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Last year my wife and I were looking to remortgage our property, so my mortgage broker applied for a rate from our then lender, Barclays. In the end we found a better rate elsewhere and decided to go with that. So imagine my surprise when Barclays said I had to pay an “early repayment penalty” of £30,000. This is because it claims I initiated the new mortgage, which was for nearly £1m, and then cancelled it after just a few days.
I am absolutely livid, as I did no such thing. At no point did I sign a new mortgage contract and I had no direct dealings with the bank whatsoever. I was horrified to receive an offer letter stating that I needed to take no further action and that the mortgage would automatically start.
This is absolutely not what we asked for. We asked for a rate that we could compare with other deals on the market so we could make a decision about what was best for us.
I have made many calls and sent numerous letters and emails to Barclays, yet it has been unable to provide any documentation to show that I signed a mortgage offer. So how can it possibly maintain that I am liable for this early repayment charge?
A payment for nearly £5,000 has just been charged to my account for this mortgage. This has been going on for more than a year, which is totally ridiculous. Nothing I say seems to make any difference.
– CW, via email
Early repayment charges are designed by banks to protect the income stream they earn from the interest that borrowers pay. Such penalties are supposed to discourage borrowers from signing up for fixed deals and then changing their minds part-way through the term. This is just business.
But clearly here, where you never intended the mortgage to go ahead in the first place, an early repayment charge was completely inappropriate.
For a start, having signed on the dotted line with another lender, you had no idea this Barclays mortgage was even being set up. You employ a broker to handle your mortgage affairs and he had booked this Barclays rate before your old two-year deal expired. It was only supposed to be a fallback while he searched for better deals for you. This is standard practice in the world of mortgage brokerage.
After initially booking this Barclays deal for you, your broker found you a lower rate with another lender. You went ahead with this and were given a completion date on which you were expecting your loan to move across. This date was supposed to be the same day your previous Barclays mortgage ended, which was a Friday.
Unfortunately, because of administration delays the new mortgage didn’t go ahead on time and was not set up until the Monday. This meant the fallback Barclays mortgage automatically went ahead and, because it was a remortgage rather than a new one, it did not require a signature.
Instead of recognising this situation for what it was, which was an administrative bungle, Barclays decided to treat you as a customer who had knowingly walked out of a fixed deal early. To me, this attitude is quite clearly ridiculous.
Happily, following my involvement the early repayment charge has been removed and the £5,000 you were forced to pay has been refunded. Why it has taken a year, and the involvement of this column, for this to happen is beyond me.
A Barclays spokesman said: “We are very sorry that Mr and Mrs W have had cause to complain. We can confirm that the early repayment charge has been removed and that we are returning the monthly repayment that we received.
“The mortgage rate was switched following an instruction from their independent mortgage broker, which we now understand was made in error. We would like to apologise for the distress and inconvenience caused.”