All Topics / Legal & Accounting / Interest Rate Error

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  • Profile photo of labrooylabrooy
    Member
    @labrooy
    Join Date: 2006
    Post Count: 1

    I recently refinanced my loan and was offered a discount of 0.9% off the standard variable rate (business loan with residential property as security). I signed the Letter of Offer document and returned it to the bank.

    Subsequently, my business banker informed me that an error had been made and the standard variable rate applied. He offered me the choice of taking up one of the fixed rates or accepting the standard variable rate. I told him to leave it as a variable rate.

    I then lodged a dispute with the Financial Ombudsman Service (FOS) along with the Dispute Resolution area of the bank. The bank has called me and offered 0.35% discount, I have made no commitment. My Accountant and the FOS are both of the opinion that the Letter of Offer is a binding contract and the bank are obliged to honour the discounted rate.

    My stance is that the offered and accepted rate is legally binding. My concern is that I will have to go through legal negotiations to reach this conclusion and I am not entirely sure how to approach the matter. My other concern is that even if I do win, the bank could simply withdraw funding.

    Is anyone able to offer any advice, similar experiences or wisdom regarding this matter?

    Links to similar situations appreciated, my search did not find anything.

    Thanks

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    That would be a shock to the system.

    Was it an error? Or did you negotiate a 0.9% discount and do you have evidence of this?

    The contract would allow the bank to vary the interest but the wording is probably such that it is 0.90% off the variable rate so they would have little room to move. Sounds like a binding contract. I am sure if it was the other way around – where you agreed to pay an extra 0.90% then they would be acting differently.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of Jacqui MiddletonJacqui Middleton
    Participant
    @jacm
    Join Date: 2009
    Post Count: 2,539

    0.9% on a $500k loan saves you in the order of $4500 per year. PER YEAR.  That's quite a saving.  I'd be keen to get my way. 

    Jacqui Middleton | Middleton Buyers Advocates
    http://www.middletonbuyersadvocates.com.au
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    VIC Buyers' Agents for investors, home buyers & SMSFs.

    Profile photo of Jacqui MiddletonJacqui Middleton
    Participant
    @jacm
    Join Date: 2009
    Post Count: 2,539

    We'd all be extremely interested to hear how this pans out… would you keep us posted on developments?

    Jacqui Middleton | Middleton Buyers Advocates
    http://www.middletonbuyersadvocates.com.au
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    VIC Buyers' Agents for investors, home buyers & SMSFs.

    Profile photo of thecrestthecrest
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    @thecrest
    Join Date: 2004
    Post Count: 992

    If you ask the bank if it’s a binding agreement, what do they say ?
    possibly one of those situations where you could win a battle and lose the war.
    Banks have so much discretionary power, you could expect them to use some later.
    Cheers
    thecrest

    thecrest | Tony Neale - Statewide Motel Brokers
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    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    I agree with the previous comments made that i hate to say i think there is little room for the lender reversing their decision but would be very interested to see how this pans out.

    Whilst you have already lodged the complaint with the Banking Ombusman you might also wish to see what the Banks publicity department have to say. Tell them the local paper wanted to know who to contact to run a story on Big banks squeezing mortgage battlers. Always works wonders.

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

    Profile photo of Jacqui MiddletonJacqui Middleton
    Participant
    @jacm
    Join Date: 2009
    Post Count: 2,539

    Richard wait till you hear what St George did this week… you will love it

    Jacqui Middleton | Middleton Buyers Advocates
    http://www.middletonbuyersadvocates.com.au
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    VIC Buyers' Agents for investors, home buyers & SMSFs.

    Profile photo of thecrestthecrest
    Participant
    @thecrest
    Join Date: 2004
    Post Count: 992

    Hi JacM.
    Put it right here so we can all see what St George did pls.
    Cheers
    thecrest

    thecrest | Tony Neale - Statewide Motel Brokers
    http://www.statewidemotelbrokers.com.au
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    selling motels in NSW

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