Get on your marks for this rare offering
Sunday 23 August 1998
A quick recap for the uninitiated. A shared appreciation mortgage lets you take out a loan (secured on the home you already own) and you then spend or invest the cash.
These loans can be particularly suited to asset-rich, cash-poor older homeowners who may want to release equity in their home. You pay either no interest or a fixed rate of interest, but no capital. The capital part of the loan is repaid when you sell the property. At that point, the lender gets back the loan plus a percentage of any rise in the home's value.
The exact percentage depends on what (if any) interest you have paid and the size of the loan as a percentage of the value of the property.
Unfortunately, no-one is offering that sort of loan at the moment. Barclays first entered the market in May with a tranche of pounds 100m to lend. The money was snapped up by some 3,000 borrowers within six weeks.
Shared appreciation mortgages are "securitised", meaning that the lender has to get funding by selling the product to (institutional) investors who take on the risk. It is conceivable that potential investors, with the last residential property crash on their minds, are nervous about another downturn in the housing market.
"We are now actively seeking further funding," says a spokesman for Barclays. "It's not a case of us pulling out of the market. We are hoping to have further tranches available, but we cannot give an indication of when that will be."
So it's a case of watch this space - and be prepared to move fast if a suitable product reappears on the mortgage market.
A question of debit
I recently took out a subscription to a magazine. It was pounds 21.95 a year or pounds 19.95 to those who pay by direct debit. I signed a direct debit mandate and was annoyed to find that pounds 21.95 had been debited. It was only pounds 2 difference, but I felt they were cheating. People who don't keep photocopies of direct debit authorisations or check their bank statements closely would never have noticed.
I rang my bank, the Co-Operative Bank, and during the course of a long and tortuous conversation I read out repeatedly the statement from the direct debit guarantee on the form: "If an error is made by the organisation or your bank or building society, you are guaranteed a full and immediate refund of the amount paid."
First I was told to sort it out with the magazine, then I was told I could get a refund of the difference. I was also blinded with jargon - indemnity, personal finance referrals, etc. In the end I did persuade a supervisor to honour the guarantee. Is it any wonder that people are still wary of direct debit?
Once a direct debit has been set up, your bank will make any payments requested. It has no way of knowing whether a request for payment under a direct debit is right or wrong. So be extra vigilant when you check direct debit payments on your bank statement.
An organisation using the direct debit scheme must give customers at least two weeks' notice in writing if either the amount or the date of the direct debit is to change. "If the customer does not get that notice, then under the direct debit scheme we are obliged to take up the matter on their behalf," says Dave Smith of the Co-Op Bank.
The direct debit payment in dispute must be fully refunded immediately. "We never give a partial refund."
It seems that staff at the Co-Op's call centre could be unaware of the correct procedure. If so, you must stand your ground.
It may subsequently transpire that the debiting organisation convinces your bank that the direct debit was fully in accordance with instructions and, where relevant, that the two-week written notice has been given. In this case, your bank is entitled to re-debit your account.
If you still insist an error has been made, you would have to pursue a formal complaint, taking it to the courts or banking ombudsman if necessary.
There are times, says Dave Smith, when it is more practical and easier for the customer to get in touch with the organisation rather than the bank. "However, under the direct debit indemnity scheme we will take responsibility for making sure the matter is put right." In other words, if you insist a bank refunds a direct debit, it must do so.
One good reason for contacting the bank is that a complaint against the debiting organisation is registered. If a bank gets a lot of complaints about a particular organisation, it should be alerted to the problem. Your bank can take the matter up with the organisation's own sponsoring bank and, if necessary, that organisation's participation in the scheme will be withdrawn.
There are occasions when a debiting organisation is not simply administratively sloppy but is actually defrauding customers. Where there's a possibility of fraud, there is added reason to contact your bank.
If you do ask for a direct debit payment to be refunded, consider cancelling the direct debit at the same time as a precaution. You may find your bank telling you that while an organisation agrees it has made a mistake on direct debit, nevertheless you still owe it some money. That's an entirely separate matter, outside the system, and nothing to do with your bank.
If you have cancelled the direct debit, it will be up to the organisation to seek payment from you by other means.
Write to the personal finance editor, 'Independent on Sunday', 1 Canada Square, Canary Wharf, London E14 5DL and include a phone number, or fax 0171 293 2096, or e-mail email@example.com. Do not enclose SAEs or any documents you wish to be returned. We cannot give personal replies or guarantee to answer letters. We accept no legal responsibility for advice given.
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