me from pillar to post) was that it was to protect against people going into dangerous credit that they couldn't afford (bullcrap, I say).

kingstreet

The concept of extra borrowing without evidence of affordability no longer fits the post-MMR lending world.

This is purely a regulatory position most lenders would take.

dunroving

kingstreet wrote: »

The concept of extra borrowing without evidence of affordability no longer fits the post-MMR lending world.

This is purely a regulatory position most lenders would take.

That's the rubbish Barclays are spouting.


I see your point in principle, but this doesn't jibe with the fact that every time I log in, I get a pop-up message saying I am pre-approved for a £35k unsecured loan. Seems counter to the position above.


My main problem isn't lack of credit or capital, it is flexibility over the 24-month period. It seems all that Barclays can do is offer me a 60-month loan (that's not what I need), with hefty early repayment penalties (how des that fit in with the credit perspective in a "post-MMR world"?), or a remortgage (with hefty fees and a much worse interest rate than I am currently on).


Both of the latter are much more expensive, and therefore more risky. The only thing they have in common are "hefty fees" and "higher interest".

getmore4less

What is the od limit on your reserve account?

I still have mine and they never fixed the problem you can borrow back all the capital paid off, it is still going up.

Reinstating a reserve that has been removed will be a lot harder.

Edit forgot to ask. do you still have a mortgage