If your mortgage is on a variable rate, make sure the lender has reduced it in line with the Bank of England's quarter-point cut this week, writes Alexander Jolliffe. If you don't, you may become one of the many home-buyers who are overcharged for their mortgages without ever realizing it. Advisers say consumers should be vigilant and check their accounts carefully as surcharges can cost thousands of pounds. MortgagecheK, the home loans auditor, says 43 per cent of mortgages are subject to overcharging with an average surcharge of nearly £3,500. Around half of these mistakes are caused by the lender applying the wrong interest rate when the variable rate changes.
If the account has had several rate changes and "somebody presses the wrong button, you get the standard variable rate" (instead of a cheaper option), says Ian MacQueen-Sims of MortgagecheK, which conducted the survey of more than 5,000 home loans in the last six years. Advisers urge consumers to take care to avoid paying too much. "Check your annual statements with the greatest care," says MacQueen-Sims. Keep all your statements and all the relevant documents, including the mortgage offer, so you can spot discrepancies in the statements.
In addition, write to your bank once a year asking it to confirm in writing that it is still applying the agreed interest rate to your loan - that gives the lender a chance to spot any mistakes. If you do have a problem, complain. Send your letter to the customer relations department and a copy to the chief executive. If you believe the lender is rejecting a legitimate complaint, persist. "The more you complain, the more likely you are to get justice," argues MacQueen-Sims.
If you and your bank cannot agree, you can apply to the Financial Ombudsman Service 0845 0801800). The ombudsman said last week that if there is a shortfall which the consumer is not responsible for, the bank has to make up the difference. So if your lender asked you to pay £150 too little each month, you won't have to make up the difference when the bank realizes its mistake. One problem arises with flexible mortgages which allow borrowers to pay back lump sums, to cut their debt.
One borrower sent a £500 cheque to his bank, only to find that his mortgage was not reduced for three months, when he checked. Mark Harris at mortgage broker Savills Private Finance advises clients with flexible mortgages to write to lenders telling them to apply their cheque to a specific account, quoting the number. Ask the bank to deduct the sum from the capital immediately, and to confirm this in writing. Follow up the letter a week later, and get the name of anyone you speak to at a call center.
Advisers are planning new services to help consumers check their mortgage statements. Checkyourbank, which audits current accounts, intends to launch a service in September that will check borrowers' home loans, and MortgagecheK is planning a similar offering. Another overcharging problem arises when people fall into arrears. The error rate for mortgages where customers fall behind with payments is 75 per cent, because arrears calculations are complex, according to MortgagecheK.
If you expect to fall behind on monthly payments, tell your bank as soon as you can. "The key thing is communication. There is a tendency to bury your head in the sand, but that could spoil your credit status," warns Harris.
If the account has had several rate changes and "somebody presses the wrong button, you get the standard variable rate" (instead of a cheaper option), says Ian MacQueen-Sims of MortgagecheK, which conducted the survey of more than 5,000 home loans in the last six years. Advisers urge consumers to take care to avoid paying too much. "Check your annual statements with the greatest care," says MacQueen-Sims. Keep all your statements and all the relevant documents, including the mortgage offer, so you can spot discrepancies in the statements.
In addition, write to your bank once a year asking it to confirm in writing that it is still applying the agreed interest rate to your loan - that gives the lender a chance to spot any mistakes. If you do have a problem, complain. Send your letter to the customer relations department and a copy to the chief executive. If you believe the lender is rejecting a legitimate complaint, persist. "The more you complain, the more likely you are to get justice," argues MacQueen-Sims.
If you and your bank cannot agree, you can apply to the Financial Ombudsman Service 0845 0801800). The ombudsman said last week that if there is a shortfall which the consumer is not responsible for, the bank has to make up the difference. So if your lender asked you to pay £150 too little each month, you won't have to make up the difference when the bank realizes its mistake. One problem arises with flexible mortgages which allow borrowers to pay back lump sums, to cut their debt.
One borrower sent a £500 cheque to his bank, only to find that his mortgage was not reduced for three months, when he checked. Mark Harris at mortgage broker Savills Private Finance advises clients with flexible mortgages to write to lenders telling them to apply their cheque to a specific account, quoting the number. Ask the bank to deduct the sum from the capital immediately, and to confirm this in writing. Follow up the letter a week later, and get the name of anyone you speak to at a call center.
Advisers are planning new services to help consumers check their mortgage statements. Checkyourbank, which audits current accounts, intends to launch a service in September that will check borrowers' home loans, and MortgagecheK is planning a similar offering. Another overcharging problem arises when people fall into arrears. The error rate for mortgages where customers fall behind with payments is 75 per cent, because arrears calculations are complex, according to MortgagecheK.
If you expect to fall behind on monthly payments, tell your bank as soon as you can. "The key thing is communication. There is a tendency to bury your head in the sand, but that could spoil your credit status," warns Harris.
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