What are your repayment plans?

by Mark Alexander

12:54 PM, 6th December 2013
About 5 years ago

What are your repayment plans?

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What are your repayment plans?

Are mortgage lenders having a campaign to ask interest only mortgage borrowers “what are your repayment plans?”

In the last 24 hours I have been contacted by two people, with different mortgage lenders, both telling me a very similar and disturbing story.

The first was my plumber, he popped around to see me yesterday. He has a relatively small interest only mortgage with Bank of Scotland secured against his home. The mortgage has 5 years to run which will take him to age 60. He had been contacted the day before by Bank of Scotland who advised him they were recording the conversation and took him through security before asking him how he intended to repay his mortgage. This alone made him nervous! The purpose of the call was to establish how he was going to repay the mortgage in 5 years time. The reason he popped around to see me is that he felt quite intimidated because he didn’t know what to say to the bank and wondered whether he ought to refinance? However, he’s paying 1% over bank base rate and it would uneconomical to change. Is this what the bank wanted him to do? What are your repayment plans?

I asked him why he felt intimidated and what his plans are. He told the bank he didn’t know how he was going to repay the mortgage and made his excuses to get off the phone. When he had the time to reflect on the discussion he realised that what he had told the bank might trigger the alarm bells and became worried about what happen next.

He gave me the true picture which seemed perfectly feasible. The truth is that he has several options but hasn’t decided which to take. That sounded perfectly feasible to me so I asked him what his options are. He said …

  1. Downsize
  2. Sell up and live abroad
  3. Refinance

I said “so what’s wrong with that?”.

He said he felt under pressure to provide a definitive answer as the bank only seemed focussed on increasing his payments to a level whereby his mortgage would be cleared within 5 years. mmm!!!

This morning I received a readers letter from a lady who is a residential borrower of Mortgages Express. The scenario she described was very similar but she is worried because she also has several buy to let mortgages on an interest only basis with Mortgage Express.

I would be very interested to hear from anybody who has experienced something similar recently. Please leave a comment below and let me know which lender you were contacted by and whether your loans are personal mortgages on your home or BTL’s. I would also like to know what the outstanding term is because both people who have contacted me to share their stories have said their mortgages have 5 years to run.

I’m wondering whether these stories are pure coincidence in their similarities and timing or whether the mortgage industry have somehow colluded or been instructed to make these calls by their regulators and/or professional bodies.

My response to a call of this nature would be that “I have several options and will let you know which I decide to take in due course”. If the mortgage lender asked me to spell out what those options are my response would be “sorry, I don’t think that’s any of your business. However, what I will say is that I have always honoured my contract with you and intend to continue to do so”.

Over to you ….



Comments

Annette Stone

13:14 PM, 6th December 2013
About 5 years ago

Mark. No lender has the authority to demand that they be told how a mortgage be repaid and I do not even speak to banks when they call me up for their own purposes and then want to take me through their "security" procedures. I tell them to write to me and when they do I choose whether I want to respond to their letters.

That having been said I have two comments:

1. On residential mortgages most lenders will give you up to a year after the interest only mortgage ends to sort things out i.e. remortgage before taking action.

2. On buy to let mortgages I am not sure if they give you any leeway and I would start the remortgaging process a year before the loan ends

Conrad Vink

13:23 PM, 6th December 2013
About 5 years ago

"So what's wrong with that?" Well, quite a lot could go wrong if the value of his house were to drop to less than the mortgage secured against it. If he sold up at the end of the term (either to downsize or move abroad) he would not be able to clear the mortgage - a big problem for the lender. And who is going to refinance a mortgage in negative equity owed by somebody in his 60s when there are plenty of 30somethings with healthy deposits and decades of wages ahead of them they could lend that money to instead?

So what were the LTVs on these mortgages?

Geoff H

13:25 PM, 6th December 2013
About 5 years ago

Hi Mark. My wife and I were first contacted in July and more recently in November for the same reason. On our main residence we have an interest only mortgage with about 6 or 7 years of term left. The lender, Cheltenham & Gloucester, provided us with a form to complete that asked whether we had a repayment plan and, if so, it required details of our endowments and insurances. Because the form does not fit our repayment strategy I ignored the first letter but when the second letter arrived I responded that our repayment vehicle may be equity from our small portfolio of BTLs. I'm highly suspicious that this is just the start of pressure to get us to either reduce the outstanding amount or change to repayment - simply because we have a very good rate deal. I suspect that they will next ask for details of our BTL properties and I'm really fed up that this may be the start of another campaign….. We are already in the BoI and WBBS resistance movement!

Chris Amis

13:28 PM, 6th December 2013
About 5 years ago

Just to reinforce, if someone rings up as a bank and takes you thru security, consider on the other end the fraudster with a little information may be talking to the real bank on another line and relaying the questions to you to answer.

And before you think, I will hang up and ring the bank, consider that if *they* do not put down the phone you could remain connected to the fraudster who could pretend to be the bank and have a second go at logging into your real bank with you answering the questions.

So ring the bank on a second phone on a public number (ie on the back of your debit card).

Or - just tell them to write to you.

Jeremy Smith

13:31 PM, 6th December 2013
About 5 years ago

I was asked by Cambridge Building Society IF I had plans in place to repay my BTL mortgages with them when they came to their end. It was very polite, just giving me a prompt not to forget they will need repaying, not asking me how, or any other details - I thought this was very prudent of them.

HOWEVER :
I have a friend who was with the BANK OF SCOTLAND:
A VERY DIFFERENT MATTER:
He had a 5 year fixed term loan for a "blighted" property, at a road scheme.
It was taking longer than he thought and got to the 5 years....
His LTV was way under 50%, and his loan was 90k.
his advisor said it shouldn't be a problem to renew this with them.
The bank spoke to him on the phone and said everything would be fine, he told them he had 20k reserve savings, but this was his float for his business:
they said that if he paid that into the mortgage account they would renew it within 30 days, at a slightly higher rate though.
They then just TOOK the 20k, then changed their mind, telling him he now had to repay the other 70k straight away.
It took him a year to sort it out, his advisor told him they couldn't take the house as long as he continued to pay the monthly payments.
He eventually managed to get another mortgage, at a hefty 10% with another lender.....funny thing is, it was ultimately owned by the Bank of Scotland anyway!!!

DO NOT TELL THEM ANYTHING ON THE PHONE THAT YOU DON'T HAVE TO.

It has caused him alot of heartache and grief, as well as illness and stress.

Jeremy Smith

13:38 PM, 6th December 2013
About 5 years ago

Reply to the comment left by "Chris Amos" at "06/12/2013 - 13:28":

Chris,
I have had Lloyds bank in Dunstable ring me on 'withheld/unknown' numbers, then ask me for security information, which I've refused to give them.
Then they've left messages on my answer phone for me to ring them on a mobile number !
Eventually I've answered them on a mobile number, they've started asking me questions again and I've told them, "well, how do I verify who YOU are?"

The worst part about all this was that it WAS the bank ringing me on a mobile, they told me they couldn't use the landline, otherwise it would block it up for incoming calls.
I know it was them, because I went into the branch and they showed me the mobile they had been using !!!!
- This opens the gates for fraudsters to do the same.
In Relation to relevance to this article: if you get called by your bank, make sure it's them you are talking to, as Chris has pointed out.

Brian Smart

13:41 PM, 6th December 2013
About 5 years ago

I have 3 years to run on a couple of mine, one of which is my own home. BM wrote to me 2 years ago and asked these questions. The letters are properly set out and intelligently presented. I also know that the CML have asked lenders to be flexible. I gave an initial response and have it on my calendar to write a more detailed proposal next year.

All these lenders know I won't talk to call centres and I have had it marked on my files. There is never a good time to receive an impromptu phone call and have to give out personal information that others nearby can hear. You can't do this sort of thing over the phone and your plumber was correct in deflecting them.

Mark Alexander

13:46 PM, 6th December 2013
About 5 years ago

Reply to the comment left by "Conrad Vink" at "06/12/2013 - 13:23":

Hi Conrad

In the case of my plumber the LTV was around 15% but that isn't the point.

What right does his mortgage lender have to put this pressure on him?

The contract doesn't expire for 5 years, in the meantime I think it's fair for him to feel in a position of quiet enjoyment providing he keeps making his mortgage payments.
.

13:46 PM, 6th December 2013
About 5 years ago

I don't think there is anything wrong with banks contacting customers to ask this question.

The customer may be financially unsophisticated and not realise that their mortgage only has a few years to run and they need to start making provision for the end of the term.

I have had several letters from BTL lenders extolling the virtues of over-payments and suggesting that I could start doing that. I think that is actually quite helpful to give customers some insights into something they may not have thought of.

At the end of the day, its the bank's money and they have a right to know if you are prepared for the end of the term.

However, they should not intimidate people, but offer support and guidance. I guess it boils down to who you get on the phone.

The agent who was mentioned on our Mortgage Express thread has been reprimanded for what they said!

Mark Alexander

13:51 PM, 6th December 2013
About 5 years ago

Very good points made regarding security, you never know who is making these calls.

My standard response is to ask for the callers number and call them back. Before doing so though I enter the telephone number into a Google search to see what comes up. Usually it's the company I was expecting to find but if not I don't call back, I wait for them to contact me again and then follow Annette's process of asking them to communicate in writing.

The reason I do this is so that I can deal with anything important immediately. A recent example is that Platform mortgages had cancelled and reinstated one of my Direct Debits due to being unable to amend their account details at the request of my bank. Their collections team called me because my bank had not paid the new DDM on the basis that it carried the same reference as the one which had been cancelled by Platform. Oh the joy of getting to the bottom of that one! Thankfully I got everything sorted the same day so arrears did not show on my account and all fees associated with the late payment were waived.

Sometimes it pays to deal with these things quickly. If it turns out to be a sales call I send a standard letter of complaint.
.

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