Mortgage - bank mistake

flatcoat

This is a bit complicated so please bear with me! I have a rapid repay type mortgage product/bank account taken out in mid 2008 with a regional bank that brings a certain type of pudding to mind. 9 months after taking out the mortgage i was made redundant and shortly after that (June 2009) I rented out the property with the banks permission. Albeit I cannot unfortunately find their letter giving approval to rent the house they have happily sent statements to my new address so are clearly aware of the change of my place of living. (I now live elsewhere having remarried). In practice I have only paid interest because that is a) all the bank have deducted from my account and b) although now back in employment I am only earning about half the salary I had at the time I took out the mortgage (I was a company director in a well paid position). Each time i get a bank statement it says 'agreed borrowing limit £xxx,xxx (always the same as the original mortgage) and limit review date 23rd May 2033. The bank have now decided they have made an error and i should be paying £500 a month over and above the interest giving me just a weeks notice of their intention and a 'we are sorry for any inconvenience' statement.......

The reality is due in part to other longstanding commitments from before my redundancy (loans etc) I simply cannot afford to pay anything over and above the interest, the house is still probably in neg equity albeit not as much as in 2009/10 after the collapse in the market. So, after almost 5 years can the bank force this change and what action/response can anyone recommend? I need to respond within the next couple of days.

Thrugelmir

You are letting the property out. Your lender is therefore able to vary the interest charged to reflect this. As Consent to Let is only ever deemed a short term option i.e. 3 years. A period of time you've now exceeded.

The interest charge reflects the risk to the bank. The fact you are in negative equity still and have not repaid any capital merely adds weight to this view.

You need to seriously consider yoour options looking forward. The past has no relevance.

flatcoat

Thanks, nothing like being straight to the point! It is not the interest they wish to vary but the payment. And what options do you suggest? If the property was in a comfortable amount of equity i would sell it tomorrow. I have told the bank as soon as the market has recovered to the point I can comfortably clear the capital that is what i will do and hopefully long before 2033. They have repeatedly sent statements which clearly state a review date of 2033, they are reviewing it in 2013...... so what is my legal situation? I have ALWAYS paid the interest as and when required so ahve never had any arrears on the terms they have applied.

kingstreet

An agreement to let, or acceptance of interest-only, may be time-limited, or subject to particular circumstances continuing to apply.

All you can do is put your circumstances to the lender, that such action would cause you hardship and see what they suggest.

Allowing you to do something doesn't necessarily constitute a legal right to continue with that behaviour.

If the lender fails to take into account your situation and to "treat you fairly," you might like to remind it of its obligations;-

In complying with MCOB 13.3.2AR(6):

(1) a firm must consider whether, given the individual circumstances of the customer, it is appropriate to do one or more of the following in relation to the regulated mortgage contract or home purchase plan with the agreement of the customer:

(a) extend its term; or

(b) change its type; or

(c) defer payment of interest due on the regulated mortgage contract or of sums due under the home purchase plan (including, in either case, on any sale shortfall); or

(d) treat the payment shortfall as if it was part of the original amount provided (but a firm must not automatically capitalise a payment shortfall); or

(e) make use of any Government forbearance initiatives in which the firm chooses to participate;

(2) a firm must give customers adequate information to understand the implications of any proposed arrangement; one approach may be to provide information on the new terms in line with the annual statement provisions.

flatcoat

Thanks kingstreet, it certainly WILL cause great hardship so that may help. However given ALL my bank statements clearly state the borrowing limit is £X and the review date is 2033 then surely they cannot change that limit OR date after almost 5 years without my agreement?!

The letter i got from the bank was not time limiting in respect of the lettings period otherwise I would have been less surprised with the banks letter. Indeed I also clearly recall (with great relief at the time) the person i initially spoke with on the phone said words to the effect of 'don't worry, we are used to this and prefer it to not getting any payments form borrowers'.

kingstreet

The review date refers to the borrowing limit on a current account mortgage. It has nothing to do with an arrangement to let, or to pay interest-only.

The lender probably has the right to review such arrangements when it chooses.

You're better off trying to appeal to the lender's moral responsibility, rather than a fancied suggestion that it may somehow be illegal to require capital repayments.

Thrugelmir

flatcoat wrote: »

Thanks, nothing like being straight to the point!

Nothing personal I can assure you. :beer:

Thrugelmir

kingstreet wrote: »

An agreement to let, or acceptance of interest-only, may be time-limited, or subject to particular circumstances continuing to apply.

All you can do is put your circumstances to the lender, that such action would cause you hardship and see what they suggest.

Allowing you to do something doesn't necessarily constitute a legal right to continue with that behaviour.

If the lender fails to take into account your situation and to "treat you fairly," you might like to remind it of its obligations;-

The OP does not live in the property and is using the property within a business. So will fall outside consumer protection. As reasonable to assume that the OP was aware of the risk they were taking.

Given the property has been let for 5 years. The OP has most likely made a profit in that period that could have been used to reduce the mortgage debt.