Contractual monthly payment increasing??

snomys

Hi

I recently ended a 10 year fixed rate @ 4.79%. Of course, mortgage rates over this past decade have been lower but thats not what I want to talk about.

So my mortgage is with Barclays and I eagerly watched to see what would happen to my contractual repayment rate when the 10 year fix ended.

So I have about 28k remaining on my mortgage, and the rate now drops to .99 + .5(BoE base rate) so rounded to 1.5.

I checked on the calculators and it was around the 180£ per month, so I was relieved to see that.

However, Barclays sent me the new statement and it stated that my new contractual monthly repayment was instead £254.98.

So why the difference?

I went to the branch and they said, yes it should be adjusted to nearer £180 so that was reassuring.

But after 2 weeks the adjustment didnt happen.

So I complained....

Today I got a call and they told me, the reason the repayment is higher and showing at £254.98 is because I have paid a sum off my mortgage sooner, by making regular overpayments over the past 10 years.

But in that case, shouldnt the repayment amount go down???

He said, its normal that when you overpay, the amount increases, because the system thinks I can afford to pay more and hence repay the full amount sooner.

But there was no change to the time remaining, the same amount of time remaining has been showing, that 15 years remaining on a 25 year term.

Im not sure hes being totally legit, because I stated my concern that I felt I may have been overcharged over the past decade, because whenever I checked calculators and typed in 4.78%, the repayment amount was always lower for my outstanding balance.

Im confused??

They now offered me £75 compensation as a gesture of good will for having to run around the houses to try and get an answer of why I am always paying a higher contractual repayment amount.

Does this sound right to you?

When I went into the branch, the "moment banker" I had asked about this, asked me "just out of curiosity, why did you check your repayment amount?", to which I replied my playing with online repayment calculators and noticing the difference of what I expected to pay to what Barclays said.

Any advice on this matter would be greatly appreciated, but I feel something just isnt right here.

Thanks

ACG

Ask to speak to someone else if you do not understand, then ask them to put it in writing and if you are still not happy go to the financial ombudsman.

It sounds wrong what you have said, but I have worked for banks and had to explain why things are as they are and people could not get their head around it...I am not saying you have misunderstood, but something is wrong by the sounds of it.

cahillg81

Didn't you receive a KFI that told you what your payments would be after the fix, your figures sound wrong as it seems you are moving to a tracker but I'd expect you to move to a SVR.

minimike2

The mortgage was obviously taken out 10 years ago. Those of us who have been around long enough will remember when the Woolwich reversionary rate was +0.99%, so that isn't an issue.

It sounds to me like you have been making overpayments, which are being used to reduce the term of the mortgage rather than the payment. The outstanding term may however not reduce on your paperwork / online banking - probably a systems thing.

If you pay the £255 ish then at current rates the mortgage would be repaid in around 10 years instead of the remaining 15.

You may want to ask if they can amend the overpayments to count towards reducing the payment instead, but it may be too late for that now given the time that has elapsed. Did you not notice this on your annual statements?

Thrugelmir

snomys wrote: »

Im not sure hes being totally legit, because I stated my concern that I felt I may have been overcharged over the past decade, because whenever I checked calculators and typed in 4.78%, the repayment amount was always lower for my outstanding balance.

You were contracted to pay a fixed amount. Your overpayments have simply increased the speed with which you are reducing your debt.

Look at your annual statements. This will show both the amounts you have paid and the interest charged on a monthly basis. You will see the interest charged reducing at a gradually increasing rate.

snomys

Hi yes you are right, it was originally a Woolwich mortgage, and was taken over by Barclays.

Now an SVR not a tracker, but the SVR is 0.99 + the 0.5 bank of England rate.

As I overpaid quite frequently over the past decade, I did notice the contractual payment gradually decreasing, often by a few pounds each month.

The remaining duration of the mortgage has remained the same, minus one month each month that passed.

The KFI that came after the fixed term, stated 15 years remaining and a new contractual payment obligation of £254.98 on the remaining amount of £28250.

However, the 1.5% on this, would result in an £180 monthly repayment, not £254.98.

AS I say, even when I was repaying over the past decade, I often checked money savings expert calculator and say that repayment amount was considerably higher for my balance on the 4.78%, and I wondered why was I having to pay more.

I have the mortgage statements for the decade just passed, but Ive always just assumed the bank would be right and never really queried the figures.

I found a company online that will do an audit on the repayments over the term of the mortgage and check to see if overcharging has occurred.

I guess they will tale a cut, but Im tempted to go for it.

Ill wait for the new KFI they said they would send through to me shortly, and then have a think whether I should go for an audit.

My mortgage is charged interest daily. Calculated and adjusted daily.

As one of you guys have pointed out, the system may not have been reducing the remaining duration and may not indicate any change to the remaining term, but instead as I said, I noticed the contractual repayment amount was reducing slightly on each overpayment.

Thanks guys, but as I say, Im still unclear on the full picture.

minimike2

Call up again and ask if your overpayments have been applied as a "part redemption" or not. If they have not they may have been applied as a "pre-payment", meaning you would not have been charged interest on the amount, but it has not yet been reflected in your payments. It could be possible to rectify the situation by applying the amount as a part redemption. Please do check all this first with the lender though, do not take any specific action without checking the status of the payments with them.