Santander mortgage refund for overpayment charge.

riceandthree

Hello everyone,

We received this letter in the post yesterday, (even though the letter was dated 2nd May)
looks like we paid an early repayment charge when remortgaging, from and to a Santander mortgage.
Could anyone let me know if they think this is fair? It’s the first I’ve heard of this, being able to ‘ask for a refund’ of the early repayment charge. We were unaware of any repayment charge? Nobody explained this to us? Have we been mis-sold? Is 8% gross interest enough?
Or should we just be very happy that we are getting some money back?

The line that gets me is ‘This includes some interest as compensation for the delay in refunding you.’

It was nearly 10years ago!!

The bank want us the reply within 3 weeks, and because the letter was late that’s just a week now.

I feel a bit under pressure to sign on the dotted line to get the money back but can’t help but think this is more of a big mistake then they are letting on and it might have happened to ots of other people?

——————————

You're due a refund on your mortgage ending in: ***********
When you paid off your mortgage with us in November 2015, you paid an early repayment charge.
As you took your new mortgage with Santander within a short timeframe, in line with the terms and conditions of your old mortgage, you were able to ask for a refund of the early repayment charge. You didn't get this refund at the time.
We're sorry and we want to put this right.
The total amount due to you is detailed in the table below. This includes some interest as compensation for the delay in refunding you.

A. Refund of early repayment charge paid by you - £3426.57
B. 8% gross compensatory interest payment - £2326.69
C. income tax deducted at 20% from compensatory interest (20%  of  B  ) -  £465.34
D. Total payment amount (A+B-C) - £5287.92

Nasqueron

The 8% interest (simple, not compound) IS your compensation - it's far more than you would have got from any cash savings over the last 10 years. It is the amount the FOS state banks should offer for the time period in question. There is no haggling or negotiation, either have the money or refuse it but you won't get more so there would be no point turning it down on that basis.

It is not a bigger issue, it has not affected lots of other people (and you have no right to know anyway as it's private, not that it affects anything), there is no conspiracy, Santander made a mistake, they have corrected it, accept the money, check if you can claim the tax back on the interest at the next tax year. Use form R40 - check your other savings interest and the tax band you are in, do not put the whole refund on the form!

Anyone else affected would have had a similar letter

Nasqueron

For what it's worth, poster below probably is with Santander though they don't name the bank in question, the timeline is similar

https://forums.moneysavingexpert.com/discussion/6527034/calculating-compensation-for-incorrect-early-repayment-charge

dunstonh

Could anyone let me know if they think this is fair? It’s the first I’ve heard of this, being able to ‘ask for a refund’ of the early repayment charge.

There are some of of these going out at the moment and not unusual.  Not loads as it only affected those with a particular type of mortgage who happened to pay it off during the ERC period and go on to borrow again from Santander within x months of repaying it.   It was a missed contract term on an older type of mortgage (I think A&L mortgages in particular but may also include some Abbey or Santander ones).     As soon as a financial firm finds an issue/mistake, they are required to see if anyone else is affected and proactively correct it.

A refund of the amount involved plus statutory interest at 8% is the defined method.

Have we been mis-sold? 

No.   Its not related to a sale of a product.

We were unaware of any repayment charge?

Maybe that is just your memory, as the redemption figures issued would clearly have stated any charges and you obviously cleared the mortgage.

 Nobody explained this to us?

Did you employ anyone to explain it to you? If you were remortgaging, then your solicitor would have pointed out the costs or sent you a copy of the redemption figures for you to confirm you have read and understood.  If you used a mortgage broker, they would have told you to.  If you bypassed both of those then the redemption statement would have covered it.

 Is 8% gross interest enough?

In a period when interest rates have been much lower than that, don't you think it is enough?     Anyway, it doesn't matter as the amount is set by the regulator.  No more, no less.

saajan_12

Comparing this 8% to your "loss", if you'd received the money in 2015 and put it in a bank account at the BoE base rate, your interest even on a compounding basis would be £378. Instead, they're offering you 8% simple interest of £2327, ie 6 times more. That extra 2k is your compensation aka their penalty. 

I'd sign and take it. 

riceandthree

Thanks all. i appreciate your comments!

Nasqueron

riceandthree said:

Thanks all. i appreciate your comments!

Just remember to do your tax return for next year - the rules are a bit complex but for a basic tax payer, you can usually earn £1000 in interest tax free annually (not guaranteed, check your individual finances) - so you can claim the tax you paid on the interest element back - just ONLY put the interest, you are not declaring the full refund as you'll end up owing tax. You need to track any other interest you earn in that period too. Higher rate tax payers have less of an allowance and there are other variables if it's a joint mortgage etc. I would recommend posting on here next year before you send the R40 form in.

Holidayblues39

Hi,

i got one of these also. Sent it back and have heard nothing also. starting to worry may be a possible scam. Have you received anything back yet

Nasqueron

Holidayblues39 said:

Hi,

i got one of these also. Sent it back and have heard nothing also. starting to worry may be a possible scam. Have you received anything back yet

It is not a scam, they have found they made a mistake and following regulatory process, have to provide you with compensation.