Lender wants to change mortgage terms after completion

marky0 · 26 May 2018 at 3:24PM

A rather odd situation has appeared with my mortgage provider and I want to understand how hard I should push back with them.

I moved property at the start of 2018, and needed to borrow more funds. So I agreed a new mortgage with my lender which consisted two elements
(1) Porting my existing offset mortgage from my old property
(2) Additional borrowing on a fixed rate to cover the purchase price of the new property.

Seems straightforward. The mortgage was arranged through a broker, and we moved with no problems, but several weeks after the move I noticed that the repayments did not compare with my mortgage offer and I contacted the lender to see what was going on.

After several months of investigation it now transpires that the lender made a mistake in the mortgage offer they gave us. They cannot deal with an offset mortgage in combination with a fixed rate mortgage as it is something that their computer systems can't handle !

They have admitted the error, and want to change the mortgage back to what they should have offered which was a tracker mortgage (to replace the offset) in combination with the fixed rate.
But clearly I will lose the offset benefits from the original offer, which they have agreed to compensate, but are very vague as to what the compensation is until I agree to the change.
They are very matter-of-fact about this stating that they can't work with a offset and a fixed on the same property and therefore I need to agree to the change.

So the question I have is can they do this ?
Surely I have an agreed mortgage contract with them that is binding, and I can ask the lender to find a solution their end, and not accept a change because its easier for them.

Am I correct in this assertion or is it more complicated ?

Thrugelmir · 26 May 2018 at 3:35PM

Quantify what you consider your potential loss to be.

ACG · 26 May 2018 at 4:08PM

They have to put you in the position you would have been had the mistake not happened. From a technical perspective, that can not be done.

From a financial perspective, it can.

So work out the difference between what you are paying and would have paid and work out how much you would have saved in interest (approx) assuming you used the offset facility as much as you plan to.

Put on a bit extra to cover 4-5 hours of your time for working that out and what you have spent dealing with it so far and thats the compensation you want.

TrickyDicky101 · 26 May 2018 at 4:41PM

I am of the opinion that the flexibility of an offset significantly outweighs any potential interest savings such a product might bring. So I would want that factored in to any compensation figure.

It sounds to me like you don't want to give up the offset product largely irrespective of what compensation you are offered in return - is that right?

And the bank are idiots if they think you should agree to something before you know what their compensatory arrangements are!

marky0 · 26 May 2018 at 5:20PM

My annoyance is more about the lenders attitude towards resolving the problem.
I am not wedded to the offset, but clearly don't want to lose out.
But the Lender comes across as vague around what options are available and how they plan to compensate. I am therefore more interested about knowing how much of a lever I have with them. It is a different conversation if they need my agreement to change the terms of the contract (which is what their language implies over the telephone), compared with this being a "fait accompli" and its just a question of haggling over the redress.

With respect to compensation its also not straight forward to work a number over 25 years, with inflation, interest rates, pay rises. etc. Online offset calculators tend not to do a great job on all the factors. Any ideas gratefully appreciated !

Thrugelmir · 26 May 2018 at 5:28PM

Your current product is only fixed term. Not for 25 years though. Whatever their error. You'll need to switch at the end of the term to another product. Otherwise it will default to SVR. Which most likely wouldn't be to your benefit.

marky0 · 26 May 2018 at 7:26PM

The offset element has a 25 year term at 0.85% above the bank of england base rate for the duration. The fixed rate has a 5 year term, which will revert to SVR. I assume that each element can be treated separately, so I would have been able to re-mortgage the fixed part and keep the offset for 25years ?

TrickyDicky101 · 26 May 2018 at 7:49PM

marky0 wrote: »

The offset element has a 25 year term at 0.85% above the bank of england base rate for the duration. The fixed rate has a 5 year term, which will revert to SVR. I assume that each element can be treated separately, so I would have been able to re-mortgage the fixed part and keep the offset for 25years ?

Yep - with the same lender (not to a different lender).

silvercar · 26 May 2018 at 7:55PM

After several months of investigation it now transpires that the lender made a mistake in the mortgage offer they gave us. They cannot deal with an offset mortgage in combination with a fixed rate mortgage as it is something that their computer systems can't handle !

If you don't want to give up the offset, then tell them. Suggest one solution would be to put the whole mortgage as an offset.

Thrugelmir · 26 May 2018 at 10:10PM

marky0 wrote: »

so I would have been able to re-mortgage the fixed part and keep the offset for 25years ?

Which presumably you can still do at the end of the 5 year period fixed term period?

When you took out the additional mortgage borrowing. The only offset options available would have been those available at the time. There would have been no right to the same terms and conditions as the original mortgage.

A lender cannot offer you a product they don't have. Which I assuming is their issue with your demands. Hence the apparent intransigence on their part. Mistakes do happen.

Out of curiosity are you utilising the offset facility fully against the original mortgage?

minimike2 · 26 May 2018 at 11:06PM

What has your broker said about all this?

Whilst the lender should not have let the application get through, the broker has made a major !!!! up with putting the application in on a offset / fixed mix and match basis in the first place.

Are they involved in sorting out this mess?

Long and short is that your options are for:
1. if you want offset, a brand new offset on the full balance at the rates available at the time of application
2. Lifetime tracker of the outstanding balance at the time of redemption of the old mortgage on the rate applicable to that mortgage, minus the offset facility, plus new borrowing on rates available at the time of your application.
3. Full mortgage on any rate available at the time of application

Lender wants to change mortgage terms after completion

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