Questions of Cash: The Independent

Posted on October 1, 2011 · Posted in The Independent

Q. My wife and I are members of the AA and have been for many years. Part of our cover relates to driving for business purposes and part for private use. When I renewed my policy, I asked if the AA to send us a receipt for our business accounts, along with the new membership cards. I was told the AA would send this, but only on payment of a £15 fee! What made it worse was that the AA persuaded my wife on the phone to take on additional cover. Doesn’t the AA have an obligation to provide free receipts? RH, Bucknell.

A A spokesman for the AA says: “There is no VAT on AA membership, so receipts aren’t issued as standard. If someone requests one, it has to be processed manually, so we apply an administration charge, as with other ad-hoc requests – these charges are laid out in our terms and conditions.” However, given your long standing membership, the AA is sending you a receipt free of charge. You are not content with this response, as the AA is not willing to change its policy of charging for receipts other than where charges are waived as a goodwill gesture.

Q. I have a fixed interest rate mortgage with Halifax. The present interest rate is 5.99 per cent – considerably higher than the standard variable rate of 3.5 per cent. It is a three year loan, which expires in August next year. I can get out of it by paying a penalty, which is what would happen if I were to sell the house now. When I was in a Halifax branch recently, I was told I could also come out of it by breaking the terms of the contract, for example by paying-off some of the mortgage loan in a lump sum, provided that this was greater than a certain percentage of the loan. But if I were to break another condition of the loan – for example, missing a monthly instalment and deliberately going into arrears – would the interest rate automatically revert to the standard rate, with no further penalties? MD, Wrexham.

A. Ray Boulger of John Charcol mortgage brokers says: “This won’t work because although mortgage contracts often say that if the borrower defaults the lender can revert the mortgage to its SVR, this will be at the lender’s option and Halifax clearly wouldn’t exercise its option to reduce the rate from 5.99 per cent to 3.5 per cent! I suspect the reader misunderstood what he was told in the bank branch, maybe because it wasn’t explained clearly. As with most lenders, Halifax allows overpayments of up to 10 per cent per annum without incurring an early repayment charge (ERC). Any overpayments in excess of 10 per cent per annum would incur the relevant ERC. Assuming the reader hasn’t made any overpayments in the last year, he could pay back anything up to 10 per cent of his mortgage now without incurring an ERC. If his mortgage is on an interest only basis he could also ask Halifax to convert it to a repayment mortgage, which would mean each month he is paying back some of the capital, in addition to the 10 per cent ERC free facility. If the mortgage is already on a repayment basis but he could afford to increase his payments beyond the 10 per cent he could ask Halifax to shorten the repayment term, which would increase the amount of capital repaid each month. If he does this, or switches from interest only to repayment, Halifax would normally charge him an administration fee. Halifax is very keen to get borrowers off interest only mortgages, so if he is on interest only he could try offering to switch to repayment if it waives its normal fee! The reader should only consider switching from interest only to repayment, or shortening the term if already on repayment, if he is absolutely confident he can afford the higher payments, even when interest rates increase, although of course he may be able to remortgage onto a different basis after his fixed rate ends next year. He should assume that if he switches from interest only to repayment, or shortens the term, it will be a one way trip as there is no guarantee Halifax would allow him to switch back if the higher payments become a problem for him in the future. Deliberately missing a mortgage payment would be a stupid thing to do, because it would be recorded on his credit file and would probably result in him either being denied credit or only offered it at a higher than normal rate.”

Q. I am unhappy that when I gave my details to a price comparison website to buy an insurance policy, this was followed up by both a phone call and a letter. This puts a potential purchaser under pressure. AB, Nottingham.

A The phone call you received was from an insurance broker, who was providing more detail on the limitations to the cover available, which enabled you to decide not to proceed with the policy purchase. The letter you received was from Churchill, and was unconnected with your online enquiry. Churchill, which is part of RBS, says it does not have a commercial relationship with the price comparison website you used.

Q. A few weeks ago you referred to three specialist health insurers who provide cover for people with impaired health histories.  Could you provide me with web addresses of these insurers. JS, by email.

A We quoted three specialist travel insurers, whose names were provided by the Association of British Insurers.  The three are AllClearPlus, whose web address is www.allcleartravel.co.uk (0845 250 5200); Free Spirit, www.free-spirit.com (0845 230 5000); and It’s So Easy Travel Insurance, www.itssoeasytravelinsurance.com (0845 222 4205). A more comprehensive list of insurance brokers who offer travel policies for people with impaired health histories can be obtained through the website of the British Insurance Brokers’ Association: www.biba.org.uk.