Overpayment of Mortgage Debacle with Halifax

Jacobs69a

Did you know that Halifax Building Society is now not automatically reducing the term of your mortgage if you make overpayments to your mortgage?  Yes, that is correct.  They now reduce the monthly amount you pay for your mortgage and not automatically reduce the term of your mortgage as most lenders do.  In fact you are probably not even aware of this because they haven't actually informed their customers.  So what does this mean?  This means that for the likes of myself who wants to retire within the next 5 years, any payment I make on my 13 year remaining mortgage have not been used to cut short my term but instead reduced my monthly payment.  If you happen to notice this they will only (after being sent on a merry dance) take you through an affordability procedure to get their permission to reduce the term even after you have been overpaying every month for over 2 years.  

Since 2023 I have regularly been paying £400 extra per month on my mortgage payments.  Why have I only now attended to this issue.  Simply, I am self employed and have been concentrating on maintaining my business and so whilst I was overpaying each month, I didn't give the amount of was paying a second glance because I was meeting the payments and some.  Now, that I have a little time I have noticed that my term was remained the same but my monthly payments had decreased.  This is not what I was expecting.

Yesterday, I called my Mortgage Advisor, who I always use to ask if he was aware of why Halifax was reducing the payments instead of the term, he informed me that he had never heard of that before.  So I called Halifax yesterday to query this and to switch it to reducting the term instead,  you would think I was asking for a bank loan for the number of hoops I had to jump through.  First off, I enquired online via their chatbot.  Was told to call Customer Service (yes I did explain what I wanted to find out) and then when I got through to Customer Service I was then passed to another person who would book an appointment with a Mortgage Advisor to check my affordability and was told I would need to make a new application for a mortgage!  What?! I was shocked so I booked a call for 8am today.

I was informed that Halifax had NEVER offered a reduction of term on their mortgages - this is incorrect.  I have been with Halifax for the last 10 years and so know full well that this was offered because I did this with my previous house.  That I would have go through the process of checking affordability (which I had no intention of doing) I had only (in the last 6 months) gone through this process because I was looking to sell my house and needed a mortgage in principal so my affordability was already established.  They had all my financial circumstances but I was told that I would need two years SA32s and bank statements.  I was not happy.

I spoke to their Mortgage Advisor at 8am and I was infomed that the FCA brought a ruling in a couple of years ago where mortgage companies could reduce the monthly amount being paid with overpayments and so Halifax did this but neglected to tell their customers and removed the automatic reduction of the term. In order to access the other option you have to jump through hoops if you wanted your overpayments to be attrributed to a reduction to the term.  I was further informed that ALL mortgage providers were doing this - which is incorrect. 

This intrigued me.  I went on the FCA website and read the guideline they brought in 2023.  It clearly states that all dealings with customers have to be fair and easy.  They encourage banks to have a discussion with their customers about overpayments, but how can that happen if Halifax don't inform their customers of a significant change to their T&Cs? 

The Mortgage Advisor I always use, who is also has a mortgage with Halifax wasn't even aware of this change.  He is absolutely livid and is now actively not promoting Halifax mortgage products until they have this sorted out.   He also told me that I would have to annually review my affordability, which was already established in January 2021 when I first took out the product.  How ridiculous, onerous are their procedures!    

Does this whole proces sound easy to you?  Does it sound fair?  Yes, I have put in a formal complaint to the FCA and I would encourage any other Halifax mortgage customers to do the same if they have been overpaying on their mortgage each month and their term hasn't be reduced as they expected but instead their monthly payment (core) mortgage payment has.  

The only conclusion I can arrive at is that Halifax want to keep customers for a long period of time and make money.  They have put procedures in place that are to hinder you doing what's best for your financial wellbeing.  Their change has resulted in me having to work that much longer because the overpayments made haven't gone where they should have.  I am NOT happy. 

I have asked them to provide me with confirmation that I was informed of this change.  I have also asked them to provide me with the number of years I have lost out because I wasn't made aware of their changes.  

Jackie1813

When I made overpayments  I had to request that that the term was reduced and not the monthly payments, it was not done automatically and that was five years ago.

ordnancesurvey84

I had a mortgage with Halifax until earlier this year and am now with Lloyds (part of the same banking group). Made and continue to make regular overpayments to mortgage. Never expected or pushed for a formal contractual reduction of the term, I was just happy in the knowledge that the term was de facto reducing, because the lender will stop taking payments once the balance hits zero, which will - by definition - occur earlier than initially expected if overpayments are made.
There was only ever one recalculation process in which a new lower monthly payment was set to take account of all the overpayments. This occurred 4 years into a 5 year fix, and there was plenty of notice about the change.
You don't say if you're currently in a fixed deal with your lender, but if you do plan on shopping around for a new deal when your current fixed deal expires, you'd have an opportunity then to formally reduce the term if you wished.

Woodstok2000

Jacobs69a said:

Did you know that Halifax Building Society is now not automatically reducing the term of your mortgage if you make overpayments to your mortgage?  

When you say 'now', this has been the case for a long long time.  I had a mortgage with Halifax in 2015 and our overpayments did not reduce the term - we fixed our payments so that the term would be shorter in reality but it always remained the same on the account.  

It was raised on this forum in January 2018:  Halifax mortgage overpayments - not reducing payment OR term — MoneySavingExpert Forum

There's also a relevant complaint with the FSO here:  Decision Reference DRN-4910961

In short, the FSO upheld the Halifax position.  It does appear that repayment recalculations were introduced on an annual basis in 2023, so that's maybe what has triggered this confusion since prior to that any overpayments would have reduced the term by default.

I understand your frustration, but it does reinforce the importance of keeping an eye on your finances and checking all regular payments are going out as expected.  

Instead of going through all the hassle of reducing your term, why not just fix your payments at the original level +£400.  That way you get all the benefit of the reduced term in reality, plus the flexibility that you can easily revert back to a lower payment if life changes.  You'll just need to make sure you reduce the overpayment if you start getting close to the 10% annual limit.

Jemma01

HSBC for me is the same, term doesn't change, the monthly payments are reduced instead every time BoE reduces the rate. I'd need to ask HSBC to change if it I wanted to, but I'd rather lower monthly obligation in case I lose my job (and I'm on tracker, so overpaying as much as possible to get out of it with no penalty).

I feel your frustration, the more time it takes to pay the mortgage, the more interest accumulates. If I were you, I would ask for reduced term and go through whatever hoop it needs. 

Edi81

Halifax hasn’t been a building society for nearly 30 years!
lots of posts on here about how they reduce the payment once a year. No big deal it ultimately reduces the term. 

bamgbost

AS @Edi81says, I too am a Halifax Customer and once a year they provide a revised lower monthly repayment amount for the subsequent 12 months. This has been happening for as long as I have had a mortgage which is only 7 years.

Chemistry777

I can only compare with our Nationwide mortgages.  Overpayments, very easy to manage and change on the app and for each over payment you have a checkbox to determine if you want to reduce the term or subsequent payments.

I can understand some companies may "default" to a reduced payment but don't understand why the need for subsequent affordability checks.  Definitely not the case with Nationwide, so cannot see it is industry wide legislation. 

BikingBud

Previous discussions on the Halifax "method":
81251489
https://forums.moneysavingexpert.com/discussion/comment/81244956#Comment_81244956
https://forums.moneysavingexpert.com/discussion/6582142/overpayments-and-bank-reducing-monthly-payments/p1

And other that can also be found but i still feel unilaterally forcing customers down one route that can only be avoided be requiring excessive intervention and reassertion of desire outcome is not and cannot be argued as being in the best interest of the customer.

There might be many other reasons why overpaying the mortgage might not as financially beneficial for the customer as other options, investing, pension building etc but that is not the point in discussion here. Halifax are not providing "advice" they are working what is best for themselves. 

Norlye

With NatWest. We can overpay 20% annually and if your overpayments are under £1000 they don’t change the monthly amount.

We just keep paying £999 and keep an eye on the percentage.

i guess it will re set when we remortgage.

penners324

I think you should take more notice of the post you receive from the bank and take more notice of what happens in your bank account