Alliance and Leicester tracker mortgage

Joesblues

Martin / All

this could be a bit long winded but if you can bear it please try and stick with me your independant opinions are of great value to me.

December last year I took a £120,000 interest only tracker mortgage at .11 below the BoE rate with A&L which by the time my statement arrived in January had increased by £32 due to the overlooked insurance with another company fee and an imbalance in the first interest payment.??

My monthly payment being £464 (120,000 X 4.64% = 5568 / 12 = 464) paying by direct debit on or around 28th of each month which is when A&L
chose to take the DD not at my choice of dates.

This has all run smoothly until the recent rate change which reduced the rate payable to 4.39 %.My expectation using the above formula was for my monthly payment to be £439 (120,000 X 4.39% = 5268 / 12 = 439 ).My rate change advise letter however informed me that the monthly payment was in fact to be £445.04.

As you do, I queried this (using the switchboard number from "no to 0870" was told by the operator that she could not put me through to the Mortgage enquiries section but persistence saw me go to a nice lady named Heather (or Helen) in Mortgage cutomer services) Heather or Helen happily informed me that when the rate change was recalculated the outstanding balance on my account was in fact £120,492.55 this included the extra £32 previously
mentioned and the August payment not yet taken by A&L which for the purposes of the calculation was being treated as 492.55 of repayment mortgage and was why I should expect my payment to be £6 per month more,
but that if I had paid on the 1st of the month this would not have occured !!

She also said that I should not worry as all additional payments would be used to reduce the outstanding balance.However when I asked how much of the extra £6 would come off of my balance and how much would go to A&L
she was unable to tell me but promised to find out and is going to send all the details in writing. When I suggested the whole thing was corrupt and merely a money making scheme for A&L from customers who didn't bother to check she was unable to agree....

If anybody is still with me and understands the above perhaps you may know if this is common practise/normal and I am overreacting or if i am right to bit suspicious.

Regards

Tony P

MarkyMarkD

With A&L and a lot of other lenders, if you take out a £120,000 interest only mortgage and the balance at a payment calculation point becomes more than £120,000, the remainder is taken to be on a repayment basis.

So the additional £6 is due to two things - the interest on £492.55 which is around £22 per annum, and the repayments of the £492.55, presumably over the outstanding term.

I don't really understand from your explanation why your balance has increased - if they are working out the payment due from 1 September, when the base rate cut impacts your account, that should include the 28 August payment having been made.

Are you saying that they are calculating the payments incorrectly, on the assumption that you won't have made the 28 August payment by 1 September? 'Cos if so, that sounds wrong.

I'm not surprised she didn't agree that "the whole thing was corrupt" - do you really expect any member of staff at a financial institution to agree with such a comment? She's only doing her job, after all.

I also have an A&L mortgage but haven't had my rate change letter yet - I'll be very interested to see if the same thing affects me as has affected you and I'll post here accordingly when the letter arrives.

Joesblues

I don't really understand from your explanation why your balance has increased - if they are working out the payment due from 1 September, when the base rate cut impacts your account, that should include the 28 August payment having been made.

Are you saying that they are calculating the payments incorrectly, on the assumption that you won't have made the 28 August payment by 1 September? 'Cos if so, that sounds wrong.

Thanks for the reply.

Yes.... when I said they should assume that the payment on the 28th August will be made and should be taken into account the reply was " we cannot be sure that the payment will be made so we take a snapshot of what is outstanding on a particular day and recalculate your payment accordingly" - a snapshot on a day that suits them of course.