Banks clawing back cheap loans

macaque_2

Is it any wonder that banks have become so reviled.

Thousands of homeowners have been left unable to move house because their mortgage lender is refusing to allow them to transfer their loan to the new property. Even worse, if they arrange a mortgage with a new lender and pay off the old loan, many face swingeing early repayment penalties. Is this treating customers fairly?

http://www.citywire.co.uk/money/homeowners-trapped-as-lenders-claw-back-cheap-loans/a556129?re=17356&ea=174368&utm_source=BulkEmail_Money_Daily&utm_medium=BulkEmail_Money_Daily&utm_campaign=BulkEmail_Money_Daily

wotsthat

Moral of the story - read the T&C's. I very much doubt that it's thousands of homeowners affected - if it was should we be expecting thousands of new buyers to enter the market once their penalty periods are finished?

Thrugelmir

What's unfair about paying a contractual early repayment charge?

macaque_2

Thrugelmir wrote: »

What's unfair about paying a contractual early repayment charge?

I did not use the word unfair but I will explain where the concern lies.

This is not strictly about early redemption but the transfer of a loan from one property to another. If the replacement loan is granted at a higher interest rate, the lender enjoys a substantial financial gain. If the lender then imposes a redemption penalty on top, they are (or could be) double dipping (and knowing how the banks behave they almost certainly are)

The banks force fed people with debt and are now milking small print like loan sharks. Wotsthat's comment about T&C's, sounds good but it is not as if the borrower can negotiate and if they go down the road to Tweedle Dee, they will get similar terms.

abaxas

Banks in 'doing what they said they would do' shocker.

RenovationMan

Bit of a non-story. It's always been the case historically that when you sold your house you paid off the old mortgage and then bought a new house with a new mortgage. Only releatively recently have portable mortgages appeared and if someone thought they had a portable mortgage and hasn't then tough. They have the choice to stay put or get a different mortgage product.

The bit that is interesting is that people with self-cert mortgages are now finding it difficult to move house, regardless of affordability.

Thrugelmir

RenovationMan wrote: »

The bit that is interesting is that people with self-cert mortgages are now finding it difficult to move house, regardless of affordability.

All the high risk lending (by HBOS in particular) is coming home to roost. These borrowers would never have been granted mortgages by Lloyds, HSBC etc even during the credit boom years. As was outside their lending risk profile.

The issue with affordability is that borrowers understanding of what this entails differs to that of lenders.

ILW

macaque wrote: »

I did not use the word unfair but I will explain where the concern lies.

This is not strictly about early redemption but the transfer of a loan from one property to another. If the replacement loan is granted at a higher interest rate, the lender enjoys a substantial financial gain. If the lender then imposes a redemption penalty on top, they are (or could be) double dipping (and knowing how the banks behave they almost certainly are)

The banks force fed people with debt and are now milking small print like loan sharks. Wotsthat's comment about T&C's, sounds good but it is not as if the borrower can negotiate and if they go down the road to Tweedle Dee, they will get similar terms.

No they did not. Please give an example.

macaque_2

ILW wrote: »

No they did not. Please give an example.

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/2807290/Borrowing-six-times-your-salary.html

ciano125

When we went for our first mortgage in 2005, HSBC tried to tell us we could afford almost twice as much as we wanted to borrow. I'm certain that other people would have just taken the amount being offered and spent it. Nobody was forcing us to take on almost twice what we thought we could afford, but I still think it was wrong of the bank to offer it. The amount being offered would, from memory, have been about five times my (now) wifes' salary (I was a student at the time so technically had no income to consider).