‘Barclays charged me £30,000 to cancel a mortgage I never signed up for’

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dear Katie,

Last year my wife and I wanted to restructure our property, so my mortgage broker applied for an interest rate with our lender at the time, Barclays. In the end we found a better price elsewhere and went for it. So imagine my surprise when Barclays said I had to pay a £30,000 “prepayment penalty”. This is because they claim I initiated the new almost £1m mortgage and then canceled it after just a few days.

I’m absolutely furious that I didn’t do something like this. At no point did I sign a new mortgage contract and I had no direct contact with the bank. I was horrified when I received an offer letter saying I didn’t need to take any further action and the mortgage would start automatically.

This is absolutely not what we asked for. We asked for a price to compare to other offerings on the market so we can make a decision on what’s best for us.

I have made many calls and sent numerous letters and emails to Barclays but they have been unable to provide any documentation showing that I have signed a mortgage offer. So how can it claim that I am liable for this prepayment penalty?

My account has just been debited with a payment of almost £5,000 for this mortgage. This has been going on for well over a year, which is totally ridiculous. Nothing I say seems to make a difference.

— CW, via email

Dear Reader,

Prepayment fees are designed by banks to protect the stream of income they earn from the interest that borrowers pay. Such penalties are designed to discourage borrowers from entering into firm deals and then changing their minds during the term. This is just business.

But here, when you never intended to draw on the mortgage in the first place, an early repayment fee was totally unreasonable.

At first, after signing on the dotted line with another lender, you had no idea this Barclays mortgage was even set up. You hire a broker to handle your mortgage affairs, and he posted that Barclays rate before your old two-year contract expired. It was just meant to be a fallback while he was looking for better deals for you. This is standard practice in the mortgage brokerage world.

After originally booking this Barclays deal for you, your broker found you a lower rate with another lender. You proceeded with this and were given a completion date by which you expected your loan to be transferred. This date should be the same day your previous Barclays mortgage ended, which was a Friday.

Unfortunately, due to administrative delays, the new mortgage did not materialize on time and was only set up on Monday. This meant that the fallback Barclays mortgage was automatic and, as it was a remortgage and not a new mortgage, no signature was required.

Rather than recognizing this situation as an administrative error, Barclays has chosen to treat you as a customer who knowingly exited a firm deal early. To me, this attitude is clearly ridiculous.

Luckily after my involvement the early repayment fee was removed and the £5,000 you had to pay was refunded. Why it took a year and the involvement of this column to make it happen is beyond me.

A Barclays spokesman said: “We are very sorry that Mr and Mrs W have had cause to complain. We can confirm that the prepayment penalty has been removed and we are refunding the monthly repayment received.

“The mortgage rate was changed following an instruction from your independent mortgage broker which we now understand was made in error. We would like to apologize for the distress and inconvenience caused.” ‘Barclays charged me £30,000 to cancel a mortgage I never signed up for’

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