Bad Luck with Northern Rock Mortgage

kintola

Hi There,

I wonder if there is any advice you can give me re my mortgage. I took out an old Northern Rock mortgage in 2007 (now landmark mortgages) just before the recession hit. It was one of the 105% mortgages as I have an unsecured loan within it as well. Timing was dreadful as litterally a month or two later house values crashed completely.

To date the property is still almost £20k negative equity (including the unsecured loan) it is a 1 bedroom flat that I can no longer live in as I have a family. I rent it out but the rent is short of the mortgage by around £100 a month. I have been paying this shortfall now for 5 years and have looked at so many possible avenues to try and come up with a solution but non have been practical.

I can't tell you how much it would change my life if I could just do something that would allow me to get rid of this mortgage or swap it in some way. It is a really high % interest only mortgage that appears impossible to pay off.

Any advice you could possibly give would be amazing!

TIA sam

Thrugelmir

Unless you pay something additional to start reducing the debt owed your problem isn't going to disappear. The real issue you face is if interest rates were to rise. Then it's going to cost you even more than now just to stand still.

muhandis

If the price of the flat is still underwater in 2016, you have to accept that it is unlikely that the situation will change in the near to medium term.

I don't mean to sound all doom and gloom but the only solution is to start chipping away at the debt by overpaying so that the capital reduces over time thus reducing the interest due as well. It might seem hard going as first for very little visible impact, but this will snowball into larger savings over the coming years once you start doing it.

This could be -

- Moving any cash languishing in a low interest ISA or savings account to overpaying the mortgage
- Cutting down your expenditure to the bone (for advice I would recommend browsing the debt free wannabe board on this forum) and overpaying the mortgage with any and all spare cash that comes your way

Unless you make paying off the capital part of the mortgage a central mission of your financial life (as opposed to seeing the whole thing as a net £100 monthly commitment) it is unlikely to go away or give you the opportunity to remortgage to a lower rate.

I wish you luck.

kintola wrote: »

Hi There,

I wonder if there is any advice you can give me re my mortgage. I took out an old Northern Rock mortgage in 2007 (now landmark mortgages) just before the recession hit. It was one of the 105% mortgages as I have an unsecured loan within it as well. Timing was dreadful as litterally a month or two later house values crashed completely.

To date the property is still almost £20k negative equity (including the unsecured loan) it is a 1 bedroom flat that I can no longer live in as I have a family. I rent it out but the rent is short of the mortgage by around £100 a month. I have been paying this shortfall now for 5 years and have looked at so many possible avenues to try and come up with a solution but non have been practical.

I can't tell you how much it would change my life if I could just do something that would allow me to get rid of this mortgage or swap it in some way. It is a really high % interest only mortgage that appears impossible to pay off.

Any advice you could possibly give would be amazing!

TIA sam

dunstonh

Timing was dreadful as litterally a month or two later house values crashed completely.

There was no property crash as the drop in sterling at the time absorbed most of it. There was a small decline but nothing on the scale of a crash.

To date the property is still almost £20k negative equity (including the unsecured loan) it is a 1 bedroom flat that I can no longer live in as I have a family.

New builds always lose value the day you move in. Builders price in extras into the house value and a new house with all its new equipment ceases to be new as you move in. The drop on new builds is often around 10-20%. Flats/apartments in particular take a harder hit than houses. During the late 90s, early 2000s this was largely not an issue as prices rose so quickly that the initial hit was quickly wiped out.

2008 was also around the time that builders found it harder to sell flats at inflated prices as lenders finally cottoned on to over inflated pricing (or rather they decided to do something about it - they knew it happened for a long time). It created a downward pressure on pricing for flats/apartments that many people are still suffering from today. And that is where you find yourself.

Any advice you could possibly give would be amazing!

There is no magic solution to this. Unfortunately, short of a TARDIS, it is going to mean some sacrifices to get out of this.

Landmark are a closed lender. They also hold no authorisations to provide further borrowing or change the term. They are effectively running the lending book down to nothing. So, you will get nothing out of them.

The only solution is to pay more into the mortgage and cutting your budget down to be able to afford it if you dont have any excess in your income to cover it. The longer you put this off, the harder it will become. So, next time you think about a holiday, think how many thousands could come off the mortgage. Or if you are paying £90pm to Sky, then think about reducing the package to £40 and pay the difference into the mortgage. If your mobile phone bill is above £20 then look to change your package (£20 gets you unlimited texts/calls with 20gb data nowadays yet you still see people paying £50-£70). Each time you are making a luxury purchase then think about what difference that money would make off the mortgage. Jam today comes at a cost tomorrow. So, think about cutting back now and then you should be able to get some Jam later. You mention family. Children get more expensive as they get older. When they are young, they don't need or want expensive toys/gadgets/clothing. The best things in life at that age are free. So, do this budget capping whilst they are young.

AnotherJoe

dunstonh wrote: »

There was no property crash as the drop in sterling at the time absorbed most of it. There was a small decline but nothing on the scale of a crash.

.

I disagree, I bought a house in 2007 for £200k (exactly) and by 2009 it was down to an estimated (judging by neighbours identical properties) £150-£160k. I'd call that a crash, and what has a drop in sterling at that time got to do with absorbing house price falls???? ?
(it wasnt a newbuild either, so there's no new build 'premium' being included here.)

It was a 2 bed, had it been a 1 bed flat or studio i woudl have expected a steeper decline than 25%

FWIW it did recover, i sold it for £250k in 2014, but this was in the overheated SE.

dunstonh

I disagree, I bought a house in 2007 for £200k (exactly) and by 2009 it was down to an estimated (judging by neighbours identical properties) £150-£160k. I'd call that a crash, and what has a drop in sterling at that time got to do with absorbing house price falls???? ?

A crash is generally regarded as a 20% decline. Looking back at that period, some areas did suffer declines whilst others did not. However, drops in excess of 20% were not common. Yours does fit the criteria to be called a crash. Even if the UK in general did not quite get to crash territory.

I'd call that a crash, and what has a drop in sterling at that time got to do with absorbing house price falls???? ?

London and parts of the south east house pricing is affected by sterling. A lot of of the properties are valued on the global market. Had sterling not fallen, the impact of house prices falls would have been greater.

AnotherJoe

dunstonh wrote: »

A crash is generally regarded as a 20% decline. Looking back at that period, some areas did suffer declines whilst others did not. However, drops in excess of 20% were not common. Yours does fit the criteria to be called a crash. Even if the UK in general did not quite get to crash territory.


London and parts of the south east house pricing is affected by sterling. A lot of of the properties are valued on the global market. Had sterling not fallen, the impact of house prices falls would have been greater.

Maybe a penthouse in Mayfair is quoted on the global market, but a 2 bed midterrace 30 miles outside London (my case) and a £105k one bed flat (in the OPs case) most definitely are well outside the scope of being buffered by falls in Sterling, much as I'd have loved to sell my place to a millionaire from Shanghai for a couple of million devalued Sterling

dunstonh

AnotherJoe wrote: »

Maybe a penthouse in Mayfair is quoted on the global market, but a 2 bed midterrace 30 miles outside London (my case) and a £105k one bed flat (in the OPs case) most definitely are well outside the scope of being buffered by falls in Sterling, much as I'd have loved to sell my place to a millionaire from Shanghai for a couple of million devalued Sterling

No. Not just penhouses in Mayfair. The overseas marketing of London property includes terraced houses from 2 bedrooms. Shanghai has significant marketing of UK property (amongst others) and its not just millionaires. It is in quite mainstream marketing.

AnotherJoe

dunstonh wrote: »

No. Not just penhouses in Mayfair. The overseas marketing of London property includes terraced houses from 2 bedrooms. Shanghai has significant marketing of UK property (amongst others) and its not just millionaires. It is in quite mainstream marketing.

But that doesn't include the OPs property since it's self evidently not in London.