Help understanding mortgage overpayment

Debtfree40plus

Hope someone can help and see if I have understood my bank correctly today.

I received a letter from my lender advising that the interest rate is going up.  We have been overpaying for some time and the letter says the monthly payment will go down because the amount by which we have overpaid is used to reduce it.

I rang our mortgage provider today to explain that we don't want the overpayments to be used to decrease monthly payments as we want to pay the mortgage off early (or have the option to underpay if needed).  They said the only way round this is to just increase the amount we overpay by, to compensate for the reduction.

Is this right?  Provider is Halifax if that makes any difference.

getmore4less

What you pay determines the actual real term.

The original term just decides the payment.

Most lenders have trigger events that recalculate the payment based on remaining original term.

Some(like Barclays) have options like never reduce only put up if needed.

chanz4

Yeah they did this to me on the annual review, problem been you can still only pay 10% of the account/ sub account bal a year

Mahsroh

chanz4 said:

Yeah they did this to me on the annual review, problem been you can still only pay 10% of the account/ sub account bal a year

That’s likely to be on a fixed deal. I assume the OP is on a variable rate as they’ve had a rate increase, so there is likely no limit on overpayments. 

OP, just increase your standard payments or make additional payments to make it back up to what you were paying before. 

RelievedSheff

OP, assuming that you are on the variable rate is there any reason that you are not looking to remortgage and look for a better rate?

chanz4

Mahsroh said:

chanz4 said:

Yeah they did this to me on the annual review, problem been you can still only pay 10% of the account/ sub account bal a year

That’s likely to be on a fixed deal. I assume the OP is on a variable rate as they’ve had a rate increase, so there is likely no limit on overpayments. 

OP, just increase your standard payments or make additional payments to make it back up to what you were paying before. 

or product is coming to an end

Mahsroh

chanz4 said:

Mahsroh said:

chanz4 said:

Yeah they did this to me on the annual review, problem been you can still only pay 10% of the account/ sub account bal a year

That’s likely to be on a fixed deal. I assume the OP is on a variable rate as they’ve had a rate increase, so there is likely no limit on overpayments. 

OP, just increase your standard payments or make additional payments to make it back up to what you were paying before. 

or product is coming to an end

Yes, of course. Either way I didn't want the OP to think that they were limited to 10% if that wasn't the case. 

Plus as a former Halifax mortgage customer who was trapped on a variable rate for several years, I know they typically take around a month from a BoE rate change to notify their rates changes, which would be about now, so I would suspect that this is the case with the OP (i don't know for sure though, obviously). 

chanz4

We normally get notified 3 months before 

Debtfree40plus

We're on SVR so will just increase our overpayment to make up for the decrease.  Got just over £7k left and just want to get it paid off.  Thanks for the advice.