Ask The Experts - Mortgage Rate Reduction

Published:07/10/2011

Question

Our 20 year fixed rate loan for our surgery had to be rearranged by our bank as it noticed the legal security was out of date due to several doctors having retired.

Surprisingly, the bank decided to reduce the interest rate by a large amount without any penalty. The new rate will still be fixed for the remaining six years. Does our PCT need to be notified of this reduction in our monthly payment and will it affect our cost rent reimbursement?

Answer

In 2004 the DoH blocked the loophole whereby GPs were arranging loans as part of a cost rent scheme, getting a cost rent based on the rates then payable and subsequently renegotiating the loan at the lower rate.

The NHS (General Medical Services – Premises Costs)(England) Directions 2004 in part 5, paragraph 40, makes it a requirement that if GPs renegotiate the terms of their loan (whether voluntary or instigated by the lender), they must advise the PCT which will, in turn, recalculate the cost rent/cost of borrowing.

You can download the directions at www.dh.gov.uk