Dec 26 2008
why you should pay off your mortgage as fast as possible
The UK newspapers have been full of stories about a couple who had a mortgage with Nat West bank, and who have received a notice insisting that their entire £226,000 be paid back within 30 days, despite the fact that they have never missed a payment. The couple have another loan on the property, but this was disclosed to NatWest when they took out their mortgage with them. The real reason for the withdrawal of the mortgage seems to be that their mortgage deal is very good, being a tracker mortgage charging just 0.4% above the Bank of England base rate, which is 2%. But then NatWest freely sold them the mortgage at this very good rate, and they should really honour the deal (especially as they charged them an arrangement fee of £1000 for the deal).
Apparently, under English law, practically all mortgages issued have a clause saying that the lender can demand repayment at any time. Banks such as the NatWest have lost a lot of money investing in scams such as the Madoff hedge funds and worthless US sub-prime paper, and are now trying to claw back money from the little man.
Be aware that your bank may do the same to you, especially if they have somehow identified you as a “risky” customer - and it might be down to something as simple as being employed in an industry that is currently in the doldrums.
How to protect yourself from this happening? Well, in the past you could have just re-mortgaged with someone else, but no one is lending at the moment. Check your mortgage clauses to see if they allow you to make overpayments, and start overpaying the mortgage. It reduces your risk, and the bank concerned might want to keep you on if they see the loan being reduced in this way.
It’s obviously hard to overpay your mortgage, but see the list of articles in the sidebar for ideas as to how to reduce expenditure and how to raise extra cash to pay off debt.
