HSBC mortgage overpayment advice

megamitts

In January 2023 I fixed my mortgage for another 5 years with HSBC. I still had 6 months of the old rate at that time (the mortgage runs from June). As I had some spare cash, I also paid off the 10% I am able to pay.

In January 2023 I was told that my new monthly payment from June 2023 would be £286 (or thereabouts).  In June 2023 I got a letter saying that my payment from June 1st 2023 would now be £256 a month. I assumed this was because back in January I paid off the 10% I was allowed. In July 2023 I paid off another 10% as the mortgage year had reset.

On June 1st 2024 when my mortgage account told me my new 10% amount I paid that off. Come July 1st 2024 and my payments are still £256 a month.

Is this right or will I be overpaying more than I should and end up getting an early payment charge?

I would have thought that overpaying the 10% every year would bring the payments down every June even on a new fixed term mortgage.

Thanks for your help.

kempiejon

It's a few years since I last over paid and I was with Barclays so the default for over payments might not be the same. We had the choice when making a lump sum to reduce term or reduce monthly payment. I think default was to reduce the payment but we wanted to keep payments the same to reduce term.

megamitts

Thanks. I think I have sussed it. The 10% is worked out at the beginning of each year according to how much you have left on the balance. The regular payments come off staying the same and at the beginning of the next year the 10% is worked out on how much you now owe. This seems to be the case.

If I suddenly get slapped with an early repayment charge there will be a complaint going in, but I don't think that will happen.

Hoenir

Your payments will not be recalculated until your fixed term ends. That's why they've remained the same. Onus is on you to ensure you don't overpay.