Building Society prematurely ending mortgage

Cumbrianchap

I have a discounted offset mortgage that is due to end in 2031. Our savings almost match our mortgage, but we want to keep that pot for easy access, should it be needed. Last month, we received a letter from our building society telling us that they were withdrawing that product and would switch us to an SVR mortgage with our savings going into an instant access account. 

There is about a 5% difference in the respective rates, which massively disadvantages us. I am just coming up to 70, so remortgageing elsewhere with a similar product is a non-starter.

Can an existing mortgage (in place since 2016) be taken away like this? There are no transgressions on our part. Their T&C's don't seem to cover this eventuality. We have lodged a complaint over their decision.

MattMattMattUK

Cumbrianchap said:

I have a discounted offset mortgage that is due to end in 2031. Our savings almost match our mortgage, but we want to keep that pot for easy access, should it be needed. Last month, we received a letter from our building society telling us that they were withdrawing that product and would switch us to an SVR mortgage with our savings going into an instant access account. 

There is about a 5% difference in the respective rates, which massively disadvantages us. I am just coming up to 70, so remortgageing elsewhere with a similar product is a non-starter.

Can an existing mortgage (in place since 2016) be taken away like this? There are no transgressions on our part. Their T&C's don't seem to cover this eventuality.

It will almost certainly be totally possible for them to do as it is a regulated industry, they will have taken advice from the regulator before doing this, but always worth double checking.

Cumbrianchap said:

We have lodged a complaint over their decision.

You can do that, I suspect you might not get anywhere, but again worth a try. 

You have a mortgage amount which has interest on it and you have savings which effectively cancel out, or nearly cancel out the interest because they are of equal amount, why not just pay off the balance?

Cumbrianchap

MattMattMattUK said:

It will almost certainly be totally possible for them to do as it is a regulated industry, they will have taken advice from the regulator before doing this, but always worth double checking.

Cumbrianchap said:

We have lodged a complaint over their decision.

You can do that, I suspect you might not get anywhere, but again worth a try. 

You have a mortgage amount which has interest on it and you have savings which effectively cancel out, or nearly cancel out the interest because they are of equal amount, why not just pay off the balance?

That's pretty much the outcome we expect...they must have researched their corporate decision before taking these steps, but it certainly leaves a bad taste. Responsible financial planning is for nought if they can move the goalposts like this.

If we pay off the balance we have no savings. A late-in-life son is in further education & moving to higher education next year, so having access to these funds over the next 5 years is our preferred route.

poseidon1

Cumbrianchap said:

MattMattMattUK said:

It will almost certainly be totally possible for them to do as it is a regulated industry, they will have taken advice from the regulator before doing this, but always worth double checking.

Cumbrianchap said:

We have lodged a complaint over their decision.

You can do that, I suspect you might not get anywhere, but again worth a try. 

You have a mortgage amount which has interest on it and you have savings which effectively cancel out, or nearly cancel out the interest because they are of equal amount, why not just pay off the balance?

That's pretty much the outcome we expect...they must have researched their corporate decision before taking these steps, but it certainly leaves a bad taste. Responsible financial planning is for nought if they can move the goalposts like this.

If we pay off the balance we have no savings. A late-in-life son is in further education & moving to higher education next year, so having access to these funds over the next 5 years is our preferred route.

Can I suggest you explore Retirement interest only mortgage providers such as Legal and General and Royal London per  links  below -

https://www.legalandgeneral.com/retirement/retirement-interest-only-mortgage/

https://www.royallondon.com/retirement-planning/releasing-equity/retirement-interest-only-mortgages/#:~:text=What is a Retirement Interest,one or fund your retirement.

The interest rate will undoubtedly be higher than you had previously, but you get to retain your savings where you can seek higher savings  rates to partially offset the increase.

Incidentally, perfectly understand your desire to retain the flexibility of  accessing  your savings whilst maintaining a mortgage in retirement. I see no necessity in following the 'herd mentality' that dictates getting rid of a mortgage at all cost if  in your case it suits your particular financial modelling strategy to retain such borrowings,

tetrarch

This sounds very dodgy.

It may be that the BS are trying their luck and will fold if challenged.

Who is the BS concerned?

Regards

Tet

Cumbrianchap

tetrarch said:

This sounds very dodgy.

It may be that the BS are trying their luck and will fold if challenged.

Who is the BS concerned?

That was our initial reaction. Their letter included, "As part of our efforts to simplify the Services we provide, we are reviewing our product offering. While your mortgage will continue to operate normally for the time being, we are unable to continue to support offset mortgages and therefore we encourage you to start exploring your options as soon as possible..."

We took this out in 2016 with a repayment date of 2031. They withdrew offset mortgages from their portfolio some time ago, but we thought there would be an obligation to support existing customers/savers as per the mortgage contract

We think they are trying to scare us into revising our mortgage to suit their management plan. There is no "as part of our ability under condition ... of our mortgage agreement with you", etc suggesting their entitlement to do this.

It is the Cumberland BS. We have been a client since 2005.

HobgoblinBT

The lender can change their terms of the loan if your agreement allows them to do so.  

I don’t expect any sympathy for myself but my bank employee mortgage like all other employees of the same bank was changed from a  preferential fixed rate mortgage to a standard customer rate back in the mid 1990s.  If they can do that to their o2n staff, they can do it to customers.

silvercar

I have a similar offset mortgage with a different building society, I’d be livid if they changed the terms mid term. We have used ours for various things along the way, so it has oscillated from being full to being nearly empty over the years. It is part of our financial planning to have this savings pot and use it this way. I would definitely put a complaint in and take it to the ombudsman if you don’t get satisfaction.

dunstonh

Can an existing mortgage (in place since 2016) be taken away like this?

Technically, it's not being taken away.  The ability to offset is being removed but the mortgage and the mortgage terms remain the same.

We think they are trying to scare us into revising our mortgage to suit their management plan. There is no "as part of our ability under condition ... of our mortgage agreement with you", etc suggesting their entitlement to do this.

Offset mortgages are expensive to operate and have become less popular as more and more people went fixed rate rather than use offset.   There comes a point where a product is no longer viable to offer.

They have to meet the credit terms agreed but the offset is bolt on functionality and doesn't have the same requirement to be continuously offered.

silvercar

dunstonh said:

Can an existing mortgage (in place since 2016) be taken away like this?

Technically, it's not being taken away.  The ability to offset is being removed but the mortgage and the mortgage terms remain the same.

We think they are trying to scare us into revising our mortgage to suit their management plan. There is no "as part of our ability under condition ... of our mortgage agreement with you", etc suggesting their entitlement to do this.

Offset mortgages are expensive to operate and have become less popular as more and more people went fixed rate rather than use offset.   There comes a point where a product is no longer viable to offer.

They have to meet the credit terms agreed but t.he offset is bolt on functionality and doesn't have the same requirement to be continuously offered.

Wasn't the ability to offset part of the T&Cs of the mortgage? I would have thought so, given they allowed you to reduce your monthly payments

I took out a fixed rate offset, so it used to be possible to combine the 2.

Cumbrianchap

silvercar said:

I have a similar offset mortgage with a different building society, I’d be livid if they changed the terms mid term. We have used ours for various things along the way, so it has oscillated from being full to being nearly empty over the years. It is part of our financial planning to have this savings pot and use it this way. I would definitely put a complaint in and take it to the ombudsman if you don’t get satisfaction.

Our practice mirrors this too. I await the response to our complaint