Fixed Rate Monthly Amount Changed - Why?

lennoxsd

My bank sent me a letter saying that my monthly payment has been recalculated - in year 4 of a 5 year fixed mortgage! I over pay by £50 a month but still would not expect the bank to change the payment amount during the initial rate term? Without doing the math my initial reactions is, even though the payment is lower, that I am being changed more interest over the term as a result. It would appear they have taken the overpayments into account, recalculated over the remaining years so in effect the mortgage would never be repaid early as expected if I switched back to paying only the required amount?

I have overpaid for the first four years and that did not change the payment amount previously?

The letter from the bank explaining why is no help at all. It just states it is an annual recalculation and should be expected.

Anyone seen this before?

PhilStation

If they have recalculated it, as you have suggested, I would contact them and find out why. Point out that you have been overpaying for four years with the intention of reducing the term, not your monthly payments.

An alternative would be to increase your over payments perhaps, given the new monthly payment is now less, but then of course there is the risk they will adjust you monthly payments again!

lennoxsd

I intend to do that. Anyone else had this happen to them too? By my calculation, this would imply you'd never pay off your mortgage early if it is recalcualted every year accounting for overpayments and recalculating back to the full remaining term. The question for me is - as a result will I pay additional interest?

getmore4less

True term is decided by how much you pay, as long as you don't hit any ERC then you can just top up your overpayment.

Even if you just did it once a year the extra interest is not much.

(post your numbers if you want some calculations doing)

lennoxsd

Even if it is 1p extra interest - I don't think that I agreed to that when I took the fixed mortgage out. Busy looking at my mortgage T&Cs and the numbers.

getmore4less

lennoxsd wrote: »

Even if it is 1p extra interest - I don't think that I agreed to that when I took the fixed mortgage out. Busy looking at my mortgage T&Cs and the numbers.

There will be triggers that recalculate the payment.

Even with no triggers the real payment dates are different to this used to calculate the payment so adjustments happen.

You will need to check the default terms for overpayment often that is reduce payment if you want to keep the payment the same you need to ask.

the overpayments still save interest.

Thrugelmir

lennoxsd wrote: »

The letter from the bank explaining why is no help at all. It just states it is an annual recalculation and should be expected.

Simply increase your monthly overpayments to compensate. If your lender has changed their internal policy then there's little point on concerning yourself with why. As the policy is generic and will apply across the board.

getmore4less

You will find you signed up to a fixed rate not fixed payment.