Barclays reneging on new Mortgage Charter interest-only switch

homesaver234

Anyone else found Barclays reneging on the new Mortgage Charter? 

The Govt. lists Barclays as one of the lenders signed-up to the charter including the option to switch to interest-only.

But when I today tried to apply, Barclays refused saying they were not providing this option. And saying they have stated this in their website at barclays.co.uk/mortgages/support-hub/ , which they have not done. That page says only:

"We’ve signed up to the charter and will update this page with more details, including any new support options and how you can apply for them, when we have more information."

I pointed out they had agreed with the Govt. to provide this by June 30th, a week ago, but that got me nowhere.

When I asked to submit a complaint, they refused that too, saying that because they had told me they were nore providing this option, such a complaint would be invalid. I filed a complaint against the operator for refusing to file a complaint, but I doubt that will get far.

MWT

There has never been a committent to deliver all aspects of the new charter by 30th June, it is going to take a little longer to get everything in place.

Also keep in mind that the intent is to offer people the chance to switch to interest only for up to 6 months only, any request to switch to interest only for longer than that is going to be subject to affordability testing...

Also consider that taking the 6 month option is not going to be the best choice for most borrowers having problems making their payments, as they would usually be better off extending the term if possible...

simon_or

Is your current mortgage with Nationwide or Barclays? Or are you changing lenders to them?

I'm only asking because you're claiming that they are both not implementing the mortgage charter when you asked but that's only for their current customers, not for people looking to re-mortgage to them.

homesaver234

MWT said: There has never been a committent to deliver all aspects of the new charter by 30th June,

So what's the commitment date for the interest-only switch option?

MWT

homesaver234 said:

MWT said: There has never been a committent to deliver all aspects of the new charter by 30th June,

So what's the commitment date for the interest-only switch option?

There isn't a specific date, the lenders have a lot to do before they can roll out the temporary interest-only period for existing borrowers.

It isn't a full switch to interest-only, just for a period of up to 6 months and it will result in higher payments afterwards as there will be the unpaid capital component of the payments over that period which will need to be recovered.

... and again, this is for existing borrowers, not new loans...

amnblog

It concerns me that borrowers think they are getting some sort of result on this interest only switch option under the Mortgage Charter.

What has been said is that you can switch your capital repayment mortgage to interest only for up to six months.

Advantage: Outgoings reduced for 6 months
Disadvantages: More interest to be paid long term, payment goes to higher level when back on capital repayment

We do not have the details yet, but let us assume the Lender allows the borrower to avoid capital repayment for 6 months whilst adding the unpaid capital to the mortgage balance.

If we assume a £200,000 mortgage on 23 year term with one of the shiny new interest rates of say 5.79%.

Normal capital repayment per month £1,313

Interest only payment per month £965

Borrower takes the option to switch to interest only for six months.

£348 (£1,313 - £965) stays in the borrower's pocket each month for six months (£2,080 total)

There may be the odd case where £348 less going out for six months is a major benefit, but for most borrowers I cannot see how it will be valuable.

Brie

amnblog said:

It concerns me that borrowers think they are getting some sort of result on this interest only switch option under the Mortgage Charter.

What has been said is that you can switch your capital repayment mortgage to interest only for up to six months.

Advantage: Outgoings reduced for 6 months
Disadvantages: More interest to be paid long term, payment goes to higher level when back on capital repayment

We do not have the details yet, but let us assume the Lender allows the borrower to avoid capital repayment for 6 months whilst adding the unpaid capital to the mortgage balance.

If we assume a £200,000 mortgage on 23 year term with one of the shiny new interest rates of say 5.79%.

Normal capital repayment per month £1,313

Interest only payment per month £965

Borrower takes the option to switch to interest only for six months.

£348 (£1,313 - £965) stays in the borrower's pocket each month for six months (£2,080 total)

In month seven mortgage goes back to original terms. Balance is now 1% higher than it would have been at £202,080

Payment is now £1,326 

Borrower is paying £10 per month extra interest from here on in.

There may be the odd case where £348 less going out for six months is a major benefit, but for most borrowers I cannot see how it will be valuable.

Sorry - but why would the balance go up if the individual has been paying the interest?  The principle would have remained the same.  

And as stated on the other thread about this - it's breathing space to give someone time to reassess their finances.

MWT

Brie said:

Sorry - but why would the balance go up if the individual has been paying the interest?  The principle would have remained the same.  

it is not that it goes up, it just doesn't go down so at the end of the 6 month period the balance will be higher than it would have been if the normal repayments had been made.

There is no saving by doing this, you just end up effectively taking a further advance for the difference between the normal repayments and the interest-only payment, so you end up with a higher repayment after than you would otherwise have had, and you'll be paying more interest over the term of the mortgage than you would otherwise have done.

silvercar

MWT said:

Brie said:

Sorry - but why would the balance go up if the individual has been paying the interest?  The principle would have remained the same.  

it is not that it goes up, it just doesn't go down so at the end of the 6 month period the balance will be higher than it would have been if the normal repayments had been made.

There is no saving by doing this, you just end up effectively taking a further advance for the difference between the normal repayments and the interest-only payment, so you end up with a higher repayment after than you would otherwise have had, and you'll be paying more interest over the term of the mortgage than you would otherwise have done.

Or you also extend the term by 6 months. So the monthly payments will be exactly what they were before the 6 month interest only period.

MWT

silvercar said:

Or you also extend the term by 6 months. So the monthly payments will be exactly what they were before the 6 month interest only period.

I'm not sure that is an option, so far it has been presented as and either/or choice, so it is one or the other, not both....

RelievedSheff

amnblog said:

It concerns me that borrowers think they are getting some sort of result on this interest only switch option under the Mortgage Charter.

What has been said is that you can switch your capital repayment mortgage to interest only for up to six months.

Advantage: Outgoings reduced for 6 months
Disadvantages: More interest to be paid long term, payment goes to higher level when back on capital repayment

We do not have the details yet, but let us assume the Lender allows the borrower to avoid capital repayment for 6 months whilst adding the unpaid capital to the mortgage balance.

If we assume a £200,000 mortgage on 23 year term with one of the shiny new interest rates of say 5.79%.

Normal capital repayment per month £1,313

Interest only payment per month £965

Borrower takes the option to switch to interest only for six months.

£348 (£1,313 - £965) stays in the borrower's pocket each month for six months (£2,080 total)

In month seven mortgage goes back to original terms. Balance is now 1% higher than it would have been at £202,080

Payment is now £1,326 

Borrower is paying £10 per month extra interest from here on in.

There may be the odd case where £348 less going out for six months is a major benefit, but for most borrowers I cannot see how it will be valuable.

There will be a lot of people who have no need to but will jump on the band wagon and switch to interest only for 6 months.

Much the same as happened with "mortgage holidays" during covid. Most people who took them had no reason too and didn't take heed of the consequences of doing so.

This will be exactly the same!