Do we fully understand mortgages?

kmmr

GMS wrote: »

Whatever the rights and wrongs contained within this post are there really is no need for the average Joe to have an in depth understanding of how lending and securitisation work.

I have been spending far too much time contemplating this comment, so I will finally respond!

I don't think it's necessary for people to understand how money is sourced, but I think it's good if they have a good sense of how things work. It's educational, and stops people feeling so 'ripped off'. Plus, I think the more people understand a bit more how the financial world operates, then it stops being so mysterious and people are more able to identify when things just feel a bit wrong.

I also read so many threads on here about how banks are ripping customers off by charging them x%, when they can borrow at 0.5% from the bank of England. I think that people trying to learn how things work should be encouraged, and not told 'don't you worry your little head about that'.

And, as an aside, I think its really interesting!

/end rant.

GMS

kmmr wrote: »

I have been spending far too much time contemplating this comment, so I will finally respond!

I don't think it's necessary for people to understand how money is sourced, but I think it's good if they have a good sense of how things work. It's educational, and stops people feeling so 'ripped off'. Plus, I think the more people understand a bit more how the financial world operates, then it stops being so mysterious and people are more able to identify when things just feel a bit wrong.

I also read so many threads on here about how banks are ripping customers off by charging them x%, when they can borrow at 0.5% from the bank of England. I think that people trying to learn how things work should be encouraged, and not told 'don't you worry your little head about that'.

And, as an aside, I think its really interesting!

/end rant.

I was not suggesting that people should be told 'don't you worry your little head about that' at all.

I cannot see how understanding the complexities of the securitisation market can help people with their mortgages. The bigger concern is for lenders offering non-advised sales to customers who do not know the difference between mortgage types.

It is interesting I agree but like most complicated things it is best left to the experts.

Strange that people will walk into a car showroom and sign up for the finance for an item which will be worth 40% of its value in 3 years and not question how much the finance company paid for the funds, but when it comes to their home they claim to be experts who are being exploited by the greedy banks.

Engeroosi

Either way lets face it, you either fill the baks pockets to buy a house or you fill someone elses pocket and pay rent, its upto you but I know which I would rather!!!

antrobus

Do we fully understand mortgages?

As far as the OP is concerned, the answer is clearly 'no'.

(I do like the easy questions.)

ILW

the_worm_that_turned wrote: »

Perhaps (if you can be bothered) you could re-read my posts. I am suggesting in the opening post that I didn't receive money. That doesn't mean that the seller will not receive money does it?

I am talking from facts. Fractional reserve banking, deeds of trust, promissory notes, security (mortgage) backed assets etc all exist. It is not wild theory. I am merely attempting to encourage people to question things.

If you are perfectly comfortable with the system and fact that to buy a home requires the use of a bank and extortion then great. But I am not!

Where does extortion come into it?

Also, if you don't like borrowing money from banks, don't do it.

Thrugelmir

kmmr wrote: »

II also read so many threads on here about how banks are ripping customers off by charging them x%, when they can borrow at 0.5% from the bank of England.

Which banks borrow from the BOE at 0.5% to fund mortgage lending?

nick-mob

Interesting to see this on MSE, but you need to do a lot more research, specifically into the money creation process and the money supply, why inflation really occurs, and how with a fiat money system, inflation is the only way to keep the system going. It's a real eye opener.

_Andy_

Thrugelmir wrote: »

Which banks borrow from the BOE at 0.5% to fund mortgage lending?

And indeed, even if they did, why is that a 'rip off'?
Love it.

kmmr

Thrugelmir wrote: »

Which banks borrow from the BOE at 0.5% to fund mortgage lending?

Precisely - none. That was kind of my point! People simply don't understand that the base rate is no real reflection of funding costs. If it ever was, it certainly isn't now.

So linking mortgages to a rate that it isn't funded at is not a viable business model anymore.

Sorry if my irony didn't make it through!

kmmr

_Andy_ wrote: »

And indeed, even if they did, why is that a 'rip off'?
Love it.

I mean customers say - how come I am being charged 5%, when the bank gets the money at 0.5%! And they are wrong... cause the bank isn't.... oh dear, something didn't come through in my comments!

d'oh.