MSE News: Chancellor writes to lenders after 'mortgage prisoner' meeting with Martin

MSE_Luke

George Osborne has written to lenders following a meeting with Martin Lewis about the plight of 'mortgage prisoners'...

Read the full story:
'Chancellor writes to lenders after 'mortgage prisoner' meeting with Martin Lewis – but more must be done'

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MacMickster

Martin Lewis is wrong on this one and the chancellor is right.

The lender who is already bearing the risk re a current borrower who wouldn't meet current affordability guidelines should be able (not forced) to offer other mortgage products on their books without revisiting affordability.

It would be foolish in the extreme to force other lenders to take on the risk of these "sub-prime" borrowers.

One-Eye

Borrowers who don't satisfy the affordability checks and are paying 5% should be accepted onto a 3% deal provided their monthly payments are not reduced and the "extra" they pay is used for capital repayment. They would soon be in a much healthier financial position due to a lower outstanding debt and a lower loan-to-value percentage.

Thrugelmir

One-Eye wrote: »

Borrowers who don't satisfy the affordability checks and are paying 5% should be accepted onto a 3% deal provided their monthly payments are not reduced and the "extra" they pay is used for capital repayment. They would soon be in a much healthier financial position due to a lower outstanding debt and a lower loan-to-value percentage.

Then lenders would fall foul of a duty of care to borrowers if such terms were imposed, and the borrower subsequently defaulted.

Leafeysurrey

One-Eye wrote: »

Borrowers who don't satisfy the affordability checks and are paying 5% should be accepted onto a 3% deal provided their monthly payments are not reduced and the "extra" they pay is used for capital repayment. They would soon be in a much healthier financial position due to a lower outstanding debt and a lower loan-to-value percentage.

Agree. I think you'll find that many trapped prisoners will jump at the chance to get back on track. I just wish it had gone further though and stipulated a date for compliance.

brit1234

We should stop bailing out reckless borrowers, it just encouraging more people to lie or take stupid risks.

:mad:

Glover1862

If you stay with the same lender and go for a 'execution only' transfer then no credit checks are done, ok, it means no advice can be given and you get no fsa protection but the option is there, what's the problem?

I've done this a few times with coop, simple phone call, pick your new product and that's it. Surly, someone on a higher variable rate can work out that a fix maybe cheaper.

AnotherJoe

Glover1862 wrote: »

If you stay with the same lender and go for a 'execution only' transfer then no credit checks are done, ok, it means no advice can be given and you get no fsa protection but the option is there, what's the problem?

The problem is, not all lenders do this

Glover1862 wrote: »

I've done this a few times with coop, simple phone call, pick your new product and that's it. Surly, someone on a higher variable rate can work out that a fix maybe cheaper.

Yes, they know that, thats why they are switching, doh ! But they arent allowed to switch !

brit1234 wrote: »

We should stop bailing out reckless borrowers, it just encouraging more people to lie or take stupid risks.

:mad:

Talk about missing the point. There's no bailing out going on, and its got nothing to do with being reckless, and everything to do with illogical bureaucracy.

Glover1862

Are there many lenders out there now that don't allow a execution only switch on a residential mortgage? All the ones I came across certainly did, different case for BTL.

Leafeysurrey

brit1234 wrote: »

We should stop bailing out reckless borrowers, it just encouraging more people to lie or take stupid risks.

:mad:

Are you suggesting people who have IO mortgages lie, are reckless and stupid borrowers? And those who do not have an IO mortgage don't lie, aren't reckless or stupid borrowers? IO mortgage lenders have done a good PR job in shifting the responsibility for their lending to the customers they lent to.

You may want to consider the reason many of us have IO mortgages instead of repayment mortgages is because they were the only ones we could get because we were self employed.

We aren't asking for more money - we're asking to be put on a cheaper deal like non IO mortgage customers are being offered so we can pay the mortgage off.

VT82

MacMickster wrote: »

It would be foolish in the extreme to force other lenders to take on the risk of these "sub-prime" borrowers.

This was my first thought, but I don't actually think it's the issue. I think the new lenders actually want the borrowers referred to in the article to be able to remortgage to them, but they're not able to because 'computer says no'. The suggestion is that these lenders should be told they can over-rule the 'computer says no' verdict if they wish to lend to the borrowers, and the borrowers can prove the new payment would be no greater than their old one that they've been easily managing. Not a case of 'forcing' new lenders to lend.