Bank of England Base Rate reduction

On Thursday 4 August 2016, the Bank of England reduced the Base Rate of Interest by 0.25%. This means the Base Rate is currently 0.25%.

As a result, the interest rate that applies to all of our Bank of England Tracker mortgages and loans has decreased by 0.25% in line with the Terms & Conditions of these accounts.

We are also reducing our Standard Variable Rates by 0.25%. For the vast majority of customers this change took effect from 1 September.

We have now written to all customers who are affected by this interest rate change. Our letter confirms both the date when the new interest rate will apply and the specific impact on your monthly payments. The letter we have sent is an important document, so please keep it in a safe place.

The impact of the interest rate change on your monthly payments will depend on a number of factors, such as the type of mortgage you have, the current balance and remaining term.

Please find answers to a number of customer questions below to help explain the potential impact of the interest rate change on your mortgage. A similar set of Q&As has been sent to all customers alongside the rate change letters.

Please read this information before contacting us with a query.

Customer Questions & Answers

Will my interest rate and monthly payment change?

If you are a customer with a Bank of England Base Rate Tracker mortgage or loan, your interest rate has decreased by 0.25% in line with the Terms & Conditions of your account. We have also reduced our Standard Variable Rates by 0.25%.

We have now written to all customers who are affected by this interest rate change. Our letter confirms both the date when the new interest rate will apply and the specific impact on your monthly payments.

Why has my interest rate and monthly payment changed?

Your monthly payment is calculated based on the interest rate, repayment type, outstanding balance and remaining term of your mortgage. Following the Bank of England's recent decision to reduce its Base Rate of interest, your rate of interest has also decreased which will change your monthly payment.

When will my interest rate and monthly payment change?

We have now written to all customers who are affected by this interest rate change. Our letter confirms both the date when the new interest rate will apply and the specific impact on your monthly payments.

For the vast majority of customers this change took effect from 1 September 2016. Some changes took effect from 1 October 2016 depending on your individual terms and conditions.

If the letter we sent to you refers to your payment being re-calculated each January, your monthly payment will not change until January 2017.

Do I need to do anything now?

We have now written to all customers who are affected by this interest rate change. Our letter confirms both the date when the new interest rate will apply and the specific impact on your monthly payments.

If you have been sent a letter, it is important that you make your new monthly payment in full and on time to prevent your account falling into arrears, as this could adversely affect your credit file and could also mean you incur additional fees and charges.

If your payment is made by online transfer, cheque, branch or phone, please make a note of your new monthly payment and pay this amount from the next payment due date after your rate changes (i.e. after the date specified in the letter we sent to you).

If you pay by Standing Order and need to contact your bank or building society to change your monthly payment amount, remember to give up to 4 working days’ notice for this change to be made. If your monthly payment has reduced and you do not change your Standing Order amount, you will start overpaying.

If you pay by Direct Debit your monthly payment will change automatically. We will collect the new monthly payment amount from the date specified in the letter sent to you, so you do not need to take any further action.

If you currently pay by another method but would prefer the convenience and security of paying by Direct Debit, please see here for more information.

Could my monthly payment increase when the interest rate falls?

In most cases, a lower interest rate will result in a lower monthly payment - although this is not always the case.

In some cases, following an interest rate reduction, your monthly payment could increase for a number of reasons, all of which are in line with the normal operation of your account. For example, if you have;

  • incurred any additional fees and charges;
  • taken a payment holiday;
  • not paid ground rent/service charges and we have paid these on your behalf;
  • made reduced monthly payments for any reason;
  • missed any monthly payments for any reason.

The impact of these differences on your monthly payment may be exaggerated if you only have a short outstanding term remaining on your mortgage or loan.

In a small number of cases, there may be other reasons why your monthly payment has increased that we need to investigate. We are currently reviewing impacted accounts and will contact you if necessary after our investigation is complete to update you with our findings and determine what, if any, actions we need to take.

If your account is being reviewed, we will be unable to inform you of the reason for the increase in your monthly payments until we complete our investigations. There is no need for you to contact us and you should continue to make your new monthly mortgage payments as usual.

Why might my new monthly payment be different to what I expected?

There are a number of important factors that can affect your new monthly payment when an interest rate change occurs, so your new monthly payment amount may differ from your own calculations.

Unless you have recently asked us to recalculate your monthly payment, differences can arise for a number of reasons, for example where you have;

  • incurred any additional fees and charges;
  • taken a payment holiday;
  • not paid ground rent/service charges and we have paid these on your behalf;
  • made reduced monthly payments for any reason;
  • missed any monthly payments for any reason.

The impact of these differences on your monthly payment may be exaggerated if you only have a short outstanding term remaining on your mortgage or loan.

What if my interest is calculated annually?

If the letter we sent to you refers to your payment being re-calculated annually, you do not need to do anything at the moment. When your next annual statement arrives, it will include details of the new monthly payment that you need to make from the following month onwards, for the next 12 months. Please contact us if you would like us to recalculate your monthly payment sooner.

Can I fix my interest rate or change to a better deal?

Since nationalisation we have been closed to new mortgage business and are unable to offer any new deals - such as fixed rates - to customers. However, our online 'DealFinder' tool can help you search the market to find and compare mortgages from other lenders.

What if I am struggling to afford my monthly payments?

If you are worried about making your monthly mortgage payments, you should call us immediately.  The sooner you speak to us, the more we can usually do to help. We will always consider your personal circumstances and be fair and considerate at all times.

You can also visit the Personal Support section of our website to find details of organisations offering free support and impartial advice to help you keep your finances on track if you are experiencing (or anticipate) financial problems or issues.

What if I've previously made overpayments?

Every overpayment reduces your outstanding balance but does not alter your remaining term.  Therefore your new monthly payment has been calculated by applying the new interest rate to a lower balance over the existing, remaining mortgage term.

If you are comfortable with the new total monthly payment quoted in your letter then you do not need to contact us and you can simply continue to overpay by the same amount as you were before the interest rate change.  If you wish to increase the amount of your overpayment, please contact us.

Could I start making overpayments?

If your monthly payment has reduced as a result of the change in your interest rate you could consider making overpayments. Overpaying could reduce the amount of interest you pay over the term of your mortgage, saving you money. Even a small overpayment can make a difference to the amount of interest you will pay.

To see an illustration of how you could benefit from making overpayments, please use our Overpayment calculator.

What if I'm in the process of making changes to my mortgage?

There are a number of changes you can potentially make to your mortgage that are unaffected by this rate change, such as 'Power of Attorney' and 'Consent to Let'.  If you are making such changes, you do not need to take any action as a result of this letter.

However, if you are redeeming (closing) your account, you should ensure that you make the monthly payments quoted in the attached letter until your account with us is actually repaid.  Similarly, if you have recently requested a redemption statement, you should bear in mind that any figures quoted may now need to be recalculated following the interest rate change.

Also, if you have received a recent Change of Parties or Porting offer, we will provide a revised mortgage illustration.

If you are unsure about anything, please contact us.

What should I do if some or all of my payment is funded by the Department for Work and Pensions (DWP)?

If you claim Income Support, Pension Credit, income-related Employment and Support Allowance or income-based Jobseeker’s Allowance, the DWP will normally pay at least some of the interest on your mortgage, as long as you took the mortgage out to buy your home.

Support for Mortgage Interest (SMI) is paid at a standard rate set by the government, and is not based on the interest rate that you actually have to pay.  You remain responsible for paying the difference between any DWP contribution and your total monthly payment and should make any necessary changes to your payment.

For more information about SMI, including the current SMI rate, visit the dedicated pages on the Government.uk website.

If you are worried about affording your mortgage each month, please call us as soon as possible.

What support is available for landlord borrowers?

If you have a Limited Company mortgage or a total of five or more buy-to-let accounts with NRAM, Bradford & Bingley or Mortgage Express, our specialist Portfolio Relationship Managers are available to support you. To speak to a member of the team please call us on 0330 159 1928* (Mon-Fri 9am-5pm) or visit our Portfolio Landlord section for more information.