Halifax - overcharging due to interest rate changes?

pinballdave

I have my mortgage with the Halifax, it's a repayment mortgage and it's getting close to the end of its term so has reverted to the standard variable rate a few years back, as there wasn't anything to be saved with any of the deals on offer.


Each time the Bank of England change the base rates, Halifax helpfully send me a letter with my new monthly repayment. For the last three attempts at this they have calculated these increased payments significantly higher than I would have expected them to be.


This time it's an extra £40 per month, last December it was just under £20 extra, and in September 2016 when interest rates were actually reduced, my payments went up by a tenner!


Halifax have explained this to me by saying that their system calculates the monthly repayment on the balance owed at the time the calculation letter is printed, but makes that calculation using the number of monthly repayments from the time the new interest rate is applied. So if your regular payment falls between the announcement (5th August) and the interest rate change (1st September) it will be ignored for the purposes of calculating your new monthly payment.


This means that the new monthly payment will always be higher than it is supposed to be, as it's calculated as if you have missed one months payment, and so has to add that on along with any additional interest that it would accrue.


Now this higher monthly payment does mean that you will pay your mortgage off slightly earlier (about 1 month earlier) than your contracted term, which is fine if you can easily afford the extra each month. However if you have other debts at a higher interest rate, you're at a disadvantage as you could be using that money to clear those debts first.


For the first two times I noticed this happening, there was no mention of this on the interest rate change letter, and when their customer services were questioned about it, it took quite an effort to get them to recalculate it. This time there's a note hidden away in the Q&A section explaining it, and the lady in the Philippines on the other end of the phone was ready to make a 'recalculation request' almost as soon as I had cleared the security questions.


I kicked up a big fuss about it the first two times, and got a small amount of compensation for the time spent having to correct their 'mistake' (in 2016, I had to make a 45 minute call to an 0845 number from a mobile so it actually cost me money to put it right).



Is this right that a lender can artificially increase your monthly payments like this without explicitly notifying you? Surely if they believed their initial calculations were correct, they would not be offering to recalculate them.


Also is this standard procedure for mortgage companies? Are all of them doing it, and if they are, should it be allowed to continue?

Thrugelmir

pinballdave wrote: »

Surely if they believed their initial calculations were correct,

The calculations aren't precise at the outset. As the mortgage balance reduces the "discrepancy" narrows. You'll never repay your mortgage a month early. There'll always be a residue balance to pay in the final month.

Ian011

pinballdave wrote: »

(in 2016, I had to make a 45 minute call to an 0845 number from a mobile so it actually cost me money to put it right).

Since 26 October 2015, FCA Regulations GEN 7.2 and DISP 1.3 have banned banks, card companies and insurers from offering premium rate numbers starting 084, 087 or 09 for contact by existing customers.

Almost all banks with 0845 numbers swapped to 0345 or 0800 numbers before the deadline. In many cases, however, old numbers were left in service and often without any sort of announcement telling callers to hang up and re-dial the new number.

If the 0845 number was detailed on official paperwork or on their official website, you should have complained and got a refund of the call charges.

If you had searched online for a number, you may instead have become a victim of the "call connection service" scam and paid premium rate to a scammer to forward your call onwards. Never call numbers starting 084, 087 or 09 found on unofficial third-party websites. They are often fakes or scams.

pinballdave

Thrugelmir wrote: »

The calculations aren't precise at the outset. As the mortgage balance reduces the "discrepancy" narrows. You'll never repay your mortgage a month early.

Yes, that is how it should work. But Halifax have been losing a months payment in the calculations, so this is a larger discrepancy than you imagine. I've only got 8 months left on a 25 year mortgage. The monthly payment has gone from around £300 to £345 (which is significantly more than a 0.25% interest rate increase!), so once I've made 7 more payments at the new rate, I'll have paid about the same as 8 payments of the old rate.

The extra increase involved is always roughly equivalent to one months payment divided by the number of remaining months, so in the early years it will be a very small amount extra and probably not noticeable, but causes big jumps in monthly payment as you near the end of the term.


Ian, I may have misremembered the actual number, but it was definitely an 'out of bundle' chargeable number on the mobile phone network I was on at the time. I did complain about the call costs and length of the call and got a refund.