MSE News: Government-run lenders slash mortgage switching costs

This is the discussion thread for the following MSE News Story:
"Northern Rock and Bradford & Bingley will allow some borrowers to move lender without the usual four-figure penalty ..."

Government-run lenders slash mortgage switching costs

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  • In this article, why have Bradford & Bingley and Northern Rock been classed as "sub-prime" lenders? This is surely not factually accurate, given that it was not the weakness of their mortgage books that caused either bank to require government support.

    In fact, both B&B and Northern Rock had relatively low repo rates and it was their securitisation strategies that were at fault.

    It is great to hear that both banks are reducing their switching costs and giving their customers some much needed flexibility. Long may it continue.
  • In this article, why have Bradford & Bingley and Northern Rock been classed as "sub-prime" lenders? This is surely not factually accurate, given that it was not the weakness of their mortgage books that caused either bank to require government support.
    I don't think that the article is actually referring to B&B and NR as subprime lenders. It's just a bit ambiguous in the wording.

    "B&B ran a similar initiative last year, while other former sub-prime lenders, who sold loans to those with poor credit histories, agreed to reduce debt by up to £25,000 in some cases in 2009 to encourage borrowers to leave".
  • MarkyMarkDMarkyMarkD Forumite
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    And the other sub-prime lenders who did it, didn't do it because they were sub prime, they did it because they were desperate to reduce the size of their lending books. Rather like B&B and NR. (Although, in the case of these government owned institutions, it is taxpayers' money they are wasting by waiving ERCs, so I am not sure that it is something to celebrate).
  • MarkyMarkD wrote: »
    it is taxpayers' money they are wasting by waiving ERCs, so I am not sure that it is something to celebrate).
    I am not sure that you can categorically say that taxpayers money is being wasted here. If more mortgages are redeemed as a result then presumably this money could be paid back to the government and help reduce the rate of increase in government borrowing.
  • smk77smk77 Forumite
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    How is this going to help out the government-run lenders?
    A B&B spokeswoman says: "We want to reduce the size of our mortgage book so this may encourage people to move."

    What they want is to get rid of as many people as possible who may default. But, surely no other lender will want to take on someone considered to be a risk but will be happy to take on people with a decent deposit.

    Would this therefore not leave the government-run lenders with a higher proportion of borrowers who may default?
  • MarkyMarkDMarkyMarkD Forumite
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    Er, yes, of course it will. It's stupid short-sighted thinking.

    They are paying to leave, customers who they could sell to someone else once the market improves. Just to maximise the government's cashflow in the short-term.
  • Ok so from selfish point of view is it worth swapping out in my case? - I have a NRAM mortgage on a BTL for £130k on a £180k value house with 2 years left to run rate is 5.99%.
    I'm not aware of many deals that would be more attractive as rates for BTL's have been pretty high for a while now. Any help would be greatly appreciated.
  • ThrugelmirThrugelmir Forumite
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    MarkyMarkD wrote: »
    Er, yes, of course it will. It's stupid short-sighted thinking.

    They are paying to leave, customers who they could sell to someone else once the market improves. Just to maximise the government's cashflow in the short-term.

    The Government is borrowing money to fund these operations. The quicker mortgages are transferred , the less the Government needs to borrow.
    Real insurance claim quote : -

    "Going to work at 7am this morning I drove out of my drive straight into a bus. The bus was 5 minutes early.".
  • MarkyMarkDMarkyMarkD Forumite
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    Yes, but so what?

    There is no harm in the government effectively borrowing to keep well-performing mortgage assets with very low risk. Whereas effectively paying such borrowers to leave is daft.
  • I've received a response to letter to NR sent with acopy of the article.
    There a re two options the second of which is if you take out a new mortgag product with any other lender of at least £3k above the total amount that was required to redeem your northern rock (asset man)mortagage "may make you eligible for a refund of up to 100% of the ERC plus the help with costs, if applicable". A significant amount of hedging there. But it continues: If you redeem your mortgage your will be charged the charges and then will have to apply for a refund of those charges. This will be "assessed" and then they will confirm whether you are eligible or not. They dont say what the criterion of assessment for eligibiliy are nor how they assess whetehr you should get 1-100% of a refund of those charges. This borders on dishonest business practice. It is certainly unfair to expect customers to act on trust that they will act fairly and consistently if they do not reveal how they are operating the scheme. They should do it properly, not hedge and see how many people go out the door before decidinig whether or not they feel like refunding their extortionate charges.
    As NR is now essentially publicly owne i wonder whetehr they would have to respond to an FOI request to reveal those criterion. Ive written to them as a normal customer to ask for them to tell me. Failing that I think ill have to kick up a big fuss. Anyone else doing the same?
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