Barclays charging me to make payment to interest only part of mortgage

Lady_1_2

HI,
I have a fixed rate mortgage with Barclays. It is part repayment and part endowment and has 5 years left to run. I incur a penalty charge if I overpay by more than 5%. Each year I repay 5% to the interest only part and my monthly repayments come down correspondingly. This year I made the 5% payment (£2600)and now they have increased my monthly payment. I have written a letter of complaint and had two phone calls from them. They state this is correct and that their policy changed in August this year. So now there is no point in making a payment to the interest only part as I have reduced my interest only part but they have increased the repayment part by about £480 pounds this year. Is there a way to get this sorted.

Any assistance would be appreciated.

kingstreet

What policy changed in August?

What was it before and what is it now?

How did they inform you of the change?

They used to allow you to make a voluntary overpayment to only the interest-only element of the mortgage? They no longer allow you to do this?

What happens to overpayments now?

What does this mean?

they have increased the repayment part by about £480 pounds this year

Has the monthly payment changed, or the balance of the capital & interest element of the mortgage.

You're going to have to set this out very clearly and very carefully so everyone fully understands what used to happen and what is happening now.

Lady_1_2

They just said their mortgage policy.

When I made an overpayment to the interst only part of my mortgage my whole monthly repayment reduced, this year it increased by £40

They did not inform me of the change in August, I was told over the phone this month when I queried my monthly payment increase.

Yes I can still repay up to 5% of my outstanding mortgage, but I then get an increase in monthly payments.

My monthly payment has increased by £40.

The balance of my interest only part has reduced. But they want me to pay more towards the repayment part.

Hope this clarifies the situation.


Basically I have paid them £2600 towards my mortgage (within the 5% agreed limit) and they are penalising me by £40 monthly on the repayment part of the mortgage.

kingstreet

I'm puzzled. What you are saying happened is counter-intuitive. Can you set out the last few years of your mortgage rates?

Fixed? Variable? Periods involved? End dates?

I don't understand how an overpayment can increase the regular monthly payment.

Let's get a few more views.

Lady_1_2

It is a fixed rate mortgage and has 5 years left to run. The rate is 4.98%. I then have a further year on the standard variable rate to take me to the end of the 25 year term.

I do not understnad either, it makes overpaying useless.

holly_hobby

Something is very wrong here .... either your understanding of whats going on, or I don't what !!

As Kings. states, how does reducing interest only borrowings, equate to the lender increasing the monthly costs pertaning to the capital and interest element ? (assuming no product/rate changes, repayment or admin fees being added to the balance).

Could they have transferred an element of the remaining interest only borrowings onto the C&I schedule (which may explain the increase, but then an affordabilty check would need to be conducted to effect the switch).

I would ask for the lender to provide you with a written explanation as to the criteria changes, and why reducing interest only borrowings has resulted in a direct increase (ie there are no other variables in the mix) in payment to your C&I borrowings.

Hope this helps

Holly

Conrad

OP - I suspect Barclays may have increased rates on interest only mortgages given all the pressure from the FSA over reducing exposure to interest only.

leedslad2012

The change in policy you refer to is related to overpayments on Part & Part mortgages. Prior to the summer any part redemptions made automatically came off the repayment element, this was then changed to come off Interest Only element by default as this is what most people wished to pay off first so would be less outstanding on Interest Only balance at end of term.

You can still make overpayments on your mortgage (either within your 5% allowance or more subject to any charges). and likewise your overpayments will still be having a positive impact on your mortgage. Have you checked your last Mortgage Year End Statement?

First off have you called the Mortgage Servicing Team to question/discuss this prior to writing a letter to them? If you discuss over the phone things are normally quicker/easier to resolve.