367% interest

innovate

:eek: :eek: :eek:

Just read this - it's plain disgusting that banks can get away with such schemes.

zincoxide

Just because they can - daylight robbery.

They are all the new graverobbers, I'm sure there will be many people going to the grave in debt even though they have repaid their original borrowing 10x over.

YorkshireBoy

Whenever I hear of stories like this I'm left wondering 'where are the children/other members of the family'?

I have elderly parents and I'm constantly 'keeping an eye out' for things like this, casually (in a non-intrusive way) quizzing them about their finances, door-to-door utility switching salesmen, best rate savings accounts, checking they are 'OK for money', etc.

I know there are vulnerable people in our society, but we all have family & friends - don't we?

---lee---

YorkshireBoy wrote:

Whenever I hear of stories like this I'm left wondering 'where are the children/other members of the family'?

I have elderly parents and I'm constantly 'keeping an eye out' for things like this, casually (in a non-intrusive way) quizzing them about their finances, door-to-door utility switching salesmen, best rate savings accounts, checking they are 'OK for money', etc.

I know there are vulnerable people in our society, but we all have family & friends - don't we?

Good point. We recently managed to talk my mother-in-law and father-in-law out of a ridiculous ‘equity release’ scheme for their mortgage free home. It turned out that they only needed a short-term loan until some investments matured.

Of course, some people are very independent and prefer to make their own decisions. Also, some of the ‘older’ generation can be to embarrassed to admit that they are in need of financial assistance and keep things quite.

newfoundglory

I wouldn't usually side with banks, but I dont think all the blame can be on the bank in this case. Essentially, its nothing short of a gamble. It is GAMBLING. No one could have predicted house prices would rise as much as they have. Just as buying shares in a company is nothing short of gambling in some ways. And we all know you should never gamble more than you can afford to lose.

You have no idea whether the value of shares are going to go up or down. You have no idea whether the value of property is going to go up or down. Take endowment mortgages for example, which are not going to reach their targets. That was yet another "gamble". Terrorist attacks in america which caused the stock markets to fall.

Look at it from the other side. If the housing market had crashed, or house prices fell, that couple would have borrowed £45,000 interest-free for 8 years - and at average rate of 7 or 8pc probably would have saved themselves £35,000 or more in interest. If that had happened, you wouldn't be reading that article. Would the bank complain and try and recover some money? Of course not. It was just the gamble didnt pay off. Nor did it benefit anyone who took out one of these products.

In many ways, its a silly thing to do. When borrowing money, you should at least have SOME idea of how much you will need to repay at the end of it. Considering the worst case outcomes.

Asset rich, yet cash poor. The one big problem with the older generation.

nelly_2

All mortgages are like this really , its no shock at all.


Try working out any mortgage, by multiplying your monthly payment by 12 then by 25 plus your deposit

A friend of mine worked out his and he is paying back over 3 times what he borowed.

You can wrap it up in a package of (5% APR) or whatever, but if you pay back 3 times what you borrow then thats over 300% in anyone's book.

Amba_Gambla

If I was to buy a house tomorrow priced at £300k (I wish), and the bottom fell out of the market next week, I might be left with a 300k mortgage and a 100k property.

It's sad, and I wouldn't wish it on anyone, but property is a gamble. Lots of people have won over the last few years, some people have lost.

but hey! That's capitalism!

(I'm not saying I'm not sorry for this couple, but it seems to me that the bank have played within the rules here, there's not much they can do about it)

Ian_W

innovate,
I'm sorry but the story is pants!! Typical Mail [& Express] trying to out-tabloid the tabloids with shock, horror, big bad wicked banks type headlines. Typical also that it's written with the 21st century's most advance science - HINDSIGHT!!

I agree with newfoundglory it was a gamble, but in case anyone thinks the odds were stacked in the Bank's favour they should remember that in the 10yrs prior to1998, when the plan was started, UK house prices had risen by under 35% - had that continued [no price crash needed] the Bank would have earned under 3% pa on the deal. No doubt they were working on normal house price rises of circa 10% which would have given them 8.5% - not a low interest rate but hardly usary when there was no pre-determined pay-back date. Additionally, the bank required them to take independent advice before signing-up and they were of an age when they would have seen other house price booms and realised [or been advised] they'd miss out if it happened again.

Oh, BTW had house prices *ONLY* risen by 10% pa, the equity that the couple would have in the house after repaying the bank would have been £167K, to-day it's £190K even after surrending 85% of equity growth.

Still, as they say, never let the facts get in the way of a good story!!

tomstickland

I read the article before reading any of the replies here and I came to a similar conclusion. The bank set out terms and conditions at the start. It's sad, but the couple agreed to the t&c. With £190K they could still buy a decent property.

EdInvestor

The article refers to "Shared Appreciation Mortgages" a type of equity release which is no longer available.

New types have built in safeguards.Check provider is a member of this organisation:

www.ship-ltd.org

and also go for schemes which have a low interest rate and where you can draw down money as and when you need it, which is much cheaper than taking a big lump sum at the start.

There's no doubt equity release has its place, though often other alternatives can be used first, in particular downsizing to a smaller home or cheaper area to raise capital for retirment spending needs.

grumbler

Every time I read these stories about 'mis-selling' I wonder if 'victims' would regret and complain in case they had saved about £25K in interest instead of loosing. I am sure they would stay happy and still and Jeff Prestridge (author) wouldn't write stories about the poor bank that lost £25K ...