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Old 28.09.2020, 16:49
Join Date: Jan 2020
Location: Devon
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Early repayment of Libor Mortgage...

I had a 3M Libor mortgage, with interest was payable quarterly in arrears.

The interest rate (3M Libor + Margin) was reset on a quarterly basis in advance (i.e. set in the last days of September for the coming Oct-Dec quarter etc.)

So far so good.

I had always assumed that because I was not on a fixed-rate product, the term of my mortgage would not be fixed either…

Work took me back to the UK and I put my property on the market.

The sale took many months to negotiate and it wasn’t possible to anticipate exactly when the sale would go through. There were even doubts right up until to the eleventh hour whether it would, but it eventually it went through in August and I was presented with a rather salty bill from my bank who believed that they were entitled to compensation to the tune of 1,5% pa from mid-August until to 31/12…

I’m scratching my head here as unbeknown to me, it would appear that I was effectively borrowing in rolling 3-month calendar quarter terms and I was obliged to give at least 3 months’ notice for the end of the next calendar quarter if I wanted to get out of it.

i.e. if I knew that my buyer wanted to complete the purchase on 01/10, I could have given notice on 30/06 but if the buyer wanted to complete on 30/09, I would have had to have given notice on 31/03 (i.e. effectively a full 6 months in advance of the sale).

The bank was thus lining itself up to extract at least 1,5% pa for 3-6 months in compensation in all but the least likely of circumstances (i.e. where the completion of a sale transaction could be negotiated on a firm basis at least 3 months ahead AND timed to coincide with the calendar quarter end).

Just wondering if this is just how it is before I consider contacting the Ombudsman for its view?
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