Pepper tracker mortgage change

[Heavyweight]

Hi,i have a tracker mortgage managed by Pepper tracked to euribor rate. Took covid holiday for 6 months after which i resumed payments.
Have received letter from them stating that from now on my monthly payment will be a fixed ammount up to the end of term at current interest rate with an adjustment to be made at the end of term to take into account any change in the euribor rate for the remaining term.
With the liklihood that rates will rise will this lead to a sizeable liability at the end of my term?
Are Pepper pulling a sneaky one and should i insist to continue as i have since the start of my mortgage as i doubt this is being done for my benefit?
Has anyone any advice here or are in similiar position.

 

[Gordon Gekko]

It sounds like extra flexibility for you.

You could choose to pay more as you go along (or not).

 

[Brendan Burgess]

That seems a really odd letter. Are you sure that you have understood it correctly?

Let's say that you have ten years left on your mortgage and your repayment is €1,000 per month.
With a normal mortgage, if the ECB rate rises from 0% to 2%, your repayments would rise.
After ten years, you will owe nothing.

What they seem to be saying is that you will continue to pay €1,000 per month, irrespective of what happens ECB rates.
Then after ten years, you will still owe, say, €5,000 - so presumably your term will be extended by 5 months.

I can't see how they can make the adjustment at the end of term.
Their mortgage accounting system will increase the interest charged when ECB rates rise, so you will see your balance.

As Gordon says, they have effectively extended your tracker mortgage. Assuming this is a cheap tracker, then this is great for you.

As it's a variable rate mortgage, you are free to increase your repayments at any time without penalty.

So when ECB rates do rise, contact Pepper and tell them that you want to repay the mortgage by the original deadline and ask them what the repayment should be to achieve this.

Brendan

 

[skrooge]

What does an "adjustment" mean. If the rate used to amortise your loan rises but your repayments don't then something else had to give. Either the term adjusts or they come looking for the (potentially sizable) outstanding balance on the last day?

It reads as if they plan to warehouse part of your mortgage (the amount to be decided with the movement in interest rates). The question arises as to what interest rate that warehouse attracts. The higher the rate the largest the cost to you.