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'Are affordability rules stopping you getting a cheap remortgage?' blog discussion
in Martin's blogs & appearances & MoneySavingExpert in the news
20 replies 9.2K views
Former_MSE_Paloma Former MSEForumite
This is the discussion to link on the back of Martin's blog. Please read the blog first, as this discussion follows it.
Please click 'post reply' to discuss below.
Read Martin's "Are mortgage affordability rules stopping you getting a cheap remortgage?" Blog.
Please click 'post reply' to discuss below.
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The point of affordability checking is that it only needs to be done by the bank being asked to lend the money. It is their money at stake after all. The affordability checking that was done by other banks earlier in the customer's mortgage history, and therefore any deal they are on at the moment, is irrelevant.
Let's say the borrower is asking Bank B to pay money to Bank A so that the borrower can repay their mortgage at a lower rate to Bank B. But Bank B doesn't care what the borrower has been paying Bank A - if the borrower doesn't meet Bank B's affordability criteria, even with the lower mortgage payment they would be getting, Bank B will decline to offer the money, and furthermore might think that Bank A shouldn't have lent them the money in the first place.
'Nonsense' it may be. But banks have a duty to lend responsibly, and in accordance with the regulations in place at the time.
And in terms of people being mortgage prisoners, when you take out a mortgage, even if you only expect to have it for two years, the contract will explicitly say what will happen to the rate after the incentive rate is up. It's buyer beware - repay your mortgage in full, move to a new lender, or see if you can product switch with your current lender. And if you can't do any of those, well tough, it was in black and white what would happen to your mortgage rate.
You'd also have to question who this is affecting. There is a responsibility for both lenders and borrowers, when any sort of loan is taken out. Many who borrowed over the past 5-6 years have seen low interest rates and the lower repayments they bring, and taken out a mortgage under the misapprehension that it was always that way, and always would be. If the increased rates that those people are being forced to pay when remortgaging have suddenly made their mortgage unaffordable, they probably shouldn't have borrowed that much money in the first place.
As with the payday loan industry, the problem appears to be a general consumer greed and expectation of entitlement to a certain lifestyle, as much as it is the bad practice of certain lenders.
I take the point made that just because you were originally given a mortgage, it does not mean that you could properly afford it, but it seems to me that if your payments are going down, and you have plenty of capacity in your figures, then this should be taken into account. Here it was a 'computer says no' situation.
I also comment that my previous mortgage was 10 yrs ago, well before the historic lows, and so I was not necessarily in any misapprehension about interest rates, indeed I was aware of impending rises so thought I would look to get a better interest rate now, capped for a while.
The key point Martin makes is that for those who can clearly afford the repayment now, and have capacity within their budgets should rates go up, remortgaging should not be such a complicated process, purely because of the affordability criteria. However in my case it nearly prevented me from getting a better deal for no positive reason, whether on my part or the bank's part.
Eventually based on their strongly-worded advice I agreed to keep the mortgage term the same and arrange to make monthly overpayments.
Seems really complex and onerous. Between 2012 and 2013 I had shortened the term twice by just a chat at the BS counter. They knew I had always paid on time and were happy to adapt; didnt even charge any admin fee. Now in 2014 there are all these bureaucratic barriers which make it much harder to exercise choice in repaying my existing loan.
Not directly relevant but just what lender can sensibly regard pension contributions that will exceed 50% of my gross income next year as committed expenditure that I can't reduce if necessary? Not a chance that I'd continue pension contributions at that high a level if the choice was that or make the mortgage payments.
I was considering asking my mortgage lenders if I could extend my term to pay less over longer......Guess there's no point!
Looks like I'll be selling up earlier than I thought. God knows where I'll go though?
Looking at the bigger picture though, potentially this means that all these people with this issue will never be considered for another mortgage ever again! What happens then?
It's not like there are even enough council houses even if you meet the criteria to get one!
Is property purchasing only for the wealthy now?
and just how big will the poor/rich divide get? Properties will be brought up by these wealthy property landlords and rents will just keep escalating, where does it end?
Martin, I think it's time for you to get on your soapbox again, shout about it as only you can.....only you seem to get results!
But I assure you we will all be behind you 100%.
Ill even march if it helps!