January seems like a long time ago right now and I have to be totally honest and say that over the last couple of months my year of thrift has taken a bit of a back seat in my life. There are plenty of thrifty things that I now do without even thinking of them, but the thing that has most put me off track is actually the response we’ve had whilst trying to save money on our mortgage.
In the early part of the year we went to huge lengths to cut down our outgoings. We changed gas and electricity supplier, we changed our mobile phone contracts and we also shopped around loads for groceries to save money on the weekly shop. When our fixed rate mortgage deal came to an end we went along to our building society to try to get a new deal from them. At the same time we also looked across the market as a whole to see if anyone else had a better deal.
There were deals to be had out there and it looked quite possible that we’d be able to reduce our monthly mortgage payments by a considerable amount. We therefore approached a building society (one that happens to be owned by the people we already have a mortgage with – although they run the two businesses as separate entities) to see if we qualified for a particular fixed rate offset product. As you’d expect we went through the whole process of telling them about our income and explained about my sparodic income from blogging.
The thing that had changed in the five years since we last got a mortgage though was the new rules relating to affordability. Mortgage lenders are now asking you to complete a questionnaire about your outgoings. We’d done similar for a mortgage broker before, so didn’t think this would present any problems. We entered all the stuff about utility bills, mobile phone bills, monthly food bills, childcare costs and all sorts of other things. Then they pressed a magic button and came back with “computer says no”. Errrr, what?
So basically the new system tells the building society that if they were to give us a new mortgage, with a lower interest rate and lower monthly repayments than what we have now then it would not be affordable. Despite the fact that we currently pay our considerably higher mortgage repayments every month without fail. So, reducing our total monthly outgoings would make it unaffordable. How on earth does that come even close to common sense?
All that work that we’ve done to save money on everything else just seems pointless when told that we can’t reduce our biggest monthly expenditure because a system says no. It goes without saying that we’re both feeling rather mad about this. Angry and frustrated with no idea quite what to do next.
What we have done is talk more and more to the building society in question and thankfully it seems that someone there finally had the common sense to talk to their underwriters who are currently considering our case. We’ve had to provide a crazy amount of information – including a copy of a letter from Little Miss C’s school saying that she’ll definitely be going there next year so we won’t have any pre-school fees to pay any more and it will reduce that line item in the spreadsheet! Apparently it’s our childcare costs that push us into that unaffordable category – yet all we pay for is one day a week at nursery for Master C and one afternoon and two one hour lunch-clubs a week (term time only) for LMC. It’s not as if they’re both in full time childcare – and I dread to think what the response would have been if they were.
The new system just seems incredibly flawed to me. If you’re already paying a monthly repayment without any problems then to deny you moving to a product with a lower monthly repayment on grounds of affordability is crackers.
Needless to say it’s made all my thrifty efforts seem pointless and my motivation has suffered greatly. I know I shouldn’t let it, but some things are easier said than done. So, for the next week or so please keep your fingers crossed for us and hope that the underwriters have some common sense when they consider our case. In the meantime I’d better get back to being ultra thrifty as we might have to keep up these higher repayments for much longer than we planned.
The mortgage rules do seem crazy in your situation. I can see why they were brought in, to make sure people can afford their monthly payments is of course sensible to avoid another crash, but like you say, there needs to be an element of human common sense.
Well done for persevering! Hope you get a positive outcome.
Thanks Liz. x
We had a very similar conversation with our mortgage company. The new system does seem a little bonkers. I can see why people abandon it in the end. I think looking at affordability is a good thing but common sense should surely prevail! Good luck xx
I agree that for new customers, or ones that aren’t keeping up their current repayments, affordability checking is a good thing. But to not take into account what customers are actually currently affording is bonkers.
Urrrrgggghhhh I hadn’t even thought about new rules. We want to move in the bearish future – better look into things as we might not be able to get as much as we hoped x
The changes certainly caught up a bit unawares.
Drop the paid for childcare until after you’ve remortgaged?
Little Miss C’s finishes in two weeks anyway and with Master C’s if we were to do that then he’d lose his place at nursery and go to the back of the waiting list. And he goes there to enable me to work anyway so if we lost that day I’d lose income.
What sort of unencumbered income are they expecting you to have then?!
Gosh that is quite scary. We have a big mortgage and because we took it out when I was working, we would get turned down now for sure. I think the new system is a good one if it regulates people properly and stops them getting in over their heads but to stop people saving money is ridiculous.
blimey Penny that is not good – why should people be penalised for saving money that seems ludricous!x
What a ludicrous system! I hope the underwriters come good for you in the end.
I have everything crossed that the actual people in charge of Mortgages see the benefit of working with rather than against actual people with real common sense. sometimes computer-says-no culture fails the people who are most deserving xxx
We have found this too, we took our mortgage out just before the crash so were paying a big chunk each month. When our fixed rate ended last year we were unable to move to another fixed rate for similar reasons to yourself. Thankfully we defaulted to the standard tracker rate which is cheaper than what we were paying so we at least a little better off each month.
That must be so frustrating. GOod on you for persevering and I hop you get a decent outcome.
So frustrating. I hope they see sense and good that they are thinking about it.
Keep up your thriftiness love it green and its savvy and its great lessons for your kids the rest will come right I am sure