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Contract Law and mortgages, when is a fixed mortgage not fixed
I am Weasel
post Mon, 4 Dec 2017 - 19:35
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Hi,

Can somebody advise me of the laws that govern mortgages. I am writing a compliant and want to get my facts straight as I expect a fight from the bank. Here is the background

  • In August I visited Barclays because I was near the end of my then fixed-term with them and wanted to lock-in a fixed rate for the remaining 5 years of the mortgage
  • At a visit to the bank, the mortgage adviser showed me that by switching rates, my monthly payment would be reduced to £1,760 per month - fixed for 5 years (remaining term) with a one-off fee of £899
  • I received a letter from the bank dated August 25 that confirmed the new monthly payments and showing a switch date of 01 Sept
  • I had also asked for my payment date to be moved from 15th to 1st of month and was happy to bring forward my payment date - this happened OK and I paid on 15th Sep and 1st Oct
  • On 28th Oct, I received a letter from the bank stating my payments were to be £1,790 per month i.e. £30 more than on the offer letter
  • I rang to query this and after a long and boring run through the script the call-centre person had to go through to try and pacify me, I was informed that my query would be analysed in detail and I would receive a written response within 4 weeks
  • On 4th December, I received the letter below which is a complete fob off. I am formulating my response, but would be grateful for any guidance about particular points of law. I think that the bank should honour the original offer because in trying to change the payment amount, they are attempting to unilaterally vary a core contract term. It is my contention that a mortgage contract is no different from any other in that it requires consideration, offer and acceptance, all three of which were present so the contract should be formed on the basis of the offer

The extra £30/mo multiplied by 5 years is £1,800 and considering the total interest charged according to the offer letter is £6,400, this represents a 28% increase in the total interest payable

Below is their fob off letter and I can if needed upload the original offer letter of 25th Aug (6 pages to redact). the monthly pay figures above are rounded to the nearest tenner, but the difference is still 30 clams (plus a bit) per month

What are your thoughts guys?


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post Mon, 4 Dec 2017 - 19:35
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Jlc
post Mon, 4 Dec 2017 - 19:42
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The illustration seems to have been given with a certain start date that didn't happen?

The wording on the illustration is important but I suspect it will state it's just that and is not a contract.

So what changed in that month 'delay'?


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I am Weasel
post Mon, 4 Dec 2017 - 19:50
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Here is the offer letter - suitably redacted (I hope)













QUOTE (Jlc @ Mon, 4 Dec 2017 - 19:42) *
The illustration seems to have been given with a certain start date that didn't happen?

The wording on the illustration is important but I suspect it will state it's just that and is not a contract.

So what changed in that month 'delay'?


I have no idea what changed. I made the normal payments that I thought I would. If anything the later start date would mean that I had made another payment and so the outstanding capital would be less, resulting in a lower monthly payment than originally offered. I just can't understadn why teh payment incresed at all

I have uploaded the original offer letter
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southpaw82
post Mon, 4 Dec 2017 - 20:32
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There's very little need to bother with the law etc at this stage. Simply make them log the complaint and keep rejecting their resolution until they sort it out. Eventually they will, and will probably throw in a gesture of goodwill as well.


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Any comments made do not constitute legal advice and should not be relied upon. No lawyer/client relationship should be assumed nor should any duty of care be owed.
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I am Weasel
post Mon, 4 Dec 2017 - 20:39
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Thanks SP. I was going to do exactly that but want to make sure that I was on solid ground first
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southpaw82
post Mon, 4 Dec 2017 - 21:07
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When dealing with banks the law is often the final stage. There's a whole plethora of complaints procedures to go through first. Unless you're asking for a lot of money back it'll go nowhere near the legal team. £1,800 is well within the discretion of a complaints manager and redoing your mortgage is not difficult.


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Any comments made do not constitute legal advice and should not be relied upon. No lawyer/client relationship should be assumed nor should any duty of care be owed.
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andy_foster
post Mon, 4 Dec 2017 - 21:10
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Is there any potential conflict of interest that needs to be declared?


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Andy

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southpaw82
post Mon, 4 Dec 2017 - 21:37
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QUOTE (andy_foster @ Mon, 4 Dec 2017 - 21:10) *
Is there any potential conflict of interest that needs to be declared?

Nope...


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Any comments made do not constitute legal advice and should not be relied upon. No lawyer/client relationship should be assumed nor should any duty of care be owed.
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I am Weasel
post Sat, 3 Feb 2018 - 12:17
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QUOTE (southpaw82 @ Mon, 4 Dec 2017 - 21:07) *
When dealing with banks the law is often the final stage. There's a whole plethora of complaints procedures to go through first. Unless you're asking for a lot of money back it'll go nowhere near the legal team. £1,800 is well within the discretion of a complaints manager and redoing your mortgage is not difficult.


Apparently it is too difficult for Barclays. After a long wait and several phone calls, they refused to budge one inch and my payments remain set at the value that I am disputing. Once I get the letter confirming this and that the complaints process is at an end, I will compose my letter to the Financial Ombudsman

The reasons for believing that the higher payment is correct are
  • The mortgage offer letters they send out are for illustrative purposes only and payment may vary. I call BS on this
  • The offer letter stated that the new payment would start in September whereas it actually started in October. My response is that I wil have paid an extra month at the higher level so that outstanding capital on 1st October woudl be less than in the offer letter. Ergo my payments should be even lower than stated on the offer letter

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southpaw82
post Sat, 3 Feb 2018 - 12:36
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QUOTE (I am Weasel @ Sat, 3 Feb 2018 - 12:17) *
[*]The mortgage offer letters they send out are for illustrative purposes only and payment may vary. I call BS on

That’s pretty special...


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Any comments made do not constitute legal advice and should not be relied upon. No lawyer/client relationship should be assumed nor should any duty of care be owed.
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I am Weasel
post Sat, 3 Feb 2018 - 13:17
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QUOTE (southpaw82 @ Sat, 3 Feb 2018 - 12:36) *
QUOTE (I am Weasel @ Sat, 3 Feb 2018 - 12:17) *
[*]The mortgage offer letters they send out are for illustrative purposes only and payment may vary. I call BS on

That’s pretty special...

excatly - and they put it in writing too - see original post
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The Rookie
post Sun, 4 Feb 2018 - 08:26
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So they are saying you will enter a contract with them having no idea of the actual payments!

They didn’t miss a monthly payment off did they during the switch?

What monthly rate is being applied now?

This post has been edited by The Rookie: Sun, 4 Feb 2018 - 08:27


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I am Weasel
post Sun, 4 Feb 2018 - 09:11
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QUOTE (The Rookie @ Sun, 4 Feb 2018 - 08:26) *
So they are saying you will enter a contract with them having no idea of the actual payments!

That appears to be the logic they are using. If it was a few pennies of even just a couple of quid, I could perhaps let it slide


QUOTE (The Rookie @ Sun, 4 Feb 2018 - 08:26) *
They didn’t miss a monthly payment off did they during the switch?

What monthly rate is being applied now?


They did NOT miss a payment - in fact I brought the payment forward. Previously, the payment was taken mid month, so under the "old" mortgage, the last payment of £1891.24 was taken on 18th September. The first payment under the new scheme was taken on 2nd October

As to the rate being applied - is that relevant? They made an offer and are trying to renege on it


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The Rookie
post Sun, 4 Feb 2018 - 10:47
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The interest rate being applied is relevant, there are different arguments in whether the illustration used an interest rate that they are no longer using or if there is an error in the calculations that mean the monthly payment is different for some other reason, in which case they would need to explain what the error was and why they can’t (or shouldn’t) correct it.


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I am Weasel
post Sun, 4 Feb 2018 - 12:23
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QUOTE (The Rookie @ Sun, 4 Feb 2018 - 10:47) *
The interest rate being applied is relevant, there are different arguments in whether the illustration used an interest rate that they are no longer using or if there is an error in the calculations that mean the monthly payment is different for some other reason, in which case they would need to explain what the error was and why they can’t (or shouldn’t) correct it.


I agree that they should need to fully explain why they feel they can change the monthly payment amount. Their excuses so far have been complete fob-offs as far as I can see the only reasons for an increase are
  • an increase in the interest rate used
  • the outstanding capital amount when the new term started was more than shown on the offer


For the latter, this should not be the case. The payments made on the account and the interest rate used were both fixed so it should be a trivial exercise to calculate the balance outstanding on any given day. Furthermore If the new rate started on October 1st, then there was a payment made on 18th September which would have reduced the outstanding capital to below that shown on the quote. This should have had the effect of lowering the monthly payment needed. This leaves the interest rate used as the only other variable




I accept that if they are using a different interest rate then the calculations will be different but surely this is a core term of the contract and should not be unilaterally varied. If Barclays were (for whatever reason) unable to honour the original offer, they should have written to me to this effect and made a new offer rather than waiting for 27 days after the supposed start of the new contact before informing me of their unilateral decision to increase the monthly payment amount. I am of course further disadvantaged now in not being able to accept a similar offer from other mortgage providers (who in August had very similar terms to those offered by Barclays). The recent rise in base rates has put paid to that
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notmeatloaf
post Sun, 4 Feb 2018 - 12:36
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Bank complaint procedure.

"You've clearly messed up."
"No we haven't."

Repeat a couple of times.

"Yes we have and as a gesture of goodwill have £50 in return for the many £thousands you will be paying us."


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My username is notmeatloaf because I'm not made of meat loaf. I hope that clarifies things.
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I am Weasel
post Sun, 4 Feb 2018 - 12:40
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QUOTE (notmeatloaf @ Sun, 4 Feb 2018 - 12:36) *
Bank complaint procedure.

"You've clearly messed up."
"No we haven't."

Repeat a couple of times.

"Yes we have and as a gesture of goodwill have £50 in return for the many £thousands you will be paying us."


biggrin.gif They actually offer £150 which I politely declined in case in could prejudice my position if I decide to take legal action (which I will unless I get satisfaction from the ombudsman)
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I am Weasel
post Fri, 1 Jun 2018 - 13:51
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To close this one off, I have just received a decision from the Financial Ombudsman. My complaint has not been upheld, however I am actually satisfied with the result. In the case summary, the Ombudsman stated something that made everything clear. Because the rate switch happened a month late, rather than 60 payments, my remaining mortgage end date would remain the same and the mortgage term would be 59 months. Hitherto, nobody had explained this to me although I did find it funny that the "extra" monthly payment I was being asked to make pretty much adds up to a single month's payment.

However the ombudsman did recognise that Barclays had provided me with inaccurate information regarding my mortgae term and monthly payments i.e. it must have known that it would be unable to switch the rates when originally proposed in the offer letter and should have provided the figures for a switch one month later with a reduced mortgage term. For this, and to compensate for my time etc, I am to be compensated to the tune of £500. This seems fair to me
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The Rookie
post Sat, 2 Jun 2018 - 04:10
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Shame Barclays couldn't see fit just to explain why until it got to the FO really!

Does sound reasonable outcome though.


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There is no such thing as a law abiding motorist, just those who have been scammed and those yet to be scammed!

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I am Weasel
post Sat, 2 Jun 2018 - 05:33
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I totally agree. If they had said that my premium increased because they are now taking one less payment then none of this would have happened.
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