Mortgage Company Profiteering

Peteshoard

MWT said:

As a complaint this makes no sense at all.

If there are excess funds available over and above the reduced monthly payments use them to make sure the maximum 10% over payments are made annually, and if there are funds left over and above that amount then put them into an interest bearing account which will be earning well above the current mortgage rate.

Then when the 5 year fix ends, use the saved proceeds to pay off a lump sum on the mortgage without the 10% limit in place as the fix has ended.

Then either pick a new fixed product, or remortgage to change the remaining term...

So this does make sense, but from a compound interest perspective there is an extra £400/month reduction difference in the amount I am able to pay off the balance, so the interest will be calculated on the higher balance. It also means the 10% + monthly payments will be a lower total and therefore interest levied on a higher amount.

You make a solid point about savings interest, but I would have to pay tax on that eating Into any significant difference.

My original complaint is that the bank can change my mortgage and cause me to pay more interest, basically penalising me for overpayments in line with the terms of the agreement. Imagine my rate had been 5% and the impact this would have made, if saving rates weren't so favourable. 

Just feels wrong to me. And I won't buy a mortgage from the Halifax again

BikingBud

MWT said:

As a complaint this makes no sense at all.

If there are excess funds available over and above the reduced monthly payments use them to make sure the maximum 10% over payments are made annually, and if there are funds left over and above that amount then put them into an interest bearing account which will be earning well above the current mortgage rate.

Then when the 5 year fix ends, use the saved proceeds to pay off a lump sum on the mortgage without the 10% limit in place as the fix has ended.

Then either pick a new fixed product, or remortgage to change the remaining term...

That being a reasonable financial decision is a different matter to what Halifax appear to be doing though. They are protecting their income stream and penalising people that wish to overpay as stated by the OP a business decision!

What does the mortgage agreement say about overpayments, not the advertising blurb that will change from time to time, but the actual agreement that you agreed to and is the legal basis for the loan?

ACG

Peteshoard said:

MWT said:

As a complaint this makes no sense at all.

If there are excess funds available over and above the reduced monthly payments use them to make sure the maximum 10% over payments are made annually, and if there are funds left over and above that amount then put them into an interest bearing account which will be earning well above the current mortgage rate.

Then when the 5 year fix ends, use the saved proceeds to pay off a lump sum on the mortgage without the 10% limit in place as the fix has ended.

Then either pick a new fixed product, or remortgage to change the remaining term...

So this does make sense, but from a compound interest perspective there is an extra £400/month reduction difference in the amount I am able to pay off the balance, so the interest will be calculated on the higher balance. It also means the 10% + monthly payments will be a lower total and therefore interest levied on a higher amount.

You make a solid point about savings interest, but I would have to pay tax on that eating Into any significant difference.

My original complaint is that the bank can change my mortgage and cause me to pay more interest, basically penalising me for overpayments in line with the terms of the agreement. Imagine my rate had been 5% and the impact this would have made, if saving rates weren't so favourable. 

Just feels wrong to me. And I won't buy a mortgage from the Halifax again

ISAs are tax free up to I think £21k a year from memory. They will be paying more than 1.5%. 

amanda1024

Have you tried making the payments by standing order rather than direct debit? That way you’re in complete control

TeaLover49

I have literally just had this conversation with the Halifax. Previous mortgage companies I've been with have allowed over payments to reduce the loan capital and shorten the term, that's sort of the point of making over payments, isn't it?
While I understand that the contract is for a loan amount over a fixed period of time, previous mortgage companies have not been so inflexible. So now I have to call them EVERY YEAR to re-adjust my over payment back to the amount I want, and then renegotiate my monthly repayment amount and term when I remortgage at the end of my fixed rate period. 
While I understand they are legally allowed to do this (they even tried to tell me it was to help me with the cost of living crisis rather than to allow them to maximize the interest I pay them...), it all just feels a bit underhand. And I don't think it has been properly explained to people either...

BikingBud

TeaLover49 said:

I have literally just had this conversation with the Halifax. Previous mortgage companies I've been with have allowed over payments to reduce the loan capital and shorten the term, that's sort of the point of making over payments, isn't it?
While I understand that the contract is for a loan amount over a fixed period of time, previous mortgage companies have not been so inflexible. So now I have to call them EVERY YEAR to re-adjust my over payment back to the amount I want, and then renegotiate my monthly repayment amount and term when I remortgage at the end of my fixed rate period. 
While I understand they are legally allowed to do this (they even tried to tell me it was to help me with the cost of living crisis rather than to allow them to maximize the interest I pay them...), it all just feels a bit underhand. And I don't think it has been properly explained to people either...

🤔🤪😂 With a straight face?

kingstreet

Sections from the Halifax guide issued with mortgage offers;-

Will overpayments reduce my term? No. Overpayments will not reduce your mortgage term. Whenever we recalculate your monthly payment, we will use the reduced balance which includes your overpayments to work out the new payment over your existing term. If you want to use regular overpayments to repay your mortgage sooner, but don’t want to formally change the term of your mortgage agreement remember: • Any recalculation of your monthly payment will include the previous overpayments. This means that if you only pay the new monthly payment, your loan will be repaid over your existing mortgage term. If you would like to permanently reduce the remaining mortgage term, you will need to speak to a qualified mortgage adviser who will discuss your current and future plans with you.

https://www.halifax-intermediaries.co.uk/assets/pdf/info-for-mortgage-customers.pdf

BikingBud

kingstreet said:

Sections from the Halifax guide issued with mortgage offers;-

Will overpayments reduce my term? No. Overpayments will not reduce your mortgage term. Whenever we recalculate your monthly payment, we will use the reduced balance which includes your overpayments to work out the new payment over your existing term. If you want to use regular overpayments to repay your mortgage sooner, but don’t want to formally change the term of your mortgage agreement remember: • Any recalculation of your monthly payment will include the previous overpayments. This means that if you only pay the new monthly payment, your loan will be repaid over your existing mortgage term. If you would like to permanently reduce the remaining mortgage term, you will need to speak to a qualified mortgage adviser who will discuss your current and future plans with you.

https://www.halifax-intermediaries.co.uk/assets/pdf/info-for-mortgage-customers.pdf

 This occurs when they recalculate the monthly payment!

Whereas the Section before that offers:

What are lump-sum overpayments and how do I make them?

• You can make a one-off lump‑sum overpayment by making a separate payment.
• You can do this by calling into your local branch or by phone; where we’ll ask if you want us to work out a new monthly payment on your reduced balance.
• You can also make a one-off payment online, but we will not automatically recalculate your monthly payment.
If you would like us to work out a new monthly payment please contact us.

You can ask if you want them to recalculate the payment - Indicates you have a choice. Why would you decide to reduce the payment when it will inhibit the savings you may make?
 
We will not automatically recalculate - so continue with existing payment as without the action to recalculate, the existing payment schedule remains and you maximise your savings by reducing period over which the interest is paid . 

So not really clear is it? 

But yes. Isn't it rather bizarre that the lender requires you to jump through such hoops to reaffirm what has already been agreed and stress tested as part of the initial mortgage agreement, that you can afford the monthly payments!

BarelySentientAI

BikingBud said:

So not really clear is it? 

It's extremely clear.

Kingstreet's quote specifically states "regular overpayments".

Your section specifically says "one-off lump-sum overpayment".

RelievedSheff

TeaLover49 said:

I have literally just had this conversation with the Halifax. Previous mortgage companies I've been with have allowed over payments to reduce the loan capital and shorten the term, that's sort of the point of making over payments, isn't it?
While I understand that the contract is for a loan amount over a fixed period of time, previous mortgage companies have not been so inflexible. So now I have to call them EVERY YEAR to re-adjust my over payment back to the amount I want, and then renegotiate my monthly repayment amount and term when I remortgage at the end of my fixed rate period. 
While I understand they are legally allowed to do this (they even tried to tell me it was to help me with the cost of living crisis rather than to allow them to maximize the interest I pay them...), it all just feels a bit underhand. And I don't think it has been properly explained to people either...

You could just do it on your online account rather than ringing them.

I literally had to do ours on Monday after we received our mortgage statement at the weekend. It took the whole of about 60 seconds.

They had reduced our contractual payment by £25 so I have just increased our monthly overpayment from £405 to £430 to keep the monthly payment the same as before.  

It really isn't a big issue.