Are You Being Overcharged For Your Mortgage?

25 Aug


Today I opened a letter from Skipton Building Society. It informed me of the following:

“Your mortgage offers a fixed interest rate for a set period. This finishes at the end of the month after which you will be charged our buy to let standard variable rate. This is currently 4.95% pa, including the 0.25% discount for paying by direct debit. This means your new interest rate will be 4.95%.

Like many other conservative buy-to-let investors I took out a 5 year fixed buy to let product – well 5 years ago. And like any astute property investor I checked the small print on the mortgage contract – especially the bit about “Understanding the Risks” Now under the “Are you comfortable with the risks” section I have the following:

“The buy to let standard variable rate is guaranteed not to exceed the Bank Of England’s base rate from time to time by more than a differential of 3% pa”

So I was a little confused when I received this letter which informed me I would be paying 4.95%. According to my mortgage contract, the rate I should be paying is Bank of England base rate (currently 0.5%) plus the differential of 3%. That gives a pay rate of 3.5%. So why then was I being charged 4.95% – a whole 1.45% more?

So I called Skipton.

The nice sounding Yorkshire lass named Lisa at the end of the telephone was most helpful. She diligently brought up the letter they had sent me so that she had it on her screen and she also brought up the mortgage contract which I had signed so that she could see the sections which I was querying.

And so I say to her:

“Lisa I’m very confused by this letter you have sent me which says that I am now going to be paying 4.95% when my mortgage contract guarantees I will never pay more than 3% above base rate”

Lisa responds “Yes, I understand, Miss Collett but you see we changed our Standard Variable Rate and we wrote to you in April 2010 to inform you of this”

I reply: “Lisa, I understand that you have written me a letter a year ago that you have changed your SVR, but given that I have a mortgage contract with Skipton which was for a fixed period and then reverted to a Variable rate which  guarantees that I will never pay more than 3% above base rate then I don’t understand what this letter about you changing your SVR has to do with me”

“Well” she replies “We sent you a letter”

I’m getting a little testy now: “Yes, I understand you sent me a letter – but I’m afraid you sending me a letter does not mean that you can change the contractual terms of my mortgage which I signed 5 years ago”

She starts to wobble now…

So I continue…in my testy manner “Did I sign this letter you sent to me saying that I agreed with any new terms and conditions which you are applying to my mortgage contract. Did I have this witnessed by a solicitor?”

She is now faltering…

“No…but, we have informed you. We sent you a letter”

Well” I retort – mightily testy now –  “I can inform you by letter that I am no longer paying the mortgage but I don’t frankly see how how that changes the contract I have with you and that I still owe you money. I don’t think that you’ll agree with a letter like that will you?”

She whimpers…

“Yes I can understand your point Miss Collett”

“So” I say in my most demanding, authoritative but still being polite manner ” I want you to change the rate you are charging me to the correct contractual rate which we agreed 5 years ago and which is in my legally signed contract as witnessed by a solicitor”

“Ahh…well it’s not that simple…let me just go and speak to my manager”


Lisa returns to the phone breathless and all purry voiced like an abandoned kitten desperate to be adopted “So sorry for the delay Miss Collett, my manager and her supervisor have been looking at your case and they have advised that we can’t do anything”

“Excuse me” I bluster, now I’m angry. No more Miss Polite Authority Woman “What do you mean you can’t do anything?! We have a signed legally binding contract from 5 years ago which states the rate I should be paying. Just because you send me a letter does not mean that you can change a legally binding contract…You are aware this is a legally binding contract aren’t you? You are aware that if the shoe was on the other foot I can’t just send you a letter saying that I am going to pay you less each month because I have sent you a letter and you just have to accept that”

Lisa is losing it…I can hear her trembling down the phone…

I realise I’m getting nowhere fast. And Lisa, bless her is trying her best…but she’s out of her depth

“Lisa, I think the best thing for me to do is to lodge this as an official complaint. This can then be dealt with in an appropriate manner. The correct rate as detailed on my legally binding mortgage contract can then be applied and this can all be sorted. Obviously, if the correct rate is not applied then I will be forced to take legal action and involve the Financial Ombudsman”

“I’m very sorry I can’t help you Miss Collett and I do understand all that you have said and I am sorry”

“It’s OK Lisa” I say “But just answer me this – given you are not charging me the correct rate on my mortgage am I right in thinking that now we are in dispute, can I stop paying it until all of this is resolved. Shall I send you a letter to that effect?”

“Oh no Miss Collett, you can’t stop paying your mortgage that would be a breach of the terms and conditions of your mortgage”

To which I replied “Oh you mean like changing the contractual rate which I am meant to be paying…isn’t that a breach of the terms and conditions of my mortgage?”

To Be Continued….



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