Northern Rock Together Mortgage in breach of "duty of care"?

Conqueror_2

dwsjarcmcd wrote: »

The slight problem I have with this statement is that if it was common knowledge that they were going bankrupt, that would mean that you also knew and yet still chose to apply for the mortgage.

Thank you dwsjarcmcd, I fully agree with this statement. I would like to point that I had written above that the borrower agrees to the terms under no duress, therefore I do not dispute your statement and fully endorse it. The debate raised is concerning the burden of "duty of care" which does not fall on the borrower, but rather on the lender.

olly300

Conqueror wrote: »

Thank you for your corrective point olly300. Though I beg to differ as bids were open to purchase Northern Rock in November 2007 so it knew it would have gone bankrupt if no buyer would approach it.

No they thought the government would bail them out in one way or another i.e. backing their assets. They didn't think they were going to be Nationalised.

Conqueror_2

olly300 wrote: »

They didn't realise like most people that that banks and finanical institutions would stop lending to each other over night.

They didn't know the media would report this in such as sensationlist way there would be a run on them and the government would have to bail them out.

Likewise Lehman Brothers didn't think that the US government wouldn't bail them out and would let them go bust.

Lots of companies take risks in obtaining capital through out the lifetime of the company.

Some companies make good risks and end up being worth millions others make bad risks and end up going bust.

Good point

Conqueror_2

olly300 wrote: »

Why is it a breach of duty of care?

In response to your query as to why this would be a breach of "duty of care", I can only refer you to the article quoted above as it is my sole reference at present time. Perhaps a member with further knowledge in the scope encompassed by the legal concept of "duty of care" would be able to enlighten us as to why the lawyer in the aforementioned article refers to "Interest only loans for 100pc of the property" as a point "raising similar questions about the lenders' duty of care to customers".

feisty1

NR did not offer 100% interest only mortgages, anything between 75 & 95% was on a repayment basis ie 75% interest only & the remaining % on repayment, the unsecured was 100& repayment

feisty1

NR did not offer 100% interest only mortgages, anything between 75 & 95% was on a repayment basis ie 75% interest only & the remaining % on repayment, the unsecured was 100% repayment

dunstonh

Thank you for taking the time to respond dunstonh. Quoting from you above, you would then deem that I would have ground to revendicate a fairer term of agreement if 1/ I was offered 125%, therefore the bank knew I was in negative equity, 2/ I was offered the 125 when the company knew its balance sheet was in a dire state, and was by then fully aware of the overall financial mess it was in, 3/ I was offered said amount in November 2007, thus making no profit at all and the bank might have known the market would tip at that point, 4/ it was interest only .
Does that sound to you like there has been a lack of "duty of care" in the legal sense in this context?

I dont think they have failed in their duty of care. I think with the benefit of hindsight that it was a bad decision but then it was also you wish that they lent you that money. The housing market could have continued for longer. The widespread feeling was that the credit bubble wouldnt burst but would slow at a manageable pace. The events of the last year are generally classed as a once in a 100 years event and happened quicker and deeper than anyone thought possible.

If you make an informed choice and it goes wrong, it doesnt mean the lender was wrong. The level of equity really doenst have anything to do with it. Its affordability. If the debt repayments were affordable at the start and there was some margin for increased rates then the grounds for any complaint are slim.

House prices fluctuate in value. They are not fixed price. So arguing that by lending 125% they were not doing the right thing is not really a goer in my opinion. Anyone that borrowed 80% in Nov 07 is probably in negative equity now (or will be soon). So, are you saying that those lenders giving 80% then were wrong as well?

Also, you borrowed over a number of years. Lets say 25 as we dont know in your case. Are you saying that the asset you bought is going to be less in 25 years time now and that the lender shouldnt have lent you money on the value of an asset that is almost certainly going to be more expensive in 25 years time?

Being in negative equity is not something that should be avoided at all costs and a failure by a lender.

Northern Rock didnt know they were going to fail. LloydsTSB looked like they were going to buy them at one point until it was blocked on competition grounds. They knew they needed a partner through a merger or buyer but the speed at events that caused failure could not have been seen at the time.

I can only refer you to the article quoted above as it is my sole reference at present time.

The article is flawed though. As mentioned is uses an example that has nothing to do with duty of care as an example of duty of care. It also contains incorrect information about the products being referred to.

Nonshy

Conqueror... put your own house on you not winning this battle.

Fighting a lost cause in my opinion.

The interest rate increasing by 8% is due to the increased risk you now pose of NR not getting their money back.

Conqueror_2

dunstonh wrote: »

I dont think they have failed in their duty of care. I think with the benefit of hindsight that it was a bad decision but then it was also you wish that they lent you that money. The housing market could have continued for longer. The widespread feeling was that the credit bubble wouldnt burst but would slow at a manageable pace. The events of the last year are generally classed as a once in a 100 years event and happened quicker and deeper than anyone thought possible.

If you make an informed choice and it goes wrong, it doesnt mean the lender was wrong. The level of equity really doenst have anything to do with it. Its affordability. If the debt repayments were affordable at the start and there was some margin for increased rates then the grounds for any complaint are slim.

House prices fluctuate in value. They are not fixed price. So arguing that by lending 125% they were not doing the right thing is not really a goer in my opinion. Anyone that borrowed 80% in Nov 07 is probably in negative equity now (or will be soon). So, are you saying that those lenders giving 80% then were wrong as well?

Also, you borrowed over a number of years. Lets say 25 as we dont know in your case. Are you saying that the asset you bought is going to be less in 25 years time now and that the lender shouldnt have lent you money on the value of an asset that is almost certainly going to be more expensive in 25 years time?

Being in negative equity is not something that should be avoided at all costs and a failure by a lender.

Northern Rock didnt know they were going to fail. LloydsTSB looked like they were going to buy them at one point until it was blocked on competition grounds. They knew they needed a partner through a merger or buyer but the speed at events that caused failure could not have been seen at the time.



The article is flawed though. As mentioned is uses an example that has nothing to do with duty of care as an example of duty of care. It also contains incorrect information about the products being referred to.

dunstonh, thank you for a very convincing argument. I think the subject at hand revolves around this statement of yours " Being in negative equity is not something that should be avoided at all costs and a failure by a lender". For if it is a veracious statement, then I can see where the lawyer's argument in the referenced article can be flawed.

Conqueror_2

Nonshy wrote: »

Conqueror... put your own house on you not winning this battle.

Fighting a lost cause in my opinion.

The interest rate increasing by 8% is due to the increased risk you now pose of NR not getting their money back.

A lost cause indeed, but interesting debate . Thank you for your contribution Nonshy. The 8% increase was put in place before the debacle of Northern Rock. Could that be construed, in your opinion, as NR viewed the borrower as risky back then but still agreed to lend?