Ok, the bank has refunded the difference (and I understand that they made their small print clearer now...). Still wonder how many other people "got taken" by this "policy" without knowing about it. I did ask the FSA whether rounding-up is standard industry practice. They sent me a VERY detailed and nice reply, but did not answer the question and instead refered me to the Banking Code Standards Board. Now, the BCSB also responded promprtly, but doesn't deal with mortgages anymore so they suggested the Financial Ombudsman Service. The Ombudsman deals only with unresolved cases, so I guess no one will look into this "practice"....

Interestingly, the Sunday Times had an article with quite a long list of "hidden mortgage cost" items yesterday. "Rounding-up" LIBOR rates was not mentioned, so either no one else ever checked and knows about it, or mine was a single case...

Louise,
thanks for the fast reply. I have written back to them and asked for a refund. Interestingly, the offer letter said that "at a current LIBOR rate of 2.81% your effective rate with a 1 pt spread will be 3.81%". I.e. it did NOT state that it would be rounded up to 3.8725% so I think I have a pretty good case. Just wondered how many cleints are out there who don't realize what is being done. Will let you know once I have a response.
mjn

Hi mjn

My understanding is that the 'rounding' policy will be specific to each Lender. However, having said that, rounding to the nearest 0.0625 (1/16th) does not seem excessive.

I would be tempted to go back to your original Lender and ask for some written confirmation of the policy which they are stating 'is standard industry practice'. I am sure our visitors (and certainly me) would be really interested in the outcome - so I would be grateful if you could let us know how you get on.

Louise

Dear Louise,
I have an interest only mortgage in US-$ based on 3 months LIBOR plus a fixed spread since 18months from a top end English Bank. When I recently checked the actual LIBOR rates at the BBA website, I discovered that the bank charged my a slightly higher base interest than the LIBOR rates effective on the day the mortgage was issued and the subsequent quarterly renewal dates. When I asked about this I was told that "the policy is to round the LIBOR rate up to the enarest 1/16". Is this standard industry practice? I can't find any reference to it in the pages of small print I received for the mortgage. I wonder how many other customers are unknowingly impacted by this. Thanks for your help!
mjn