Mortgage reserve account

Fernella

Hi Guys,
I'm a newbie and wanted to seek advice. I have a mortgage with Woolwich (Barclays) that has been running since 2006. I must admit to not being savvy when I took it out (I've grown up since..well just a tad) and noticed that there was a 'reserve figure' on my statements. First it was £3k then 5K then 7K then 9K I eventually called the bank to ask what this was and was told that it was money I could borrow as long as I had my mortgage . the advisor confirmed how I could take out the money and what I could spend it on. My mortgage account was up to date and as it was 2011, the fixed rate had dropped down to a base rate tracker so I was actually now over paying on my mortgage. I decided to take the money out to pay off my credit cards...Result?!:T
I wish! This month got an alert about my credit file saying my credit score had declined. Looking into it I found that my mortgage was somehow responsible. So after investigating it turns out that once I borrowed against the mortgage the 'loan' was set up under a different account so whilst I thought I was paying the mortgage and a bit of the loan (at my nice low interest rate, each month, I wasn't. Sending my account into default.:mad:

Pls stay with me...SO I called the bank who listened to the call and conceded that I was ill advised as I was unaware of the separate accounts and that a different interest rate was payable on the loan. Whilst they are prepared to pay the interest I accrued so far, they want me to consolidate with them (at a higher rate) or continue to pay. I have offered to pay a fixed amount over a period but only if they reduce the interest rate to the same as my mortgage. they won't budge. Does anyone have any comments or advice about this? Thanks so much for reading...I know it's crazy!!:eek:

getmore4less

the details of how the reserve work are in the mortgage documentation.

The mortgage reserve account is just like a current account with an overdraft, the rate should have been the SVR(for offsets it is the mortgage rate).

The rate is still low compared to other types of borrowing.

If you check the documantation it will explain how the interest on the reserve should be paid.

I don't have the docs handy to check also have an offset wich works a bit different to a regular tracker.

For offsets the interest gets added to the mortgage account.

I suspect that the regular payment was not enough to cover the normal payment and the interest on the reserve(which may get added to the reserve account taking it over the the limit) and that has caused the issue but do check.




If I remember I will get out my docs later and have a look.

Thrugelmir

Are you now paying a lower rate of interest on the loan than you were on the credit cards? If so you are at no financial disadvantage.

Annisele

Broadly, the remedy for misrepresentation is to be put into the position you would have been in if the misrep hadn't happened - not to be put into the position you'd be in if the misrep had been true.

So, what would you have done in 2011 if Barclays hadn't given you the wrong advice?

If the Barclays reserve interest rate is higher than the rate on your cards, then presumably you'd have continued to repay your credit cards, at the credit card rate of interest?

If the Barclays reserve interest rate is lower than the rate on your cards, then I guess you'd have switched anyway - and so your position now isn't any worse than it would have been if Barclays hadn't lied to you.

In either case, if Barclays hadn't lied to you you'd have had to pay interest between 2011 and now. Barclays' offer to cover that interest (without taking into account the savings you made) means that for the period between 2011 and now, you're better off than you should have been.

Is Barclays also fixing your credit file?

If the rate on the Barclays reserve is higher than the rate on your credit cards, are you in a position to switch the debt back to where it came from? If not, I think you might have a case for getting Barclays to reduce on the reserve to the rate on your credit cards.