Bank changing mortgage payments while fixed?

RelievedSheff

400ixl said:

RelievedSheff said:

We had the same letter last week from Halifax. They reduced our contractual payment by £25 a month due to our overpayments.

I logged onto the online account on Monday morning and changed our overpayment from the £405 we had been overpaying each month to now be £430 overpayment per month so that we are still making the same monthly repayment.

Took the whole of 60 seconds. No faff, no drama. 

That will work whilst your overpayment is still below the % you are allowed to pay in the year. As they keep re-calculating the payments each year you will potentially hit the point where you cannot increase (and will have to decrease) the monthly payment.

A fixed term mortgage is not really suitable for continuous year on year overpayments at a set total monthly payment.

Our overpayment allowance is 10% of the original loan amount which equates to £18150 per year or £1500 per month.

We are nowhere near that threshold and nor will we be when the fixed term is up at the beginning of June 2026.

JamesO

Exodi said:

JamesO said:

@RelievedSheff I'm glad that worked for you - unfortunately, as I've said, I already make the maximum permitted repayments so can't do the same... 

The maximum amount is based on your overpayment allowance.

For example, if have an overpayment allowance of £30k per year (I don't know how Halifax calculate it, but most lenders do 10% of the loan amount), and your monthly payments are £1k per month, you can overpay up to £18k (meaning total payments for the year are £30k).
If your monthly payment is reduced to £800, you can overpay up to £20.4k (meaning total payments for the year are £30k).

There's no big drama here.

For Halifax, I'm allowed to overpay up to 10% of the amount I owed at the 1st January within that calendar year as a lump sum or regular payments. My contractual monthly repayments don't come into it. 

So £100k outstanding on 1 Jan would allow £10k overpayment PLUS I would then make my regular monthly payments each year. Meaning reducing the monthly payments is directly reducing the total amount I can pay from the balance within the calendar year. 

I could contact them to reduce the term of my mortgage, but that would then involve a new assessment and would mean I don't have the flexibility of deciding when and how to make the overpayments going forward. The whole point of fixing (for me) is for the assurance of knowing what the monthly payments will be and having then the ability to overpay should I choose/be able. 

I'm also not sure why people are repeatedly attempting to (IMO passively aggressively) dismiss my thread as 'drama'?

I had a legitimate question (was this normal as I'd not received a letter like this previously, and what are my options given the letter doesn't offer any). I'm not suggesting this is the end of the world or some unreasonable underhanded trick, but it will be an inconvenience could potentially will cost me some money and the suggestion to 'invest' the money in a savings account (while a good one) may further complicate my personal financial arrangements after a separation, so I think it's perfectly appropriate for me to want to ask questions on an 'advice' forum without being accused of making drama.  

BarelySentientAI

JamesO said:

Exodi said:

JamesO said:

@RelievedSheff I'm glad that worked for you - unfortunately, as I've said, I already make the maximum permitted repayments so can't do the same... 

The maximum amount is based on your overpayment allowance.

For example, if have an overpayment allowance of £30k per year (I don't know how Halifax calculate it, but most lenders do 10% of the loan amount), and your monthly payments are £1k per month, you can overpay up to £18k (meaning total payments for the year are £30k).
If your monthly payment is reduced to £800, you can overpay up to £20.4k (meaning total payments for the year are £30k).

There's no big drama here.

For Halifax, I'm allowed to overpay up to 10% of the amount I owed at the 1st January within that calendar year as a lump sum or regular payments. My contractual monthly repayments don't come into it. 

So £100k outstanding on 1 Jan would allow £10k overpayment PLUS I would then make my regular monthly payments each year. Meaning reducing the monthly payments is directly reducing the total amount I can pay from the balance within the calendar year. 

I could contact them to reduce the term of my mortgage, but that would then involve a new assessment and would mean I don't have the flexibility of deciding when and how to make the overpayments going forward. The whole point of fixing (for me) is for the assurance of knowing what the monthly payments will be and having then the ability to overpay should I choose/be able. 

I'm also not sure why people are repeatedly attempting to (IMO passively aggressively) dismiss my thread as 'drama'?

I had a legitimate question (was this normal as I'd not received a letter like this previously, and what are my options given the letter doesn't offer any). I'm not suggesting this is the end of the world or some unreasonable underhanded trick, but it will be an inconvenience could potentially will cost me some money and the suggestion to 'invest' the money in a savings account (while a good one) may further complicate my personal financial arrangements after a separation, so I think it's perfectly appropriate for me to want to ask questions on an 'advice' forum without being accused of making drama.  

So to just directly answer that legitimate question - yes, it's pretty normal but not ubiquitous.  Options would include contacting them and asking to change the payment back, changing your overpayments to maintain the overall payment, or doing something else with the money.

400ixl

JamesO said:

I'm also not sure why people are repeatedly attempting to (IMO passively aggressively) dismiss my thread as 'drama'?

I had a legitimate question (was this normal as I'd not received a letter like this previously, and what are my options given the letter doesn't offer any). I'm not suggesting this is the end of the world or some unreasonable underhanded trick, but it will be an inconvenience could potentially will cost me some money and the suggestion to 'invest' the money in a savings account (while a good one) may further complicate my personal financial arrangements after a separation, so I think it's perfectly appropriate for me to want to ask questions on an 'advice' forum without being accused of making drama.  

I'm not sure there are other options other than paying the maximum overpayment allowed in that year on a reducing amount, or change the mortgage.

Did you know you wanted to keep an overpayment going and reduce the term when you took out the mortgage? Did you make your mortgage broker (or mortgage company if going direct) aware of this?

Essentially you unfortunately bought the wrong mortgage product. I know when we had a Halifax mortgage there was a choice of reduced term or reduced payment options when it came to picking one and it was one or the other.

How much longer is left on the deal? Is the rate lower than you could get a decent savings rate for?

You could put the overpayments you can't make into a savings account and then use it when you next re-mortgage as an option outside of the mortgage itself.

JamesO

There may not be any other (better) options. It is what it is. But I hope you understand why I asked the question in the first place given this was a new situation to me? 

Yes, as I've said, I've had the mortgage for a number of years and I've always overpaid during a fixed term then reduced the term when remortgaging. 

Yes, I made my broker aware I wanted to do this when first getting the mortgage (with a different bank), then I made Halifax aware when I remortgaged directly, and again when I took out a small sub-account as part of my partner and I separating. I was assured it was not a problem to continue making the payments the way I always had... 

The rates on the two accounts aren't awful (one is 3.48%, the other 1.93% - both are fixed until early and mid 2027). 

As I've suggested, putting the extra cash in a savings account would complicate my other financial arrangements, so itself not an ideal solution. It may well be the 'best' option, but I would need to investigate further. 

penners324

JamesO said:

@RelievedSheff I'm glad that worked for you - unfortunately, as I've said, I already make the maximum permitted repayments so can't do the same... 

Then you'd get charged an ERC in that case?

jrawle

JamesO said:

With respect, while I appreciate this will not be unique to me, I did search the forum before posting and couldn't find anything relevant. If there were any useful suggestions in those threads then I would appreciate a link to them.

It wasn't intended as a suggestion you should search before posting, but more as a reassurance that you are not the only one bothered by this.

My point is that, while you may not benefit in terms of interest saved to quite the extent you would had they not reduced your regular payment, you will still benefit significantly by overpaying. They won't recalculate your payment every month, but at an annaul review. Also, the new regular monthly payment is calulcated on the basis of the current interest rate lasting for the whole of the mortgage term. The reduction in the monthly payment won't claw back the overpayments you make; it just makes it slightly less good than if they didn't do this. As this is where you are, you have to decide whether to continue making overpayments, or whether to put money in a savings account, taking into account your personal circumstances, etc.

You can bet Halifax are operating within their terms in doing this. When I had a Nationwide mortage, their terms were that if I overpaid by £500 they would do a recalculation; otherwise they would not. If you intend to overpay, it's worth considering these sorts of T&Cs when choosing a mortgage provider.

Newbie_John

Why not just save instead? 
If in let's say 10 years your savings match your remaining balance and your fix ends - pay it off in full (or during remortgage).

My mortgage is 4.4% and I put overpayment money into ISA 5.17%, gaining 0.77% of free money.

BarelySentientAI

Newbie_John said:

Why not just save instead? 
If in let's say 10 years your savings match your remaining balance and your fix ends - pay it off in full (or during remortgage).

My mortgage is 4.4% and I put overpayment money into ISA 5.17%, gaining 0.77% of free money.

As the OP has said several times on the thread, savings have been considered and rejected due to other complexities.

Newbie_John

Ah ok I see it now, hidden within long replies.

If that's not a solution then I guess overpay the way you do - I would argue that in most cases it makes not much difference on interests compared to all the calculators show (unless you waste the money saved monthly) - not ideal and then in 2027 remortgage to First direct which offers unlimited overpayments and allows to overpay the way you want.