Many mortgage owners have been forced into renegotiating the terms of their mortgage loans as a result of the rise in interest rates during the financial crisis.  Rather than foreclose the banks were happy to negotiate a lower repayment to help these clients stay in their homes.

It also suited the banks as foreclosing could have had a serious impact on the property market and ultimately their mortgage books. According to the National Credit Regulator (NCR)  , about 30 000 homeowners are in debt counseling, and about 197 000 South Africans’ home loans are in arrears by more than 30 days.

As these  private agreements aren’t regulated by the NCR the onus is on the client to ensure that the arrangement is above board and that the lender does not unilaterally alter the terms and conditions of the loan.

Banks typically change you profile when you enter into an arrangement and suddenly you go from being a sub-prime client to a client with a much higher interest rate. Always make sure that in terms of the agreement the banks is permitted to alter you interest rate unilaterally - in many instances they aren’t and can end up overcharging you thousands of Rands on your mortgage.

The number of clients entering these arrangements is quite large , according to  Standard Bank  it enters on average 400 such agreements per month , while  FNB says it has done more than 1 000 of them and Nedbank 10 000. Absa was unable to substantiate with any figures.

Its standard practice for the banks to charge you prime while the arrangement is in force , but once the arrangement period is over they should change you back to the interest rate prior to the debt arrangement. If this doesn’t happen you should check your loan agreement , if they are acting contrary to the terms of your agreement take it up with the bank and get the interest rate changed to the agreed rate. If you don’t get any satisfaction from your bank , you can always refer the matter to the Banking Ombudsman.

Over the period of the mortgage , paying to much interest can result in tens of thousands of Rands of over payment , the onus is always on the client to ensure that you aren’t getting ripped off.