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millsy1980

horace wrote:

>> millsy1980

I do not believe what you say.

Can you post chapter and verse to support your stance? If you can I will be open to persuasion.

If you can`t put up and shut up..

horace

Temper, Temper is something I remember you saying to me horace.

Can I ask you a civil question? What do you do for a living? Who do you work for?

horace_2

>> millsy1980

I may have been rather abrupt in the previous post.
Too much Thather`s cider.
In anwser to your question I am retired (59 health grounds) former civil servant dealing with benefit fraud for more years than I care to remember.

I am rather long in the tooth which makes me very, very suspicous of blanket assertions people make without verification which is why I sought additional information from your goodself.

If you are able to support you stance I indicated that I would be open to persuasion.

If, however, you are simply regurgitating stuff your staff trainer said then I am not impressed.

From experience,I am inclined to the rule, the more folk tend justify their stance the more improbable their situation appears.

Something about the lady protesting too much?

horace

Andyboy

It is Always a pleasure to read a post looking for some advice and information only to find two "adults" with handbags at dawn!:T

MarkyMarkD

Horace

You have asked for chapter and verse, but honestly it's not necessary because it's obvious. The mortgage advisers who have said that there isn't much margin in mortgage lending are speaking the truth. But I'll give a bit of chapter and verse just for your benefit.

Moneyfacts' best buy 2 year discounted mortgage is with Newcastle BS. Its rate is 4.74%, with a £499 fee. However, this rate isn't shown on Newcastle's own website, so I'll go with the second best buy - 4.94% from the Loughborough BS, also with a £499 fee.

UK 3 month LIBOR last week was 5.59938%.

So, Loughborough BS can take its savers' funds, and lend them to other banks, and get 5.59938% - so that's its opportunity cost of funds. Or it can lend them out on a 2 year discounted mortgage for 4.94%.

So, by lending it out at 4.94%, it's making a loss of 0.65938%.

And that goes on, month after month, for 2 years. (Obviously, the LIBOR rate can move and the customer rate can move, as it's a discounted product, but the gap between the two isn't going to change very dramatically).

If a mortgage customer had borrowed £100,000, the total LOSS on interest margin is £659 per year or £1,318 over the two years. The £499 up-front fee (and any Mortgage Exit Administration Fee) don't come within a mile of clearing that loss.

Not to mention that the building society has to pay the introducer who sells the mortgage (if they sell this through intermediaries), their own staff, etc. etc.

So, when people say that lenders aren't making money on their discounted or fixed rate products, that's because it's true - during the discounted or fixed term, any decent mortgage product loses money for the lender even after taking account of the up-front and end of product fees. Even for products which aren't absolutely best buys, the fees are a huge part of the profitability if not all of it.

horace_2

>> MarkymarkD

Thank you for a reply.
Are you absolutely sure that funds used by the lenders are not directly financed by the yen carry trade instead of LIBOR?

horace.

edit.
Although the following link refers directly to the U.S.A. the same applies to the U.K. Although a lengthy read it is worth persevering to the end.

https://www.financialsense.com/stormwatch/oldupdates/2004/0804.html


h

horace_2

>>dunstonh

The economics of it is that the mortgage rate doesnt give the profit that it once did and fees like this account for a lot of the final profit (in some cases all or not even that).

So, whilst lending rates are cheap compared to base rate, admin fees have crept up to compensate.

So why do you feel Martin has launched the present `admin fees` crusade?

Consumer revenge for underhand practices?

h.

MickKnipfler

I'm about to redeem my £1 mortgage and pay an £80 deeds release fee!

MarkyMarkD

Whilst Horace's previous post #26 didn't warrant a reply, I think it's important to point out that the FSA have not specified in any way what level of MEAF is acceptable.

Indeed, if you listen to the Moneybox interview on the BBC website, he is very clear that lenders can charge any amount they choose as long as the way the amount due will be calculated is defined in advance in the offer documentation.

So the consequence of the FSA ruling is likely to be that those who bought mortgages with a fee of £x quoted will be charged £x; those who bought mortgages with a fee of £y quoted will be charged £y.

There's no reason to infer that lenders currently charging £y to new borrowers will reduce that amount back to £x - there is every reason to believe that they will continue to charge £y as there's no ruling to force them to change.

For the avoidance of doubt I'll clarify what the FSA bloke said in the interview: MEAFs do not have to reflect the lender's costs in any way, shape or form. But the amount which will be due has to be clearly specified up front.

It's also even more important to note that the amount doesn't even have to be fixed up front. If a lender chose to say "Our MEAF is £250 but it will increase by £50 on 1 January each year" then that would be fine. Or "Our MEAF is £250 but it will increase in line with RPI on 1 January each year".

That said, I think that most lenders will fix the amount in cash terms as it makes things easier to calculate.

I'm sure that the sub-prime lenders will go for something more penal as they feel they can get away with charging their customers more and the FSA aren't doing anything to stop them with this ruling.

horace_2

Whilst Horace's previous post #26 didn't warrant a reply, I think it's important to point out that the FSA have not specified in any way what level of MEAF is acceptable.

>>> MarkymarkD.

You have confused me here.
What has the `carry trade` which has nothing to do with the FSA got to do with Financial Instiutions charging excessive mortgage exit fees?

Please explain.
I look forward to your reply.

horace

MarkyMarkD

Because it was worth responding to your post #27 relating to the FSA, and not to your previous one #26 which was just irrelevant twaddle.