Bank Error with Early Repayment Charge Deducted from Outstanding Balance 21 January at 1:21PM edited 21 January at 1:22PM in Mortgages & endowments 6 replies 362 views

Leon12

Hi All,

I am a Natwest mortgage customer and have recently re-mortgaged with them (stayed with the same provider) and I did this before my old mortgage run out as it made sense to pay the early repayment charge (which was a reasonable small amount) to get a better deal. On the same day I did the re-mortgage / product transfer, I also made an overpayment so the two payments made on that day were first an overpayment (whilst still on the old mortgage to avoid eating into the overpayment percentage limit on the new mortgage) and then also the early repayment charge to get out of the old mortgage. The issue is I can see from the outstanding balance of my new mortgage that the bank have made an error and directly applied / taken off the early repayment charge amount from my mortgage or in other words, they have deducted both the overpayment and early repayment charge off of the outstanding / remaining balance of my mortgage when they should have only deducted the overpayment as the early repayment charge is effectively a fine to get out of the old mortgage and obviously not an overpayment.

Obviously this error works in my favor and I am 100% sure in saying it is definitely an error as it is clear for me to see from the outstanding mortgage balance I have remaining. So my question is, should I alert Natwest to this or just leave it as I am benefitting from it as my outstanding balance is almost £600 lower than it should be and the monthly payments are also now a little lower than they should be as well. The onus is obviously not on me to spot their errors and it is up to them to either not make the error in the first place or to spot it if they do. My concern is they will realise at some point in the future and fine me then or something along those lines - which again I feel would be very unfair as it is their error and I paid the early repayment charge in the way they told me to do which was by calling their mortgage admin team and making it as a one off payment by card which I did. Despite all of that, could their be any consequences to me in not alerting them to it? I guess the worst that could happen if they ever do notice it would be to add the value of that early repayment charge (almost £600) back on to the outstanding balance of my mortgage?

Thanks in advance.

Leon

Leon12

Please does anyone have any advice on the above?

Thanks,

Leon

MorningcoffeeIV

There won't be any 'fine' when they realise the mistake.

The credit will just be removed.

jrawle

Did they tell you you needed to pay an ERC? How did you switch? If you did it online, there must be no ERC as Natwest say you need to phone if there is; you can't switch online.

It may be that ERCs shouldn't be paid in the same way as overpayments. I can't find information on how Natwest handle it. Do they add the ERC to your mortgage balance? Maybe they'll do it at the end of the month.

Leon12

Thanks both.

They told me I needed to pay an overpayment so I did the call by phone with them as they had to offer me advice - which I didn't need but had to do anyway as per the process when someone voluntarily wants to pay the ERC which I did. I was told to phone their mortgage team and pay the ERC by card which I also did and thats where they made the mistake - they have actually reduced the outstanding amount of my mortgage by the value of the ERC when obviously that shouldn't have happened as the ERC is effectively a fine or one off charge to pay and is not to be taken off the balance of the mortgage - so that is where they have made the mistake.

So is there a possibility that if they notice this they could add the value of it (nearly £600) back onto the outstanding balance of the mortgage without telling me? So in other words at any time the loan amount could suddenly increase by nearly £600? I know its their mistake and therefore their issue to rectify it but that doesn't seem like the best customer service if the loan can just increase by nearly £600 at any random time?

Thanks,

Leon

MorningcoffeeIV

Yes, they could - and probably will if it's discovered swiftly. But they may notify you beforehand - depends on their processes.

But it's a change you'll be expecting, so won't be too much of a surprise.  If you think it will be a problem for you, let them know now so they can fix it.

Leon12

Ok thank you. 

I will let them find their own mistake as the onus isn't on me to point out their mistakes and there remains a chance they wont notice it in which case I will be almost £600 better off in regards to the balance of my mortgage. As you say, if they ever do notice it then it will be something I will be expecting so wont be the end of the world - my main concern is I wouldn't get in any sort of trouble for not pointing it out to them but again its their mistake which as it works in my favour, is their issue to sort it out.

If they do notice it though I would expect them to at least tell me that they are suddenly adding almost £600 back onto the value of my mortgage - that would be very poor customer service indeed if they didn't do that.

Thanks,

Leon