MSE News: Homeowners to sue banks over 'unfair' mortgages

ILW

Treadmill wrote: »

There are occasions when you can get your horse money back when your horse didn't win, one of them would be if the race was declared void, another would be if your horse was second and the winner was disqualified after a stewards enquiry or objection, if we take the latter example you would get MORE than your money back.

That analogy doesn't bear up I'm afraid

The analogy does stand up, unless the borrowers can prove that their houses did not rise in value.

ninky_2

i wonder why they thought the banks had agreed to an interest free loan?

loup67

mmillie wrote: »

It's like someone saying "here's a free house, can you live in it for me, and when you sell it just give me a cut of the increase in value please?" Frankly a fantastic deal for consumers who might not otherwise have been able to afford anywhere to live.

Also, it's not actually a bad investment. Lets say the consumer puts in 75% of the value of a £100,000 house, and the bank puts in the other £25,000. The bank then charges no interest for 10 years, by which time the house is worth £260,000 (that's the average increase since 1997). You sell the house, and give 75% of the increase to the bank, keeping £140,000 for yourself. That means your £75k has doubled in value over the 12 years. That's an interest rate of 14% a year, and a free house to live in! Sweet deal.

Martin

Most people owned their houses outright,ie their £100,000 house,borrowed £25,000,as you put it the house could now be worth £260,000 so to redeem the mortgage they will have to pay the original £25,000 plus 75% of increase £120,000 ie £145,000 so left with £115,00 which yes is £15,000 more than when they took out the loan but considering £260,000 is now the average price they would have to pay for another home leaves quite a shortfall!Where oh where do you see any profit in that!?
I find it incredible that people are so unsympathetic to people being charged over 500% and "trapped".To me it is completely unethical.

EdInvestor

It' s very obvious that this was not the simple deal it may have looked to be on the surface but had hidden underlying risks which were not revealed or discussed when the products were sold.While possibly understood by the banks, it seems very unlikely they were grasped by the borrowers, who would no doubt have walked away pronto if they understood what the outcome might be.They should be allowed to make their case.

Muhasib

loup67 - If this is unethical then do you have an opinion on the Government's flagship shared equity scheme 'Homebuy Direct'; after all this gives an interest free loan and then to buy back your share in future years you have to also pay the market price it has appreciated to.

Anybody see the similarity?

ILW

EdInvestor wrote: »

It' s very obvious that this was not the simple deal it may have looked to be on the surface but had hidden underlying risks which were not revealed or discussed when the products were sold.While possibly understood by the banks, it seems very unlikely they were grasped by the borrowers, who would no doubt have walked away pronto if they understood what the outcome might be.They should be allowed to make their case.

Which bit is difficult to understand? Seems very straightforward to me.

Conrad

Some are forgetting, the expert's, i.e. the lenders had a duty of care. They were in by far the stronger position to determine the long term outcomes.

A Doctor cannot brush aside a claim for prescribing WD40 for insomnia just because thier patient signed a disclaimer.

Conrad

ILW wrote: »

Which bit is difficult to understand? Seems very straightforward to me.

The kneejerk dailymailer in you is clouding your good judgement - you are making a sweeping assumption that all borrowers automatically possessed the requisite capability to understand a complex legal device.

Like all hoodies are feral kids and bad just because they're bad, not because they were mistreated by adults - another dailymail non think example

ILW

Conrad wrote: »

The kneejerk dailymailer in you is clouding your good judgement - you are making a sweeping assumption that all borrowers automatically possessed the requisite capability to understand a complex legal device.

Like all hoodies are feral kids and bad just because they're bad, not because they were mistreated by adults - another dailymail non think example

What is the difficult bit to understand (unless I am missing something)

You borrow say £25k

House price static, you pay back £25k
House price rise 50%, you pay back £37.5k
House price rise 100%, you pay back £50k
etc etc.

Which part of that is complicated?

loup67

ILW wrote: »

What is the difficult bit to understand (unless I am missing something)

You borrow say £25k

House price static, you pay back £25k
House price rise 50%, you pay back £37.5k
House price rise 100%, you pay back £50k
etc etc.

Which part of that is complicated?

Yes you are missing quite a bit!

Borrow 25k which would be 25% of value ie house worth £100,000
House price static pay back 25k as you said (though in climate of 97/98 highly unlikely!)
House price rise 50% ie £150,000 pay back 75% of increase ie £37,500 plus original £25,000 ie £62,500!

House price rise 100% pay back 75% increase £75,000 plus £25,000 original loan ie £100,000!

Maybe now you can see it's not such a great situation to be in!

In most cases the house prices doubled very quickly so after a couple of years they would have to pay back half or more to the bank for a small initial loan!
Apart from that as prices have gone up by an average of 4.4 times you do the sums!it gets worse!