Overpay Accord Fixed Mortgage - Static payment confusion

Barnsey737

Hi everyone!

3 years into a long 15 year fix with Accord, have decided to overpay by £200 a month until the end of the fix so called to increase the monthly DD. It's an 18 year term. This should leave me with a relatively small balance to pay off at the end of the fix, not triggering any early repayment charges.

Thought I could opt for reducing the term but told I'd have to go through affordability checks etc, so I said I'll just revert to my normal payment as don't want my payments to be reduced next year after the annual review.

They put me through to someone who explained that whilst I'm not formally committing to reducing the term, my increased monthly DD payment will be static and won't reduce next year, essentially building a balance (but not an offset mortgage) which I can use to have a payment holiday in future. I've never heard of this before and to be honest I'm concerned I'm being conned here somewhere, but am I right in thinking this is perfectly fine and the interest paid will reduce in exactly the same way as an officially reduced term? Both Accord/YBS and Barclays seem to do this.

I'm also concerned that this 'prepayment balance' isn't FSCS protected so could dissappear if Accord/YBS went bust? Or am I talking nonsense?

Any advice would be hugely appreciated. The easiest solution would obviously be to save the £200 in a higher paying savings account but I'd rather lock that money away reducing the mortgage so that I won't be tempted to use it for something less important. 

penners324

Yes, that's how it works

You're talking nonsense 

Just set up a standing order for the £200 into the mortgage account (with the correct references.

Petriix

Depending on the rate you're fixed at you might be better off saving the overpayments elsewhere and paying off the balance when the fix ends. I stopped overpaying and started saving when savings rates overtook my mortgage rate. 

Barnsey737

penners324 said:

Yes, that's how it works

You're talking nonsense 

Just set up a standing order for the £200 into the mortgage account (with the correct references.

Should I be concerned that I wasn't offered a standing order option? They've only allowed me to increase my monthly DD mortgage payment. 

penners324

There is a standing order option. Just use the bank details advised on their website or paperwork and your account number