New rules for payments on mortgages in the UK

Rule of additional payments on mortgage loans will not affect proven borrowers Nationwide. Mortgages in the UK

Nationwide has increased the amount borrowers can overpay on their loans, and 10% of the debt per year, but this list includes only new customers, which caused a protest from the already granted mortgage loan. One of them described it as “a kick in the teeth”. The largest in its field organization for issuing loans on real estate the UK has changed the rules of payments on mortgage loans, allowing new customers to pay each year an additional 10% of your loan , moreover, will not be subject to the penalties associated with accelerated payments. This means that these users will be able to pay your loan much faster than they had planned. The new rules apply only to those loans that were issued from 29 may. But those whose contracts were signed earlier, will remain with the limit of overpayment of ₤500 a month.

Rachel Veit 32 years, she is a journalist and together with her husband they received a loan of ₤160,000 for the purchase of apartments in England at Nationwide for five years at a rate of 4.39% per year. She is outraged, than can take advantage of the new rules.

“We took out a loan in July 2011, and therefore, we have three more years. And I am saddened by the fact that we can’t pay our loan earlier. After the conclusion of the loan the couple inherited some money. After some discussion, we decided to pay our credit, however, the rules allow us to repay early only ₤500 a month. And I was very surprised that you can pay extra up to 10% of the debt per year, but unfortunately it is available only to new clients who buy property in the UK, while the old customers are forced to pay as before. It’s like a punch in the jaw, especially considering their slogan is “we’re on your side”

Representatives of the Nationwide confirmed that it is not going to change the rules for existing loans. It was also stated that in taking this decision, they were guided by the advice of brokers, but the change was overall very well received. The opportunity to pay 10% of the debt per year – a significant step for the development of the whole area of lending for the purchase of property in the UK.

Mark Harris, of broker in the SDF commented on this in the following way.

“If you have the opportunity to invest more money in repayment of the loan, whether to do it? Of course, with record low interest rates to give the money saved to repay the loan in the future to save a lot more money – the decision is reasonable. However, in reality the situation is somewhat different. The increase in prices is happening at all, even necessary things become more expensive, which encourages many people to spend this free money on something else. On the other hand, in the short term, while lenders will provide more favorable loan schemes, they will strengthen its position in the markets of England and the United Kingdom. And you, overpaying for loans will become more attractive for creditors that will make it easier to get a new loan.”

Adrian Anderson, of broker in another office, Anderson Harris, also indicates that it is not necessary to invest all free money into overpayments on the mortgage loan.

“Clearly, overpayment – a wise decision, however, we should not forget that borrowers are deprived of a considerable part of the funds that may be needed in unforeseen circumstances. And the money that was already invested in the repayment of the loan, it is extremely difficult to get back. Because it is not necessary to invest in the repayment of the loan, save some for a rainy day. Before you pay, you need to check how many percent of your loan per year, you can pay for, not falling under the effect of the penalties, some lenders are providing 20%, others 10%, and the third even less.”

® Mark Saruhanov. 11.06.2013