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Remortgage Trap

I've got a Santander 123 account and mortgage.

I've applied for and been accepted on new 2 year fixed deal, but thought about extending terms for 5 years to reduce monthly costs by £350.

After going through income and outgoings, I was told by bank that due to new regulations and review, I cannot afford extension to mortgage term, but I am able to afford the much higher monthly cost of my new deal!!!

Anyone got any advice or had similar experience?
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Comments

  • squeeks
    squeeks Posts: 309 Forumite
    Under the new rules, you are not eligible for a new product. It doesn't matter if you already have a mortgage on different terms, it appears that they can't issue a new product.

    Take a look at other lenders and see if anyone else will offer you a comparable product over a term and at a rate you are happy with.
  • mikrt
    mikrt Posts: 230 Forumite
    Part of the Furniture 100 Posts Name Dropper Combo Breaker
    Paula Higgins, of the campaign group HomeOwners’ Alliance, said: ‘Many people are in a mortgage trap. When they first moved house and took out the mortgage, they were told they could afford it. But now, when they try to get a new deal they are told they can no longer afford that loan, despite keeping up with the repayments.
    ‘The consequence is that they are paying more than they should be because they are stuck on a default rate.’
    Lenders say they fear being punished if they accidentally break the regulations – and have called for more clarity on who they can lend to from the Financial Conduct Authority.
    But the FCA has already accused lenders of defying ‘common sense’ in some cases and has promised to look into how the Mortgage Market Review rules are being applied.



    Read more: http://www.dailymail.co.uk/news/article-2960963/Families-stranded-rip-mortgage-rates-Banks-say-new-rules-stops-handing-cheaper-loans-remortgage-approvals-slump.html#ixzz3TdqKabXv
    Follow us: @MailOnline on Twitter | DailyMail on Facebook
  • squeeks
    squeeks Posts: 309 Forumite
    Mortgages have always been at the lenders discretion.

    If the lending criteria has got tighter you can't expect them to throw away their criteria just because you have an existing product.

    If the OP had less borrowing or more income it wouldn't be an issue and they would be eligible for a new product, they aren't being deliberately excluded.

    Banks are famous for lending you an umbrella when the sun is shining, but will demand that it is returned if it starts raining.
  • CKhalvashi
    CKhalvashi Posts: 12,134 Forumite
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    Unfortunately, this is a result of the new rules. There should be something to say that you can move onto another product with the same lender, but this isn't the case.
    squeeks wrote: »
    Banks are famous for lending you an umbrella when the sun is shining, but will demand that it is returned if it starts raining.

    However as long as you remember it is only borrowed, there shouldn't be too much of an issue.
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  • squeeks
    squeeks Posts: 309 Forumite
    edited 7 March 2015 at 10:05AM
    CKhalvashi wrote: »
    Unfortunately, this is a result of the new rules. There should be something to say that you can move onto another product with the same lender, but this isn't the case.

    Why?

    The better rates I would suggest, reflect that the banks are lending to individuals who are a lower risk.

    The people who can most afford a loan, credit card, mortgage etc... always get the lower rates.

    If house prices start to go down, we're going to get a swathe of people coming to the end of their fixed terms, wanting to avoid the lender svr rate but unable to get a competitive product because they no longer have the LTV. This stuff happens.
  • kingstreet
    kingstreet Posts: 39,335 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    The OP is being offered a new product.

    The issue is the term extention. The case is being re-checked for affordability and perversely, the OP cannot demonstrate affordability for the mortgage he already has, even over the longer term.

    Therefore the lender is rejecting the change, as doing nothing does not place the lender in potential conflict with the regulator, where allowing the change may do if the borrower later gets into payment difficulties.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
  • CKhalvashi
    CKhalvashi Posts: 12,134 Forumite
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    squeeks wrote: »
    Why?

    The better rates I would suggest, reflect that the banks are lending to individuals who are a lower risk.

    The people who can most afford a loan, credit card, mortgage etc... always get the lower rates.

    If house prices start to go down, we're going to get a swathe of people coming to the end of their fixed terms, wanting to avoid the lender svr rate but unable to get a competitive product because they no longer have the LTV. This stuff happens.

    Why, I don't know.

    I do completely agree with you, though. My opinion is that people should be free to fix with the same lender without being re-assessed for affordability, especially as a 5 year fix now would make many £1000s better off over the course of 5 years.

    This should be, IMO, on condition the terms aren't varied, however.
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  • getmore4less
    getmore4less Posts: 46,882 Forumite
    Part of the Furniture 10,000 Posts Name Dropper I've helped Parliament
    edited 7 March 2015 at 4:07PM
    CKhalvashi wrote: »
    Why, I don't know.

    I do completely agree with you, though. My opinion is that people should be free to fix with the same lender without being re-assessed for affordability, especially as a 5 year fix now would make many £1000s better off over the course of 5 years.

    This should be, IMO, on condition the terms aren't varied, however.

    people can, (that is not a problem many people are doing it if you read the threads here)

    the OP has done a 2 year fix,

    What they(lender) won't do is change the term by adding 5 years.
  • Red-Squirrel_2
    Red-Squirrel_2 Posts: 4,341 Forumite
    CKhalvashi wrote: »
    Why, I don't know.

    I do completely agree with you, though. My opinion is that people should be free to fix with the same lender without being re-assessed for affordability, especially as a 5 year fix now would make many £1000s better off over the course of 5 years.

    This should be, IMO, on condition the terms aren't varied, however.

    I agree with this.

    I'm coming to the end of a 5 year fix later this year, I've paid by DD every month without fail. When I went through a DIP just to get an idea for a new deal/possible port with the same lender they decided that even though the loan amount is now less, the LTV is better and my salary is nearly 10K higher I can't afford to pay £50 a month less than I currently am. The only solution is to put me on the SVR so I can pay £50 a month more, it doesn't seem to matter whether I can afford that or not. ;)

    I admit that lending was a bit frivolous in the past (I was approved for this mortgage while unemployed!) but there should be some mechanism to recognise past form, when you've proven yourself a reliable borrower and shown through your actions that you can make the payments.
  • CKhalvashi
    CKhalvashi Posts: 12,134 Forumite
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    people can, (that is not a problem many people are doing it if you read the threads here)

    the OP has done a 2 year fix,

    What they(lender) won't do is change the term by adding 5 years.

    Ah, sorry!

    Change what I said about fixing, to extending the term and that should make sense and also adequately reflect my views. :)

    The only issue I can see with an extension is if the OP would be over retirement age at that time. Not specified whether this is the case.
    💙💛 💔
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