MSE News: Regulator admits 'mortgage prisoner' problem as Martin meets George Osborne

MSE_Luke

The FCA admits mortgage lenders "could be more proactive" in making sure homeowners don't become 'mortgage prisoners'...

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'Regulator admits 'mortgage prisoner' problem as Martin meets George Osborne'

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dunstonh

It was the Govt that put pressure on the FCA who brought in new rules for lenders that brought about this issue. So, when it says lenders could do more, you have to remember how we got here and that the FCA says one thing but the FOS says another.

Indeed, in the financial press today is a case that followed FCA guidelines (and the FOS acknowledge that) but the FOS decided to ignore that. So, it is no wonder that firms are not transacting too far off the FCA guidelines nowadays.

michaels

If I were a bank with a captive customer paying 4.5% I would not try very hard to offer them a better deal....

IN fact if I were a cynic I might suggest the plethora of short 'intro offer' deals available before MR was actually seen as a golden opportunity to trap a few customer who would go on to become cash cows.

Thrugelmir

michaels wrote: »

If I were a bank with a captive customer paying 4.5% I would not try very hard to offer them a better deal....

4.5% is historically low. Some people are blinkered to what rates could potentially rise to. If 4.5% is a struggle then how is the capital going to be repaid?

Pincher

I wish they would promise Everyone who wants to sleep with Monica Bellucci, Can. It's just as silly as Everyone who wants to buy a house, Can.


If there was a million highly qualified financial professionals, who are set to review each mortgage application individually, MMR can work, but of course all the lenders have are minimum wage keyboard moneys who just know how to say: "The computer says NO."


All they do is to look at your teeth and say, this one is good for another 25 years in the cotton field, and this one is a waste of space, throw him in the sea so we don't waste any food.

brit1234

Sorry I haven't much sympathy for people who recklessly over borrowed. It was their choice to inflate their wages for self cert mortgages, it was their choice to choose interest only mortgages and not have a repayment vehicle.

If the government wants to stop more mortgage prisoners then it should ban Help to Buy (especially H2B London) and all these crazy 30-35 year mortgages. Its amazing what irresponsible lending which is coming out so close to the events of 2008 and now another house price drop emerging.

Leafeysurrey

Thrugelmir wrote: »

4.5% is historically low. Some people are blinkered to what rates could potentially rise to. If 4.5% is a struggle then how is the capital going to be repaid?

I feel qualified to answer that given I'm on a IO mortgage and paid the mortgage when the rates were over 15% without fail.

First the bank will remove your SVR cap guarantee not to raise the interest rate over a certain level, raise the interest rate - twice - reducing the risk of you putting any of that money towards the capital, then, they'll cite the MMR rules when you fail the affordability check to get on a cheaper deal - which they control - further reducing the risk of you putting money against the capital, and, just to make sure they'll shorten the term of the mortgage so you have even less time to put money against the capital.

Then, when you come to the end of the term they will reluctantly take possession of your property which has signigicantly gone up in value, but will rent it back to you via the medium of a lifetime mortgage at the same high interest rate you apparently were unable to meet according to their affordability check just the day before. Capital paid

Phew...thank goodness we have the FCA watching over us or who knows what may happen....

AnotherJoe

Thrugelmir wrote: »

4.5% is historically low. Some people are blinkered to what rates could potentially rise to. If 4.5% is a struggle then how is the capital going to be repaid?

I dont understand your logic.

The situation is that someone may be on a 4.5% mortgage and paying it. A 2.5% is available, they go to lender who says "no you cant have it because you couldnt afford a 7% rate"
Is that what you are defending?

To take an extreme case, there could be someone on a 7% rate who is paying it within their means, and would like to remortgage to 2.5% but could be told "no you cant have it because our affordability calculation shows you couldn't afford a 7% rate"
Is that what you are defending?

If not, what is your point please as I dont understand it.

Thrugelmir

AnotherJoe wrote: »

I dont understand your logic.

At some point the market will change for the worse. If people are mortgage prisoners at 4.5%. In that they are unable to pay down the capital debt owed for whatever reason. Then they are financially going to struggle with a 2.5% rise in interest rates. To what is realistically a normal level of interest rates. Nor is there any inflation to lift the burden of debt through wage increases. The economy is showing increasing signs of stagnation. Something the financial engineering was supposed to do in order for us not to fall in the same state as Japan.

AnotherJoe

Thrugelmir wrote: »

At some point the market will change for the worse. If people are mortgage prisoners at 4.5%. In that they are unable to pay down the capital debt owed for whatever reason. Then they are financially going to struggle with a 2.5% rise in interest rates. To what is realistically a normal level of interest rates. Nor is there any inflation to lift the burden of debt through wage increases. The economy is showing increasing signs of stagnation. Something the financial engineering was supposed to do in order for us not to fall in the same state as Japan.

I'm still mystified. Whats all that got to do with someone on a 4.5% mortgage being unable to move to a 2.5% one on the grounds of affordability ???????

(And who's saying they are unable to pay the debt down? These are ordinary repayment mortgages on SVR. They could pay a lot more off if they could move to a 2.5% one.)

Leafeysurrey

AnotherJoe wrote: »

I'm still mystified. Whats all that got to do with someone on a 4.5% mortgage being unable to move to a 2.5% one on the grounds of affordability ???????

(And who's saying they are unable to pay the debt down? These are ordinary repayment mortgages on SVR. They could pay a lot more off if they could move to a 2.5% one.)

Precisely.

But therein lies the problem. If you start paying off the mortgage the bank's hold over the property is weakened. If they can keep you trapped on their high SVR until the term ends then they've ring fenced the property to default to them.