When is 2 years fixed rate NOT 2 years?

Steamahead · 18 July 2018 at 8:19PM

I'll try to keep it short and sweet....

- Myself & wife approach Countrywide near the end of 2016 as first-time buyers, they recommend Natwest Bank as lenders.
- Acceptance offer from Natwest on; 12/12/2016, with 2 years fixed rate at 1.55%
- Completion date with Natwest on; 27/04/2017
- Deed transfer, Mortgage transfer etc.. 22/05/2017 (we move into property around this time)
- First mortgage payment; 01/06/2017
- Mortgage documents state 2 years fixed rate at 1.55 % to end 31/01/2019, this has been confirmed by both Mortgage broker and Natwest over the phone as well as on the 'offer' documentation from Natwest back in December 2016.
- Documents also state; Section 6: What you need to pay each month.... These payments are based on a mortgage of xxx,xxx & includes the fees that are shown in Section 8 as being added to your mortgage, and assumes that the mortgage will start on 01 December 2016. 26 payments at a fixed rate at 1.55% followed by 274 payments at variable rate, currently 3.75%

In light of the above, how can our fixed rate of 2 years not be 2 years?
I base my statement on the fact that my first payment to Natwest was; 01/06/2017 (So the fixed end date 'should' be 01/06/2019).
I can see this is based on the offer date, but surely this cannot be right? Logic would say; either the start of a fixed rate mortgage would be first payment of Mortgage or at least from the completion date of Mortgage documentation, in this case; 27/04/2017 (Fixed rate should then end; 27/04/2019)

Am I correct in thinking we're being short-changed by a few months here? As I'm sure I was taught that 2 years is 24months, and not 'assume' it's 18 or 20 months :huh:

Regards, James.

[Deleted User] · 18 July 2018 at 8:29PM

Steamahead wrote: »

I can see this is based on the offer date, but surely this cannot be right?

It surely can.

Mortgage deals are not personalised for each individual. They are set to run over a certain period - meaning that some customers may get more, some may get less, a few may get the exact period.

ACG · 18 July 2018 at 8:30PM

Mortgage lenders have 2 ways of working.
The first is you get the product for a fixed 24/36/60 payments (depending on how long you fix for).
The second is the lender launches a deal with a set end date. Typically when you apply, that deal will be around 26/38/62 months, knowing it will probably take around 2 months to complete. Every month or 2 they will update the deal, which may be a change of rates and end dates or just a change of end date.

This type of thread crops up periodically on here and in light of it, I have actually updated my suitability letters to make customers aware of it.

You will find on your KFI/Mortgage offer it has a set end date (as that is how Natwest work) and that the "24 payments of" will be based on an assumed completion date.

The fact your application took 5 months to complete is where the issue primarily lies with yours. Not many Mortgages take 5 months from application to completion, although it looks like you would never have had 24 months, maybe 22 had everything gone smoothly.

middleclassbutpoor · 18 July 2018 at 8:34PM

My understanding would be as follows;

There was a fixed end date to this rate - which was 31/1/19. If you complete your mortgage at a point where you have 2yrs or more before this end date then you would get the fixed rate up to that point or for the 2 years.

If you complete at a point where 2 years takes you beyond that fixed rate end date then you would only get the rate up to that date and not beyond.

It is strange though that they have put Dec 16 and 26 payments in your offer though....

Steamahead · 18 July 2018 at 8:48PM

Thankyou ACG for your reply.

From what you are saying; our lender went with the second option of '26' months.... and you say that every month or 2 they will update the deal, which may be a change of rates and end dates or just a change of end date.
So should my lender of updated accordingly in light of the delay?

haras_nosirrah · 18 July 2018 at 8:58PM

When you book a mortgage rate that tranche of funds has the same end date. Some may complete in 6 weeks and get 26 months, some may take 6 months and get 20 months but you get the funds booked with the end date booked which you took out at application. The only way you would have got a different end date would have been to scrap the application and start again with a new product

ACG · 18 July 2018 at 9:49PM

Steamahead wrote: »

Thankyou ACG for your reply.

From what you are saying; our lender went with the second option of '26' months.... and you say that every month or 2 they will update the deal, which may be a change of rates and end dates or just a change of end date.
So should my lender of updated accordingly in light of the delay?

Sorry, I did not explain it that well.
The lender updates the deal with a later end date of the deal, but only for new applications. You can switch deals, but it might not necessarily be the same deal. The rate may have gone up or down when they renew their deals as well as the end date being extended.

I do not want this to come across as arrogant/a***ey or anything bad, but what you have is what you have. You should have read the paperwork properly.

As I said, others have made the same mistake going off posts on this forum and I can see how the mistake can be made, most people skim over it and make assumptions, which is why I have gone out of my way to make it clear on our paperwork.

It is fairly standard practice from the mainstream lenders. It is the more specialist lenders who typically do the deal for a fixed 2/3/5 years to the month.

I have just pulled up a Natwest Mortgage offer I have, have a look at Section 1 the bottom sentence in bold should read something like:

This Offer and Mortgage Illustration are prepared on the assumption that the loan will be drawn down on 18/01/2018.

Thrugelmir · 18 July 2018 at 10:07PM

Steamahead wrote: »

So should my lender of updated accordingly in light of the delay?

Likewise should the Natwest keep track of the thousands of other customers that applied for the same deal.......... You are far from being alone. A tranche of funds runs into the hundreds of millions of £'s.

Steamahead · 18 July 2018 at 11:25PM

Thank you for the replies.

You are correct, our section 1- This offer and Mortgage Illustration are prepared on the assumption that the loan will be drawn down on 02/12/2016.
Section 2 - in bold; This Offer is valid until 02/06/2017...
Section 5: - The product is a 2 year fixed (purchase) until 31/01/2019

I'm sure those reading through will say; why did you not just ask your mortgage broker if things are not clear.

When you are new to all this and doing all you can to gather the wealth information being thrown at you, things will be missed and questions you now wished you ask, you did not think of asking at the time.
Our assumption was that we're being offered this product for 6 months, with that, the fixed rate (of 2 years) would start upon completion/transfer.
At the same time, we also assumed (purchase) at the fixed rate means just that = purchase/buy, at that moment in time we had not purchased/bought the house.

To conclude,
You have all given us a good insight into why we're in this position and although it seems there isn't anything we can do (yes I know, tuff), it does still feel a little frustrating that had we known or been given better advice maybe we could have made some different choices at the time.

Lack of clarity around the fixed end date and lack of information about how any delays would affect the total months' payment would have been nice, then again, would we have taken it all in? as any first-time buyer will tell you - buying a house is scary when you lack the knowledge.

As for that word; assumption..
We're always told; don't assume in life. Seems the same can't be said for these mortgage documents can it haha!

getmore4less · 19 July 2018 at 7:39AM

with a gap of 4 months between choosing a mortgage and drawing it down there should have been a review to check it was still the right product.

If those predicting the massive rate rises are right you will be able to switch sooner than you though and maybe catch the next deal before the imminent doom.

one thing you will have to consider, if you had analysed the LTV at 2 years this may not be quite as good as you thought and miss a LTV change point.

Jan 19 is close enough to start thinking about the next deal as Natwest allow 3.5 months early switching this could be as early as Sept and catch a good retention deal.

Although 1.55% is a very decent rate what is the LTV?

ACG · 19 July 2018 at 8:20AM

As I said, you are not the first and definitely wont be the last - although I appreciate that will not make you feel any better.

We have invested in a new back office system that automates a lot of our processes, one of which is the suitability letter. It now writes one of 2 paragraphs depending on the type of deal.

I have only done that because of things I have read on this site. Even brokers (or at least 1 broker... me) learns from this site.

Historically, I would have said this is a 2 year deal and like you, people would have assumed it was 2 years. It was not a way to catch people out, but just an assumption that people read the paperwork and understood it. In reality those illustrations are 5-6 pages long, nobody reads all of it and understands it fully.

You have been caught out on the extreme side due to how long it took you to complete which is probably why it is much more noticeable.

Although the flip side is that had rates dropped, you would be eligible for a lower rate sooner rather than later.

When is 2 years fixed rate NOT 2 years?

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