Variable rate mortgage

Marguerita

I have a mortgage with a High St bank (they call it a business loan) which I used to buy my shop and the living accommodation that goes with it. The loan is on a variable rate of interest, 1.75% above the bank's base rate. I took it out in December 2004. Since that time, interest rates have risen several times, but the bank has never increased my monthly repayments unless I ask them to. I contacted them early this year, and they increased my payments by £65 per month, and now, 2 0.25% rises later, I have contacted them again and the repayments are going to rise by £69 per month.

My concern is that if the bank does not increase the payments at the time of the rate increases, then interest is accruing and compounding on the loan. I wanted to be sure that my loan is still going to be paid off within the agreed time frame. I was talking to my business manager today and he says it is a fault in the bank's internal systems that my loan is not being automatically adjusted. I asked if it was just me and he said no it would be everyone. I said that there must be people coming to the end of their loan term and still owing the bank a lot of money and he said yes. Surely this is sharp practice by the bank? They are causing people to run up much higher interest charges than are necessary because seemingly they have no system in place to track the loans and increase the repayments on time.

I think this should be investigated.