Extended Mortgage term and Buildings Insurance Premiums.

[Guest]

A bit of explanation is called for here. Normally any short fall (arrears) at 31/12 is capitalised (ie forms part of the balance carried forward to next year and on which the interest is calculated. So there is no arrears carried forward at 01/01. Similarly, if overpayments had been made, they would have reduced the balance outstanding and so interest would be calculated on that lower amount.

I am guessing here, that in this instance you had been advised in December '91 that to keep the account up to date a payment of £127.07 was required. Unfortunately, it looks as though it was paid AFTER the interest calculation for the next year had been posted. Therefore they had, unusually, to bring forward a credit balance to '92. The exact circumstances may not be as I am guessing, but the principle remains the same.

EDIT: Principle remains the same!

Still Waving


Thanks for this, you've come up trumps for me again with your explanations of stuff. I think i have got this now. I doubt i will get the 89/90 statements but might not need them to prove anything.

At the start of the 1991 statement i can deduce that my closing balance on December 1990 was £13,324.50 and i can see like you say they have forwarded my credit balance so the true position at the end of 1991 is a balance of £13,401.87 . So my payment of £127.07 not making it on time plus the unpaid ins.premium of £51.93 (a total of £179) has increased my balance by £77.37 .

Now you have explained to me previously how only a small amount of the capital is paid off initially. And the higher the interest rate then the less capital is paid off. If my assumption is correct and the closing balance @ Dec 1990 was infact £13,324.50 then its not to far away from where you would expect it to be. For most of 1990 the interest rates where about 15%, i'll seek clarification of rates later today with them. If thats the case then it would show that my account during 88/90 was not infact short, contrary to their assumption in 1997 letter. I believe that it would also show contrary to their assumption that i did not increase payments, that it would show i paid in the branch at the requested amount.

So , why am i interested in their initial calculation ? I believe it was wrong, and i'm sure when i get the rates i'll find that the payments for 1991 are wrong, i believe they have been over charging. My late payment at the end of 1991 cost me dearly i can see, and also whatever went on in 1992 didn't help matters. I must have been like Mr.Magoo bumbling around thinking i'm paying the right amounts and leaving a wreck of a mortgage account behind me ! :-) I'll go get them rates..................

[Guest]

Ok, just come off the phone to the SAR team. The 89/90 statements are not available, so that the end of them. Team was suprised i did not have the interest rates pre 1994, so they're going to get them sent out to me.

[Guest]

Let me explain why i think its very important. Their initial calc:
£13,375.69, @ 25 years @12.75% they get to £118.69 , i get the calc to £112.81 so if i'm correct they are overcharging by £5.88. Some £70 over the year. If they had to refund that over the course of the years 1989 to 1992 it would get very complicated for them, hence the transfer to a new system and extend everyones mortgage and not tell them. No one would know.

Here is an initial offer from 1988, it never completed at the time. But you can use their figures again and see the same mistake:

[Guest]

Now when i queried my term extension in 1997, they jumped straight to what they knew the problem was........... interest rates. And they tried to baffle me with science. Had they of bothered to look at my account properly they could of said allsorts, missed payments etc... but they never.

[Roger]

Now when i queried my term extension in 1997, they jumped straight to what they knew the problem was........... interest rates. And they tried to baffle me with science. Had they of bothered to look at my account properly they could of said allsorts, missed payments etc... but they never.

My instinct is Computer System and change over!
Before the account would have been manually calculated and audit checked by a second party. The benefit of the manual system is knowledge of the running of Accounts.
But a Computer System is a Blind animal works by assumptions and sometimes by presumptions. So on a specific cut of date calc interest for the year!

Now this could indeed create a shortfall , by calculating payments over 11 months rather than 12 (late payment) and as a result increasing the outstanding Loan.
This is perfectly feasible.

I am not convinced that the Insurance is an additional payment!! On the contrary it is more likely to have been included in their calculation of the monthly payment.
That it is and was their AN insurance of the outstanding Debt!

JUST to make this very clear ! Under what they have told you THERE WOULD HAVE TO HAVE BEEN AN INITIAL INSURANCE PREMIUM WHEN THE MONIES WERE RELEASED!! This would have shown in the first year of the Account. Subsequent year Premiums cover subsequent NOT prior YEARS!

It simply enough because the Insurance Premium was Either against the Property OR against the outstanding DEBT!
Ask them the sums assured for!!! and on what basis!!
Mortgage protection! I say this because I don't believe it should have been charged to YOU that it was actually a hidden cost within their package! For their benefit to cover their business risks.

You should ask for this and especially the Amount Insured!!

If this initial Premium was shown on that first payment how come you have been dumped with an annual cost added to the outstanding Loan every year!
Over 30 plus years a £50 annual premium (£1500) but when added yearly to the oustanding Loan AND paying compound interest on this would create a not inconsiderable increase in the Loan!

[Still Waving]

So many points to answer, and so many comments to make about other items I've been looking at. I don't have time just now, so I'll answer just a couple.

I see what you are saying now about the initial repayment calculation, but I don't agree with your figures. Taking the original loan amount using 9.57% (rounded up) as the 12.75% MIRAS-deducted rate, I get 117.51, which is pretty close to what they quote. The online calculators are useful tools, but are not what the Societies use, so there will be a slight variation. According to the calculator, that repayment would reduce the capital balance by approx £11 per month.

However, your point is that the repayment they quoted you is at the old rate (which is what they said a few years later), but someone in March '89 seemed to think it was the correct debit for Feb and March. Unfortunately, due to the 'lost' statements you cannot prove what did or did not happen subsequently in that year and the following.

At 13.5% (discounted to 10.13%) I make the repayments to be £122.77 (est). So if they HAD corrected the rate during '89 (possibly at the end and backdating) this could have led to a £60-£70 deficit (rather than an approx £120 balance reduction) if you had, as they allege, continued paying at 118.69.

Also, with the rate quoted in that '88 letter I make the MIRAS discounted (8.63%) repayment to be £108.88 , not quite so close to theirs this time, but still in the ballpark. You didn't say what you made it, but I don't think we need concern ourselves on this particular one.

[Still Waving]

I would agree that we here could use some clarity regarding insurance. If it is/was property cover, it would be expected that the premiums rise over time to reflect increased re-building costs. If mortgage protection it should be reducing over time as the risk decreases. The premiums were higher in '93 and '94 than in '89.

[Guest]

Thanks Roger. There is a bigger picture here rather than my account specifically. While i have been concentrating on the various single activities on the account looking for this or that then i'd missed the bigger picture. I now know that it was not down to me alone, even with the way my account was, it would not of itself been sufficient to add ten years to a term. Thats the first alarm bell. The second alarm bell is that they said nothing about it and it did not show on any early statements. Thats the second alarm bell. The Insurance premiums, although its true they have caused a debit, they are no where near enough to add tens years to an account. The Insurance Premiums are a complete Red Herring.
Their own quotations give the game away as regards what they have done by miscalculating the interest rates from the outset. Its telling that the 89/90 statements have been disposed of. If that really is their Data retention policy, then why have i been provided with letters from 1988 ? There is another alarm bell. The 91/92 statements are chopped, no interest rates on them. Another alarm bell.
I'm not savvy enough yet to work out in practice what it means for them, but i can deduce that when they have quoted me £118.69 @ 12.75%, then that figure is really what the payment is at 13.5%. I can't actually work out if this mistake caused them a loss or a profit. But what i do know is that it would of cost an absolute fortune to put the error right and i'll guarantee i'm not the only one. But for me, its shows that what i have been told is incorrect.

[Guest]

So many points to answer, and so many comments to make about other items I've been looking at. I don't have time just now, so I'll answer just a couple.

I see what you are saying now about the initial repayment calculation, but I don't agree with your figures. Taking the original loan amount using 9.57% (rounded up) as the 12.75% MIRAS-deducted rate, I get 117.51, which is pretty close to what they quote. The online calculators are useful tools, but are not what the Societies use, so there will be a slight variation. According to the calculator, that repayment would reduce the capital balance by approx £11 per month.

However, your point is that the repayment they quoted you is at the old rate (which is what they said a few years later), but someone in March '89 seemed to think it was the correct debit for Feb and March. Unfortunately, due to the 'lost' statements you cannot prove what did or did not happen subsequently in that year and the following.

At 13.5% (discounted to 10.13%) I make the repayments to be £122.77 (est). So if they HAD corrected the rate during '89 (possibly at the end and backdating) this could have led to a £60-£70 deficit (rather than an approx £120 balance reduction) if you had, as they allege, continued paying at 118.69.

Also, with the rate quoted in that '88 letter I make the MIRAS discounted (8.63%) repayment to be £108.88 , not quite so close to theirs this time, but still in the ballpark. You didn't say what you made it, but I don't think we need concern ourselves on this particular one.

MIRAS was a straightforward 25% rebate of your interest payment. You can see this on any of the statements 91/92/93 . And it was applied at source, i.e when you paid. £13375.69 @25 years @12.75% gives me a monthly full payment of £148.34. Interest only would be £142.12 . 25% off £142.12 gives us £106.59 . Thats why endowment mortgages where popular remember ? Now add £106.59 to the difference between full payment and interest only (£6.22)........................ 106.59+6.22 = £112.81 . That should be the correct payment for £13375.69 @ 12.75% (i.e the full payment with a 25% reduction of the interest portion)
Hopefully if i'm right ? !!!

[Guest]

I would agree that we here could use some clarity regarding insurance. If it is/was property cover, it would be expected that the premiums rise over time to reflect increased re-building costs. If mortgage protection it should be reducing over time as the risk decreases. The premiums were higher in '93 and '94 than in '89.

It was straightforward "bricks and Mortar" insurance. You'll note they say the premium of £80.30 in the 1989 letter. By 1993 it had gone up to £134.51 . The odd figures from 89/90/91/92 tell me that i must of paid part when i went into the branch to pay. And like they said in their initial correspondance, if it was not paid after so many days in full they would deduct it, and thats what they have done. Do you think there may be some credence that them premiums could lead to such a term extension ?

[Guest]

MIRAS did change to 20% but that was 1st April 1994 .

[Still Waving]

MIRAS was a straightforward 25% rebate of your interest payment. You can see this on any of the statements 91/92/93 . And it was applied at source, i.e when you paid. £13375.69 @25 years @12.75% gives me a monthly full payment of £148.34. Interest only would be £142.12 . 25% off £142.12 gives us £106.59 . Thats why endowment mortgages where popular remember ? Now add £106.59 to the difference between full payment and interest only (£6.22)........................ 106.59+6.22 = £112.81 . That should be the correct payment for £13375.69 @ 12.75% (i.e the full payment with a 25% reduction of the interest portion)
Hopefully if i'm right ? !!!

Clearly one of us is approaching the calculation from the wrong direction. So, I've taken your method and applied it to 13.5%. Full payment 155.91. Interest 150.48. 25% off = 112.86. Add principal element 5.43 = 118.29.

So - either they were correctly charging you at the new interest rate, or they were incorrectly charging you at the old rate, or they were correctly charging you at the old rate but someone thought in March/April that 118.69 was correct at the new rate. The waters get muddier.

[Guest]

Clearly one of us is approaching the calculation from the wrong direction. So, I've taken your method and applied it to 13.5%. Full payment 155.91. Interest 150.48. 25% off = 112.86. Add principal element 5.43 = 118.29.

So - either they were correctly charging you at the new interest rate, or they were incorrectly charging you at the old rate, or they were correctly charging you at the old rate but someone thought in March/April that 118.69 was correct at the new rate. The waters get muddier.

You've got it. Thats spot on. If you use the same calculation on the 1988 quote, you'll see they are out again even with that. That also makes sense why no one has told me how the calculation was worked out (i.e they know its wrong). It makes sense as to why i have no interest figures, other than what i have been able to asses from their various letters and quotes. If i am correct then i'd say thats pretty massive ?

[Guest]

Clearly one of us is approaching the calculation from the wrong direction. So, I've taken your method and applied it to 13.5%. Full payment 155.91. Interest 150.48. 25% off = 112.86. Add principal element 5.43 = 118.29.

So - either they were correctly charging you at the new interest rate, or they were incorrectly charging you at the old rate, or they were correctly charging you at the old rate but someone thought in March/April that 118.69 was correct at the new rate. The waters get muddier.

You can also test out my theory by forgetting MIRAS, just go with the % and the quoted rate and look at the Monthly Capital & Interest Payment Breakdown, i believe it will show i am correct ?

[Guest]

Clearly one of us is approaching the calculation from the wrong direction. .

Like i said earlier, your brain works very different from mine. And if it wasn't for you i wouldn't have got this far. Cheers.