Interest rate reduction - August 2016

On Thursday 4 August 2016, the Bank of England reduced the Base Rate of Interest by 0.25%. This means the Base Rate is currently 0.25%.

As a result, the interest rate that applies to all of our Bank of England Tracker mortgages and loans has decreased by 0.25% in line with the Terms & Conditions of these accounts.

We have also reduced our Standard Variable Rates by 0.25% from 4.79% to 4.54%. For the majority of customers this change took effect from 1 September 2016, although for some accounts the change took effect from 1 October 2016.

We have written to all customers who are affected by this interest rate change. The letter sent confirms both the date when the new interest rate will apply and the specific impact on the monthly payments of affected customers. It is an important document, so, if you have received it, please keep it in a safe place.

The impact on monthly payments will also depend on a number of other factors, such as the type of mortgage you have, the current balance and remaining term.

We have produced some questions and answers below which will hopefully help explain the potential impact of the interest rate change on your mortgage.

If you do not find the information you need, just give us a call.

Customer Questions & Answers

Has my interest rate and monthly payment changed?

If you are a customer with a Bank of England Base Rate Tracker mortgage or loan, your interest rate has decreased by 0.25% in line with the Terms & Conditions of your account. We have also reduced our Standard Variable Rate and Loyalty Rate (for qualifying customers) by 0.25% from 4.79% to 4.54%.

Why has my interest rate and monthly payment changed?

On August 4 2016, the Bank of England decided to reduce the Base Rate from 0.50% to 0.25% so the interest rate and monthly payment have changed for your mortgage. The monthly payment is calculated from the interest rate, outstanding balance and remaining term of your mortgage.

When did my interest rate and monthly payment change?

The letter sent to all customers affected by the interest rate change confirms whether these changes took effect on 1 September  or 1 October.

If the letter we sent to you refers to your payment being re-calculated each January, your monthly payment will not change until January 2017.

Do I need to do anything now?

Our letter confirms both the date when the new interest rate was applied and the specific impact on your monthly payments.

It is important that you make your new monthly payment in full and on time to prevent your account falling into arrears, as this could adversely affect your credit file and could also mean you incur additional fees and charges.

If your payment is made by online transfer, cheque, branch or phone, please make a note of your new monthly payment and pay this amount from the next payment due date after your rate changes (i.e. after the date specified in the letter we sent to you).

If you pay by Standing Order and need to contact your bank or building society to change your monthly payment amount, remember to give up to five working days’ notice for this change to be made.

If you pay by Direct Debit your monthly payment will change automatically. We will collect the new monthly payment amount from the date specified in the letter sent to you, so you do not need to take any further action.

If you currently pay by another method but would prefer the convenience and security of paying by Direct Debit, please see here for more information.

Could my monthly payment increase when the interest rate falls?

There are a number of important factors that can affect your new monthly payment when an interest rate change occurs, so your new monthly payment amount may differ from your own calculations.

In most cases, a lower interest rate will result in a lower monthly payment, however sometimes it can increase.

The increase in payment could occur for a number of reasons, which are in line with the normal operation of your account. For example, differences can arise where you have;

  • incurred any additional fees and charges;
  • taken a payment holiday;
  • not paid ground rent/service charges and we have paid these on your behalf;
  • made reduced monthly payments for any reason;
  • missed any monthly payments for any reason.

If you have any questions about an increased mortgage payment, just give us a call.

The impact of these differences on your monthly payment may be exaggerated if you only have a short outstanding term remaining on your mortgage or loan.

In a small number of cases, there may be other reasons why your monthly payment has increased that we need to investigate. We are currently reviewing impacted accounts and will contact you if necessary after our investigation is complete to update you with our findings and determine what, if any, actions we need to take.

What if my interest is calculated annually?

If the letter we sent to you refers to your payment being re-calculated annually, you do not need to do anything at the moment. When your next annual statement arrives, it will include details of the new monthly payment that you need to make from the following month onwards, for the next 12 months. Please contact us if you would like us to recalculate your monthly payment sooner.

What if I am struggling to afford my monthly payments?

If you are worried about making your monthly mortgage payments, you should call us as soon as you can. We will always do what we can to try and help and consider your personal circumstances along with being fair and considerate at all times.

You can also visit the Personal Support section of our website to find details of organisations offering free support and impartial advice to help you keep your finances on track if you are experiencing (or anticipate) financial problems or issues.

What if I've previously made overpayments?

Every time an overpayment is made to a Mortgage it reduces the outstanding balance but does not alter the term that is remaining. The new monthly payment of your mortgage has been calculated by applying the new interest rate to a lower balance over the existing, remaining mortgage term.

If you are comfortable with the new total monthly payment quoted in your letter then you can continue to overpay by the same amount before the interest rate change. If you wish to increase the amount of your overpayment, please contact us.

What if I'm in the process of making changes to my mortgage?

There are a number of changes you can potentially make to your mortgage that are unaffected by this rate change, such as 'Power of Attorney' and 'Consent to Let'. If you are making such changes, you do not need to take any action as a result of this letter.

If you are redeeming (closing) your account, continue to make monthly payments quoted in the letter until your account with us is fully repaid.  Similarly, if you have recently requested a redemption statement, any figures quoted may now need to be recalculated following the interest rate change.

Also, if you have received a recent Change of Parties or Porting offer, we will provide a revised mortgage illustration.

If you are unsure about anything, please contact us.

What should I do if some or all of my payment is funded by the Department for Work and Pensions (DWP)?

If you claim Income Support, Pension Credit, income-related Employment and Support Allowance or income-based Jobseeker’s Allowance, the DWP will normally pay at least some of the interest on your mortgage, as long as you took the mortgage out to buy your home.

Support for Mortgage Interest (SMI) is paid at a standard rate set by the government, and is not based on the interest rate that you actually have to pay. You remain responsible for paying the difference between any DWP contribution and your total monthly payment and should make any necessary changes to your payment.

For more information about SMI, including the current SMI rate, visit the dedicated pages on the Gov.uk website.

If you are worried about affording your mortgage each month, please call us as soon as possible.