Santander offset mortgage

aedenbor

I’ve had an offset interest only lifetime tracker with Santander for almost 20 years. I have been adding lump sums to my savings account until it reached the total mortgage amount. Then after few years I needed cash and I started making withdrawals from this offset savings account. I’ve noticed the mortgage deductions started to increase exponentially. 

I called Santander and to my shock they told me when the offset amount equalled the mortgage, the mortgage got automatically paid off. This was 6 years ago and from then any withdrawals I make from what I thought were my savings are treated as a borrowing on capital repayment basis over the remaining term. The mortgage ends in 2030. 

I had no communication about this and I would never agree to this even if I did. When I complained, the complaints officer said to me, “This is in terms and conditions. You were planning to repay your mortgage anyway, didn’t you?”. 

Has anyone accounted this? This my own home and the mortgage should be FCA regulated. Do I have a chance resolving this and switching back to my original offset interest only tracker?

ACG

If you had a £100k interest only mortgage and then paid in £100k savings, the mortgage would/should still be £100k. You are just not paying interest on it. 

If you then withdraw £5k and another £5k and another £5k, you would then be incurring interest on £5k, then £10k and then £15k, so the balance of the mortgage would be increasing unless you were paying the interest on that £15k. 

Are you paying the interest each month? If not, then the balance will increase. 

silvercar

ACG said:

If you had a £100k interest only mortgage and then paid in £100k savings, the mortgage would/should still be £100k. You are just not paying interest on it. 

If you then withdraw £5k and another £5k and another £5k, you would then be incurring interest on £5k, then £10k and then £15k, so the balance of the mortgage would be increasing unless you were paying the interest on that £15k. 

Are you paying the interest each month? If not, then the balance will increase. 

I think OP is saying that his repayments are now being calculated on a repayment basis not interest only. 

Ayr_Rage

Time to dig out the original Ts and Cs.

Santander may well be correct.

Hoenir

aedenbor said:

I had no communication about this and I would never agree to this even if I did. When I complained, the complaints officer said to me, “This is in terms and conditions. You were planning to repay your mortgage anyway, didn’t you?”. 

Has anyone accounted this? 

Suggest you pull out the documentation and have a good read. I expect your lender to know their own products extremely well. 

aedenbor

I have asked for the original T&C and will check it. 

I have been always paying interest only on the outstanding amount - mortgage less savings. Then savings became =mortgage, there was no interest. 

When I took out £10K, they’ve deducted interest plus capital repayment amount on £10K over remaining term. I thought the interest would be calculated on £10K.  Over few months I made a withdrawal of £40K so they charge almost £750 per month.  

My point is the product changed half way through the mortgage term.  It is no longer an offset mortgage. 

They didn’t  say when I took it out. I would have put my extra savings over the mortgage amount elsewhere  I believe this  is a misspelling. 

I have another Santander fixed rate mortgage. Within 6 months of the term expiry, they sent warning emails.  every week. 

I will go to the Ombudsman and see what happens. 

Hoenir

aedenbor said:

I would have put my extra savings over the mortgage amount elsewhere  I believe this  is a misspelling. 

In the past I've had two offset mortgages with different lenders. Both clearly stated in the product literature that the "savings account" balance would earn no interest if it exceeded the balance owed on the mortgage.  

I'd be greatly surprised if this was overlooked by Santander. I'm one for always reading things thoroughly at the outset. Before signing on the dotted line. 

aedenbor

Thank you for your comments. 

But the issue here is that the offset mortgage changed to a standard capital repayment half way into the term without notice.  Although my savings at some point were equal  to the mortgage,, I should be able to take it when I want without being penalised by taking away the offset feature. 

I also read the documents but this wasn’t in the mortgage offer. 

ACG

You can have a repayment offset mortgage as well as interest only. It is still an offset mortgage in the sense that you can access your savings. 

But appreciate what your saying. I dont know the answer, you will have to go through everything with Santander and then if unhappy go to the ombudsman. A lot went wrong with interest only mortgages in the past and I know a lot of lenders have tried to get people off them. But they cant just change the product unless you are making changes (eg choosing a new fixed rate). 

Hoenir

Was your original mortgage taken out with Alliance & Leicester or Santander ? 

aedenbor

The original offer was from Abbey. Since I last wrote, it got worse. Santander now wants to do  affordability check every time I drawdown from available funds which are my own savings on capital repayment basis. 

I have found the original T&C and there is nothing on automatic repayment of the mortgage if offset savings equal the mortgage nor about capital repayment. I’ve been a customer over 20 year and never been in areas. It is strange Santander’s policy changed so much, they used to be a good lender.