Letting a mortgage go on to the follow-on rate

clubfootkid

I have a mortgage (Santander) with 3 parts, each with different interest rates. The first part of the mortgage has just gone on to the follow-on rate - I plan to remortgage in September when the second part of the mortgage is due to hit the follow-on rate. This way I will incur no early repayment penalty from those two parts (the third part has minimal early repayment fees). I have received many letters warning me that I was due to move to the follow-on rate. However, there is not a smooth transition from one month's payment to the next. There is a delay due to the date of payment each month. I have not been warned that there would be 'delayed interest' added to the next month's payment. When I spoke to customer service, they explained nothing could be done - 'the system doesn't update until the end of the month'. It seems as if I am being swindled out of a bit more money. My mortgage advisor claims to have never encountered this before. Has anyone else?

user1977

Not clear what you mean, you might need to give us figures. Do you mean you're ultimately paying the correct amount but don't like the timing of the payments?

ACG

If you go on to the SVR on the first of the month but their system does not update until the end of the month would that not mean you are paying less interest?

In any event, assuming your interest is charged daily (some still charge monthly but very few) at some point they will correct it and either reduce your payments/credit you the overpayment or increase your payments accordingly.

Dispite system limitations, they are not allowed to let you underpay/overpay involuntarily for long. It might be the annual review it corrects itself, but it will be put right at some point.

clubfootkid

The last payment at the low rate was £611 on 28th March. Follow on rate kicks in on 3rd April. 28th April payment due to be £611. 28th May payment due to be £1132. 28th June and thereafter due to be £844. I understand why the May payment is higher, I just think it's unreasonable to charge extra interest in May when I can pay it in April. Also, I'm still miffed there was no warning this extra, delayed interest would appear!

ACG

Your making your payment at the end of the month. That means you are paying 27 days extra interest each month.

Your mortgage would likely have reverted to the SVR on the 1st of the month (although a weekend might have given you a couple of days grace), so rather than making your payment on the 1st, you incurred 27 days worth of interest before making your payment.