MSE News: Mortgage applicants to undergo IQ tests

One-Eye

What's funniest about this is the bit about lenders running it.

Q1. You borrow £500,000 at 4%pa on an interest only basis so you can buy one of the governments "affordable starter homes for people earning £7.20 an hour". What is the amount you will pay in the first year?

Borrower: "£20,000"

Lender: "Wrong - It's £25,600 - you forgot that 4% is only the figure we put in our adverts. You will actually be charged 4.5%. You also overlooked the arrangement fee, the payment protection insurance and the insurance premium tax on it, the foreign exchange manipulation repayment levy, and of course, the £100 admin fee we have to charge everybody for dealing with all those forms that people send to us after downloading them from MSE."

Goldiegirl

If only it were true


After a lifetime working in finance, one of the first things I discovered that there a lot people out there who are too dim to be allowed a mortgage

[Deleted User]

Just after the credit crunch in 2008 there was a Prof from one of the American unis on the Today program talking about some research he had been doing. He found that numeracy levels were a much better predictor of who gets into trouble repaying their mortgage than income.

diamonds

"The first part will be a mental arithmetic aptitude test, requiring applicants to sit a short exam, not unlike a maths GCSE paper. The idea is to test how effective individual borrowers are at managing money"

Like any MSE does not know maths and budgeting are two different teachings (unlike our education system) lol

diamonds

zzzt wrote: »

Oh dear, but imagine the controversy when people start to realise who is excluded...

Well we did take the faulty vitiligo gene...and then breed like we were a council estate offered child tax credits

Plus

Pincher wrote: »

I know it's a 1st of the Fourth Dunce thing, but it's what I have been calling for for years. We need a financial driving license.

A broker actually made me do a test like that, to get eligibility to trade complex products (options, derivatives etc). I didn't want to trade them, but I did the test out of interest anyway. I failed Possibly because I might have let on that I wasn't the kind of person who wanted to trade complex products.

It seems you can however just retake the test if you wish. So you can eventually pass if you try enough times.

getmore4less

Although some of the maths to get amortization schedules is not that easy the basic concept are very simple and you don't need to know the detail.

One issue is some of the basic groundings in numeracy are no longer to a decent level in the population.


Where things start to get a bit more difficult trying to explain things like when you are 1/2 way through your term the amount paid off the debt with a repayment mortgage depends on the interest rate.

Then you have to undo the myths like

paying your fees up from saves you money.
with offset mortgages your savings are getting interest tax free at the mortgage rate.

dunstonh

Since MiFID came in, there has been a discreet test with investment advice. Advisers are required to provide investment recommendations in line wit the knowledge and understanding of the client. So, most advisers will test their clients knowledge and understanding without the client ever being aware of it. Just questions in a discussion style.

The FOS have also upheld decisions on the basis that was unable to understand the product that had. Although, a fairly high profile one from just over a year ago just showed how much of a nanny state we are in when a company director with investment properties was considered too stupid (my words, the FOS would never be so blunt) to have been recommended a spread of mainstream unit linked investment funds in UK Equity, Euro Equity, US Equity etc. And instead should have had a single multi-asset fund that invested in UK Equity, Euro Equity, US Equity internally.

SO, whilst this thread is an April fool, it is worth noting that IQ does play a part in some areas.

Pincher

I have a question that might help.


If you have £10,000 to invest, how much in fees and charges will keep all the people involved in investing it watered and fed?


1. £10 a year


2. £100 a year


3. £1,000 a year.


4. £10,000 year.




Does choosing 1 class as a fail?