I took out a five year fixed term mortgage with The Mortgage Works in 2018. The mortgage offer was made on 21 August 2018, and said that it was valid for six months, so I assumed the mortgage would start on 1 September.
The mortgage didn’t start however until 28 November 2018. I have another document entitled ‘Your Mortgage And Insurance Payments Arrangements’ which states: ‘The first payment will be collected from your current account by direct debit on 28 November 2018.’
That is what happened. However, TMW have contacted me and told me that the fixed term ends on the 30 September this year as per the offer letter.
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I contested this, but it was adamant the fixed term ends on 30 September and so giving me 58 months fixed rate at 2.09 per cent and not the promised 60 months.
Who is right? I contend the offer finishes on 28 October 2023 – ie 60 months after it began.
Is there any legal precedent which determines when an offer actually begins and ends? Via email.
David Hollingworth replies: The mortgage market is one full of jargon and although there has been plenty of effort put into standardising terminology to try and align wording it is easy to see how there can be confusion.
When taking a mortgage it’s quite common for the formal offer to be valid for up to six months.
This allows borrowers to secure a rate well ahead of the point that they actually want to complete on the mortgage.
Some deals designed for new build homes will give even longer completion deadlines to allow for the fact that the property will often not be completed when the application is made.
That offer validity period means that you can complete on the specified mortgage deal within that timeframe.
The deal itself will also be clearly spelt out in the mortgage offer and that will break down the rate, type of deal and all the fees that will apply.
It’s essentially the full specification of the mortgage that you are signing up to.
That will have therefore laid out the fixed rate and how long the mortgage was fixed for.
There’s often reference made to two and five-year fixed rate mortgages, which are amongst the most popular types of product.
That’s a generic term for the product sectors and are core areas that most lenders will have a range of options available in.
However, that shouldn’t be mistaken for meaning that all deals will be fixed for that specific time.
You pose the question of when the scheme term starts, but it’s all about when the deal actually ends.
Most fixed rates will actually be fixed until a certain date, rather than for a specific number of years from completion.
That means that the benefit period of the deal could be shorter or longer than the two or five years depending on the point at which the mortgage completes.
Lenders will apply different end dates and will periodically alter those end dates, to ensure that they don’t begin to edge too close and fail to offer the benefit period that borrowers would typically expect.
Most fixed rates will actually be fixed until a certain date, rather than for a specific number of years from completion.
In the past lenders would occasionally offer a sharper rate but apply a slightly shorter benefit period.
Something to watch out for when comparing deals.
It’s not clear whether there was a delay in your completion, or if that was by design to tie up with the end of an existing deal, but unfortunately, as those months ticked by, it meant that the remaining fixed period was reducing.
I’d expect that the details in your mortgage offer will indicate that the fix lasted until the end of September, rather than for five years from completion.
Many borrowers, both residential and buy-to-let, will have been looking to secure a deal earlier in recent months due to the fact that rates were climbing so quickly.
Although that will help to grab a better rate, this point around end dates is something to be aware of, as it can impact the length of the benefit of the deal.
If the offer is secured six months in advance then by the time the mortgage completes the remaining fix may have been eroded, particularly on a shorter term deal.
Some lenders do offer rates that are fixed for a full number of years from completion.
That includes Nationwide BS, First Direct and Mpowered mortgages in the owner occupied market plus Buy-to-Let lenders including Precise Mortgages and Paragon amongst others.
It still makes sense to shop around well ahead of time to have a deal in place but the end date is something to keep an eye on and to balance up against the potentially better rate that can be secured when rates have been rising.
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