Coronavirus Mortgage Problem

ThracianKing

Hi all,

This is my 1st post so sorry if it's long winded. I lost my job due to Covid in March last year. We had to go onto Universal Credit (family of 4) and then had to use the 6 month mortgage payment holiday with our provider (Santander). As it was incredibly difficult to find a job, we then ended up having an arrangement with them for just over 50% of the usual monthly payment. I found a new job in June of this year, but we now have arrears on our mortgage account.

The main issue is that our mortgage deal is up in November and Santander will not offer us a new rate (other than their standard follow on rate which is 3.3%) due to the arrears. I have asked them to roll the arrears into the loan, but they will not do that unless there are 6 months of full payments on the account. We will only be able to make 4 moths of payments before the rate changes, and we cannot afford the payments at the new rate.

Surely this cannot be legal? Santander are effectively trapping us into a rate we cannot afford through no fault of our own. This is the second mortgage we have had with them and we have never missed a payment before Covid 19 hit. Are they actually allowed to do this?

Thanks for listening.

[Deleted User]

It's surely absolutely legal. 

They're not obliged to offer you any new deal and they definitely won't while you're in arrears.  You'll need to get up to date first and then see what options you have.

Go to the DFW boards for advice on cutting your costs and repaying quicker.

kaMelo

ThracianKing said:

Hi all,

This is my 1st post so sorry if it's long winded. I lost my job due to Covid in March last year. We had to go onto Universal Credit (family of 4) and then had to use the 6 month mortgage payment holiday with our provider (Santander). As it was incredibly difficult to find a job, we then ended up having an arrangement with them for just over 50% of the usual monthly payment. I found a new job in June of this year, but we now have arrears on our mortgage account.

The main issue is that our mortgage deal is up in November and Santander will not offer us a new rate (other than their standard follow on rate which is 3.3%) due to the arrears. I have asked them to roll the arrears into the loan, but they will not do that unless there are 6 months of full payments on the account. We will only be able to make 4 moths of payments before the rate changes, and we cannot afford the payments at the new rate.

Surely this cannot be legal? Santander are effectively trapping us into a rate we cannot afford through no fault of our own. This is the second mortgage we have had with them and we have never missed a payment before Covid 19 hit. Are they actually allowed to do this?

Thanks for listening.

 I don't think they are actually allowed to include the sum in arrears to be rolled into the mortgage, I think they have to set up a kind of parallel account for the sum in arrears which bears no interest. This is what the Financial Ombudsman would expect a financial institution to do in this scenario.
With this thought it seems strange they would say they would do it for you if you can make six month of full payments. Maybe what they actually mean is they would consider offering you a new product if able to demonstrate six months of full payments.

Whichever it may be they aren't trapping you into anything, the terms of your mortgage were known at the outset an there were no guarantees as to what may happen at the end of your offer period.

Losing your job was very unfortunate and deferring payments, whilst necessary at that time, don't look great to any other lender. However Santander have more history to go on and maybe what they are saying is that after making six months payments in full you have demonstrated your financial problems were only temporary and they would be more willing to discuss a new mortgage offer.



Edited to add.
Going forward, affordability checks for a new mortgage will include whether you can withstand a substantial interest rate increase, probably to a higher rate than the 3.3% SVR that your mortgage will change to. If you can't afford the 3.3% then I don't see how you would pass affordability checks. 
With that in mind I'd second what ZX81 suggests and maybe post on the DFW boards for ideas on how to trim your outgoings/increase your income.

ThracianKing

Deleted_User said:

It's surely absolutely legal. 

They're not obliged to offer you any new deal and they definitely won't while you're in arrears.  You'll need to get up to date first and then see what options you have.

Go to the DFW boards for advice on cutting your costs and repaying quicker.

I thought that the Government and the FCA had stated that no one should either become a mortgage prisoner or be 'worse off or penalised' due to Covid? Are these not exceptional circumstances that should be taken into account? If there was no Covid then I wouldn't have lost my job, and the payments would not be an issue. It still feels like this should not be a standard terms and conditions situation.

kaMelo

ThracianKing said:

Deleted_User said:

It's surely absolutely legal. 

They're not obliged to offer you any new deal and they definitely won't while you're in arrears.  You'll need to get up to date first and then see what options you have.

Go to the DFW boards for advice on cutting your costs and repaying quicker.

I thought that the Government and the FCA had stated that no one should either become a mortgage prisoner or be 'worse off or penalised' due to Covid? Are these not exceptional circumstances that should be taken into account? If there was no Covid then I wouldn't have lost my job, and the payments would not be an issue. It still feels like this should not be a standard terms and conditions situation.

You're not worse off because of Covid19, you're in a better position as you had a six months payment holiday with no negative markers on your credit file. That is what they referred to when not suffering adverse consequences, not that you wouldn't be affected at all.
Contracts are still valid however financial institutions have been instructed to show "forbearance" and that is what they have done. You took a payment holiday and then paid less than the agreed payment since, both without suffering any penalties.

The terms of your mortgage were clear, you would revert to the SVR interest rate at the end of your current offer and that is exactly what is happening.  There would be no guarantee of a new mortgage offer with Santander, or anyone else, at the end of your current mortgage offer. Any new offer would be a new product with eligibility dependant upon your financial circumstances at that time. 





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MattMattMattUK

ThracianKing said:

Deleted_User said:

It's surely absolutely legal. 

They're not obliged to offer you any new deal and they definitely won't while you're in arrears.  You'll need to get up to date first and then see what options you have.

Go to the DFW boards for advice on cutting your costs and repaying quicker.

I thought that the Government and the FCA had stated that no one should either become a mortgage prisoner or be 'worse off or penalised' due to Covid? 

That is not what they said. What they said was that no one should have a default marker added due to agreeing a payment holiday. Banks have been allowing people to re-mortgage an existing property having taken two six month payment holidays, arrears are a different issue as that means that non-payment was not agreed with the bank in advance. 

ThracianKing said:
Are these not exceptional circumstances that should be taken into account? 

They are exceptional circumstances, but no they should not be taken into account in the way you wish. From a financial perspective lending is made based on risk, new products (a remortgage for example) are regulated and the rules and regulations have to be followed. The mortgage holidays were of substantial benefit to the individual borrowers and the wider economy, however the issue with arrears is different. 

ThracianKing said:
If there was no Covid then I wouldn't have lost my job, and the payments would not be an issue. It still feels like this should not be a standard terms and conditions situation.

It is not a standard terms and conditions situation. The payment holidays were implemented as a way around this, they gave those who used them six months of no or reduced mortgage payments, that was put in place to alleviate the issues. However if someone then goes into arrears after a year of mortgage holidays that indicates a deeper underlying issue with the individuals finances. 

I understand people have been impacted, personally my income has fallen by 90%, until I get my income back up I would not expect a bank to extend lending to me based on my previous income, nor would I expect them to ignore arrears. As zx81 has mentioned now really might be the time for the DFW boards. Cut everything to the bone, work overtime if it is available in your profession and if not put in extra hours in a second job, if your partner is able to then she should do the same. Use that extra cash to cover the increased payments in those two months to give you the six months clean payments and clear down the as much of the arrears as you can and then remortgage. 

ThracianKing

kaMelo said:

ThracianKing said:

Deleted_User said:

It's surely absolutely legal. 

They're not obliged to offer you any new deal and they definitely won't while you're in arrears.  You'll need to get up to date first and then see what options you have.

Go to the DFW boards for advice on cutting your costs and repaying quicker.

I thought that the Government and the FCA had stated that no one should either become a mortgage prisoner or be 'worse off or penalised' due to Covid? Are these not exceptional circumstances that should be taken into account? If there was no Covid then I wouldn't have lost my job, and the payments would not be an issue. It still feels like this should not be a standard terms and conditions situation.

You're not worse off because of Covid19, you're in a better position as you had a six months payment holiday with no negative markers on your credit file. That is what they referred to when not suffering adverse consequences, not that you wouldn't be affected at all.
Contracts are still valid however financial institutions have been instructed to show "forbearance" and that is what they have done. You took a payment holiday and then paid less than the agreed payment since, both without suffering any penalties.

The terms of your mortgage were clear, you would revert to the SVR interest rate at the end of your current offer and that is exactly what is happening.  There would be no guarantee of a new mortgage offer with Santander, or anyone else, at the end of your current mortgage offer. Any new offer would be a new product with eligibility dependant upon your financial circumstances at that time. 





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I do not understand how you can say I am not worse off because of Covid. I lost my job, I had to go onto Universal Credit and I am now in arrears on my mortgage all because of Covid. I am immeasurably worse off, and am having to battle to keep my home rather than accepting a new deal at 1% (which I could have done without the pandemic). The FCA has stated that there is not a 'one size fits all approach' to the current situation so to revert to standard terms and conditions is not applicable. 

ItsComingRome

ThracianKing said:

kaMelo said:

ThracianKing said:

Deleted_User said:

It's surely absolutely legal. 

They're not obliged to offer you any new deal and they definitely won't while you're in arrears.  You'll need to get up to date first and then see what options you have.

Go to the DFW boards for advice on cutting your costs and repaying quicker.

I thought that the Government and the FCA had stated that no one should either become a mortgage prisoner or be 'worse off or penalised' due to Covid? Are these not exceptional circumstances that should be taken into account? If there was no Covid then I wouldn't have lost my job, and the payments would not be an issue. It still feels like this should not be a standard terms and conditions situation.

You're not worse off because of Covid19, you're in a better position as you had a six months payment holiday with no negative markers on your credit file. That is what they referred to when not suffering adverse consequences, not that you wouldn't be affected at all.
Contracts are still valid however financial institutions have been instructed to show "forbearance" and that is what they have done. You took a payment holiday and then paid less than the agreed payment since, both without suffering any penalties.

The terms of your mortgage were clear, you would revert to the SVR interest rate at the end of your current offer and that is exactly what is happening.  There would be no guarantee of a new mortgage offer with Santander, or anyone else, at the end of your current mortgage offer. Any new offer would be a new product with eligibility dependant upon your financial circumstances at that time. 





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I do not understand how you can say I am not worse off because of Covid. I lost my job, I had to go onto Universal Credit and I am now in arrears on my mortgage all because of Covid. I am immeasurably worse off, and am having to battle to keep my home rather than accepting a new deal at 1% (which I could have done without the pandemic). The FCA has stated that there is not a 'one size fits all approach' to the current situation so to revert to standard terms and conditions is not applicable. 

They didn't say nobody should be worse off due to COVID. Clearly most of the population is to a greater or lesser extent.  They said that people shouldn't; be penalised for taking payment holidays by having late payment markers AP markers or the like. And they weren't.

kaMelo

ThracianKing said:

kaMelo said:

ThracianKing said:

Deleted_User said:

It's surely absolutely legal. 

They're not obliged to offer you any new deal and they definitely won't while you're in arrears.  You'll need to get up to date first and then see what options you have.

Go to the DFW boards for advice on cutting your costs and repaying quicker.

I thought that the Government and the FCA had stated that no one should either become a mortgage prisoner or be 'worse off or penalised' due to Covid? Are these not exceptional circumstances that should be taken into account? If there was no Covid then I wouldn't have lost my job, and the payments would not be an issue. It still feels like this should not be a standard terms and conditions situation.

You're not worse off because of Covid19, you're in a better position as you had a six months payment holiday with no negative markers on your credit file. That is what they referred to when not suffering adverse consequences, not that you wouldn't be affected at all.
Contracts are still valid however financial institutions have been instructed to show "forbearance" and that is what they have done. You took a payment holiday and then paid less than the agreed payment since, both without suffering any penalties.

The terms of your mortgage were clear, you would revert to the SVR interest rate at the end of your current offer and that is exactly what is happening.  There would be no guarantee of a new mortgage offer with Santander, or anyone else, at the end of your current mortgage offer. Any new offer would be a new product with eligibility dependant upon your financial circumstances at that time. 





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I do not understand how you can say I am not worse off because of Covid. I lost my job, I had to go onto Universal Credit and I am now in arrears on my mortgage all because of Covid. I am immeasurably worse off, and am having to battle to keep my home rather than accepting a new deal at 1% (which I could have done without the pandemic). The FCA has stated that there is not a 'one size fits all approach' to the current situation so to revert to standard terms and conditions is not applicable. 

With reflection, saying you were not worse off was the wrong terminology as of course you are, but there is nothing that can prevent you suffering because of Covid completely and that was never the intention of the schemes.
Things happen that have a financial impact on people, like losing their jobs, all the time, it's not unique to the Covid era. That is of course undoubtable a bad thing to have happen to them and one I have sympathy with. However unlike other times people were able to make use of schemes, like taking payment holidays, without suffering the usual negative impact of doing so.  Hence my point, albeit made poorly, of you actually being in a better position than you normally would be.

You assume you would have been able to secure a new deal at 1% without Covid but it is just an assumption and Covid did happen. Even if you hadn't take a payment holiday you still might not have been able to secure that deal as lending criteria has tightened considerably.
Even without that deal 3.3% is not exactly a high interest rate but from what you've said you can't cover the payments at that level. I would expect that's a cause for concern for any lender including Santander. Hence the suggestion to look at ways to increase income/lower spending as that's really the only way to improve the situation at the moment.

Tokmon

ThracianKing said:

Hi all,

This is my 1st post so sorry if it's long winded. I lost my job due to Covid in March last year. We had to go onto Universal Credit (family of 4) and then had to use the 6 month mortgage payment holiday with our provider (Santander). As it was incredibly difficult to find a job, we then ended up having an arrangement with them for just over 50% of the usual monthly payment. I found a new job in June of this year, but we now have arrears on our mortgage account.

The main issue is that our mortgage deal is up in November and Santander will not offer us a new rate (other than their standard follow on rate which is 3.3%) due to the arrears. I have asked them to roll the arrears into the loan, but they will not do that unless there are 6 months of full payments on the account. We will only be able to make 4 moths of payments before the rate changes, and we cannot afford the payments at the new rate.

Surely this cannot be legal? Santander are effectively trapping us into a rate we cannot afford through no fault of our own. This is the second mortgage we have had with them and we have never missed a payment before Covid 19 hit. Are they actually allowed to do this?

Thanks for listening.

Why did it take you 15 months to find a job! I know plenty of people who got jobs after loosing them last year and supermarkets in particular were crying out for workers. Also why is no one else in the house working, are the other three members children?

Taking so long to find a job is your problem, there was no reason it should have taken so long and that's the reason your in such difficulty now.

sammyjammy

Tokmon said:

ThracianKing said:

Hi all,

This is my 1st post so sorry if it's long winded. I lost my job due to Covid in March last year. We had to go onto Universal Credit (family of 4) and then had to use the 6 month mortgage payment holiday with our provider (Santander). As it was incredibly difficult to find a job, we then ended up having an arrangement with them for just over 50% of the usual monthly payment. I found a new job in June of this year, but we now have arrears on our mortgage account.

The main issue is that our mortgage deal is up in November and Santander will not offer us a new rate (other than their standard follow on rate which is 3.3%) due to the arrears. I have asked them to roll the arrears into the loan, but they will not do that unless there are 6 months of full payments on the account. We will only be able to make 4 moths of payments before the rate changes, and we cannot afford the payments at the new rate.

Surely this cannot be legal? Santander are effectively trapping us into a rate we cannot afford through no fault of our own. This is the second mortgage we have had with them and we have never missed a payment before Covid 19 hit. Are they actually allowed to do this?

Thanks for listening.

Why did it take you 15 months to find a job! I know plenty of people who got jobs after loosing them last year and supermarkets in particular were crying out for workers. Also why is no one else in the house working, are the other three members children?

Taking so long to find a job is your problem, there was no reason it should have taken so long and that's the reason your in such difficulty now.

Not helpful or related to the question OP asked, personal circumstances are none of our business unless OP chooses to share, unlikely after a post like yours.