RBS Can't Explain Why Mortgage Interest Rate Has Reduced By 0.25% But DD Has Gone UP?

fallen121

Ok so this is the second time this has happened since our mortgage was moved from The One Account to RBS. We get a letter telling us that the mortgage interest rate has gone DOWN by 0.25% but the DD is being amended so that we pay £22 a month MORE. Each time we call up the staff on the phone blame it on "timing differences" due to daily calculation of interest but then tell us that if we did nothing we'd still carry on paying £22 a month more. Over the next 12 months that would amount to £264 in extra mortgage payments. How can a mortgage payment INCREASE when the mortgage interest rate goes down? Surely it should be the other way around? And how come RBS staff don't seem to appreciate that something isn't right here? It worries me that basic maths doesn't seem to be their strong point!

We were also told today that there was a huge backlog of calls due to mortgage letters going out (and it was a 20 minute wait to talk to someone) so presumably we're not the only ones noticing that something is rotten in the state of Denmark. If large swathes of customers are presumably taking umbrage at being told they suddenly need to pay more (presumably they wouldn't bother calling if it was less) then what on earth is going on?

Can a maths genius please come along and explain this state of affairs? We haven't ever asked for the end date of the mortgage to be adjusted, never increased the mortgage and haven't ever underpaid or taken payment holidays. We also never EVER encountered this situation in 20 years of The One Account. Just very, very confused. Clearly an interest rate CUT isn't all it's cracked up to be?

Product: RBS Flexible Mortgage

Hoenir

fallen121 said:

 Each time we call up the staff on the phone blame it on "timing differences" due to daily calculation of interest

Interest is calculated daily and charged monthly ( in arrears). 

Without numbers it's impossible to perform the maths. 

ACG

I cant answer your question, but when I worked for RBS it wasnt uncommon for some of my colleagues to not be able to answer questions about payments and interest. They just said whatever they needed to to get people off the phone. If it escalated and they wanted a manager or supervisor I would usually pick it up in our area and then have to undo all the rubbish they had told the customer and explain it correctly. 

With the one account, its a bit different to normal mortgages. There are various reasons for it, just because someone cant explain it on the phone to you doesnt mean it is wrong. Your right it looks odd so you would think someone should be able to explain it to you - there is nothing worse than someone sitting there saying you are wrong but is unable to explain how. 

It might be worth trying to escalate it to someone a bit higher up or make a complaint and ask for the response in writing. 

tacpot12

The larger number of customer call might be due to others noticing the change and querying it, but that doesn't mean that an error has been made, just that lots of people have noticed a counter-intuative result. 

The issue is almost certainly one of timing, but without all the data that affects the timing being available, no internet maths genius can say whether RBS are correct or not. It is highly likely that the system is correct. It will have been tested by professionals. The chance of there being an error is low, but not zero.

You need to complain to RBS and ask for a manual calcuation to be done to show that the system is correct. Be prepared for this to take some time, and for them to be resistant due to the cost. The programmers who wrote the system and the testers who tested it may have died, as the system could be decades old. (I worked for another bank in the same situation. No-one still working for the bank knew how the credit card interest calculation worked. When we needed to change it due to some new regulation, the system maintainers had to review the source code to confirm that it wasn't already doing what the regulation required.)  


 

fallen121

We've gone back through 23 years worth of interest rate letters and each time the interest rate reduced they didn't adjust the payment, just sent us a letter saying "as you're already paying more than this, we've left things as-is and the DD will remain the same". The premise presumably being that any overpayments would be a positive thing in terms of reducing amount owed.

Recently they started amending the DD to the lower amount. Presumably a change in policy due to the short time remaining on the mortgage. 

ONLY since it moved to RBS have we received letters increasing the DD payment each time the interest rate goes down. 

If everything that previous posters say is correct, in terms of how things are calculated at the system level, why are we only noticing this now?

The staff on the phone took great pains to assure us NOTHING HAS CHANGED. It's the same staff, the same product, the same T&Cs. Only the masthead has changed.

The mortgage has a very short time still left to run and it’s almost like the goalposts are moving as we are approaching the finish line. Is this a crazy assumption? 

Hoenir

fallen121 said:

We've gone back through 23 years worth of interest rate letters and each time the interest rate reduced they didn't adjust the payment, just sent us a letter saying "as you're already paying more than this, we've left things as-is and the DD will remain the same". The premise presumably being that any overpayments would be a positive thing in terms of reducing amount owed. ONLY since it moved to RBS have we received letters increasing the DD payment each time the interest rate goes down. 

If everything that previous posters say is correct, in terms of how things are calculated at the system level, why are we only noticing this now?

The staff on the phone took great pains to assure us NOTHING HAS CHANGED. It's the same staff, the same product, the same T&Cs. Only the masthead has changed.

Co-incidence?

We can spend all day surmising.  The original facility was the Virgin One Account if I recall correctly. This account had the ability to drawdown and repay. Without numbers impossible to comment. Not do we know how you've utilised the account.  Is the account on interest only or a repayment basis now? 

The system software is unlikely to be performing incorrect mathematical calculations for all these years. The root cause lies elsewhere. 

fallen121

When the interest rate reduced in September 2024 the DD went down by £7. We’re currently on the phone to them and they’re now saying it’s because the mortgage has less than three years to run. But it also had less three years to run in September!

lfc321

£22 (from £950 to £972??) is a very large monthly change on what is presumably a fairly small (£30Kish?) mortgage with less than 3 years to run.

If my estimated figures in the previous sentence are close, and assuming this is on a repayment basis, that would be equivalent to something like a 1.5 point increase in the interest rate, not a 0.25 decrease. Such a big change can't be explained by a minor alteration to what day the DD is collected or precisely when interest is calculated.

As others have said, there is something else going on here. The calculation might be right, but something else must have changed to explain it.

poseidon1

fallen121 said:

When the interest rate reduced in September 2024 the DD went down by £7. We’re currently on the phone to them and they’re now saying it’s because the mortgage has less than three years to run. But it also had less three years to run in September!

With repayment mortgages towards the end of the term, the bulk of your mortgage payments will be capital rather than interest.

Therefore depending on the amount of capital outstanding, incremental  interest rate reductions will tend to have minimal effect on monthly payments.

Suggest you get a redemption statement confirming outstanding capital amount, divide that by the remaining months of the mortgage term and see how that compares with your revised monthly payments.

singhini

@fallen121
We experienced similar issues with our Barclays mortgage a few years back. We made overpayments totalling £100,000 over 4.5 years and the repayments seemed to drop from £800 to £700, to £600 to £400 (everything seemed fine).

One day i made an overpayment of £7,000 which brought the outstanding balance down to £1,800. We received our usual letter in the post a few days later acknowledging the £7,000 overpayment and it said the new monthly repayment was now £330

I rang Barclays and said it looks wrong, i have almost 15 years left and the outstanding balance is less than £2k and i currently pay £60
The staff member said she will recalculate it and said it will be £11.39
When i asked her how they calculated £330 she didn't know.

A few months later the interest rate dropped and the letter in the post suggested the repayment was going to be £350 (again i rang up and got them to recalculate the payment and it was £11.21). When i asked how had my repayment jumped from £11.39 to £350 while interest rates had dropped 0.25% i was told the computer doesn't take into account my overpayments).

I never understood what was going on. The only saving grace was when the annual end of year letter was sent to us it did show all the payments into the account i.e. the regular monthly repayments aswell as any overpayments and the dates these payments were made. 

While having that repayment mortgage we took an interest only mortgage alongside it. Again we made overpayments on that part of the mortgage aswell (i would send £1 initially and assuming that had been sent and received correctly i would then send £5,000 or £10,000). When the annual statement came i would expect it to say overpayments made equal £15,002 (£1 + £5,000 + £1 + £10,000). No -------> it would say overpayments equal £2 yet the outstanding balance had reduced by £15,000

ACG

fallen121 said:

We've gone back through 23 years worth of interest rate letters and each time the interest rate reduced they didn't adjust the payment, just sent us a letter saying "as you're already paying more than this, we've left things as-is and the DD will remain the same". The premise presumably being that any overpayments would be a positive thing in terms of reducing amount owed.

Recently they started amending the DD to the lower amount. Presumably a change in policy due to the short time remaining on the mortgage. 

ONLY since it moved to RBS have we received letters increasing the DD payment each time the interest rate goes down. 

If everything that previous posters say is correct, in terms of how things are calculated at the system level, why are we only noticing this now?

The staff on the phone took great pains to assure us NOTHING HAS CHANGED. It's the same staff, the same product, the same T&Cs. Only the masthead has changed.

The mortgage has a very short time still left to run and it’s almost like the goalposts are moving as we are approaching the finish line. Is this a crazy assumption? 

It wont be the same staff. The average lifespan of a call centre worker must be less  than 5 years. 
The one account stopped taking on new customers maybe 10 years ago? The staff will have been replaced 2-3 times over. 

But as I said, your in the wrong place. You need to go to RBS and ask them to explain in a way that allows you to understand. There is a difference between not understanding and not agreeing.