Balance transfer vs credit rating

Marchitiello

As others have said, the mortgage and re-mortgage application will consider affordability checks vs existing and new debts and will model worst case scenario of interest rate move to an all time high to assess if that is likely to impact your affordability .

As I have said before, I have witnessed a full conversation between the Mortgage manager dealing with my application and the Underwriters, and in addition to learning that they often only see type of accounts, when it was opened and outstanding debts, all they were interested in was that we reduced some of that debts by paying it off and prove to them/our solicitors that it was done.

SuzieSue, So I believe that if your husband had challenged that, HSBC would have simply asked him to pay off £x from specific cards without transferring it to new debt, and this would have helped the underwriters approve a large amount. I do not believe that in order to chase few extra pound this year I would risk not getting a better, long term, mortgage deal, is the right things to do...

bigadaj

Marchitiello wrote: »

As others have said, the mortgage and re-mortgage application will consider affordability checks vs existing and new debts and will model worst case scenario of interest rate move to an all time high to assess if that is likely to impact your affordability .

As I have said before, I have witnessed a full conversation between the Mortgage manager dealing with my application and the Underwriters, and in addition to learning that they often only see type of accounts, when it was opened and outstanding debts, all they were interested in was that we reduced some of that debts by paying it off and prove to them/our solicitors that it was done.

SuzieSue, So I believe that if your husband had challenged that, HSBC would have simply asked him to pay off £x from specific cards without transferring it to new debt, and this would have helped the underwriters approve a large amount. I do not believe that in order to chase few extra pound this year I would risk not getting a better, long term, mortgage deal, is the right things to do...

Worst case interest rates?

Would that be near infinite. Whilst that sounds flippant, we all know you would have been treated as an idiot fifteen years ago if you had suggested near zero interest rates would exist for nearly a decade, just wanted to put some perspective on things.

Marchitiello

Re: worst case scenario interest rate:

I believe they modelled it on their risk model that was interest rates at a potential high rate (may not be at the highest of the 80's model but close probably to what we had before the crisis e.g. 5-7%... )

bigadaj

Marchitiello wrote: »

Re: worst case scenario interest rate:

I believe they modelled it on their risk model that was interest rates at a potential high rate (may not be at the highest of the 80's model but close probably to what we had before the crisis e.g. 5-7%... )

Probably but certainly an argument to say nowhere near worse enough.

Mortgage rates could easily get into double figures again, there're renting fixes in the nineties available at close on 10%, on the basis that it gave people,certainty about expenditure and long fixed rates were potentially a good thing for many.

To say that's not credible then just look at current rates, extreme lows not encountered for 300 years, so rates at 15% are far more likely in my opinion.

SuzieSue

Marchitiello wrote: »

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SuzieSue, So I believe that if your husband had challenged that, HSBC would have simply asked him to pay off £x from specific cards without transferring it to new debt, and this would have helped the underwriters approve a large amount. I do not believe that in order to chase few extra pound this year I would risk not getting a better, long term, mortgage deal, is the right things to do...

No, they gave him the same rate but they wouldn't lend him the amount he wanted. He was able to get the rest of funds from family and it actually worked out better for him in the end, but the point is that the new affordability checks only look at liabilities and not assets. Of course if he had needed the higher amount then he would have had to pay off his 0% credit cards.

bigadaj

SuzieSue wrote: »

No, they gave him the same rate but they wouldn't lend him the amount he wanted. He was able to get the rest of funds from family and it actually worked out better for him in the end, but the point is that the new affordability checks only look at liabilities and not assets. Of course if he had needed the higher amount then he would have had to pay off his 0% credit cards.

Right, but the opportunity to benefit from a probable short term arbitrage was obviously more important to him than getting extra lending or credit facilities.

Your example isn't representative and is a potential anomaly in the system, still no reason for a bank to change its criteria on your single example, if you don't like HSBC (and many don't) then simply go elsewhere.

Banks are commercial organisations, even though they are regulated, and it would be crazy to force them to transact with people, or in particular ways, that they don't believe is suitable or commercially justifiable.

SuzieSue

bigadaj wrote: »

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You also need to understand or leaRn about the difference between secured and unsecured lending.

Exactly, which is why I do not understand why they are worried about unsecured lending when the person has liquid assets to cover that lending several times over.

I am just relieved that I took my mortgages out in the days when they only took account of your income and I was therefore able to keep my 0% credit card balances.

It is exactly the same for the mortgage prisoners who are told that they can't afford rates of 2% and are forced to stick on rates of 5% plus. Of course you should fight against the system when it is wrong. Fortunately, a lot of newspapers have been fighting for these mortgage prisoners with some success. If we all had bigadaj's attitude nothing would ever change.

redux

SuzieSue wrote: »

Exactly, which is why I do not understand why they are worried about unsecured lending when the person has liquid assets to cover that lending several times over.

The bank's attitude might be more balanced or equivocal than you think.

They might say:

You appear to have plenty of assets you can put towards this purchase, so you don't seem to need such a high percentage mortgage from us.

Ok, you also have some short term debts on cards, but surely you can pay those off in due course with your future income, and you seem to be happy enough doing it so far.

bigadaj

SuzieSue wrote: »

Exactly, which is why I do not understand why they are worried about unsecured lending when the person has liquid assets to cover that lending several times over.

I am just relieved that I took my mortgages out in the days when they only took account of your income and I was therefore able to keep my 0% credit card balances.

It is exactly the same for the mortgage prisoners who are told that they can't afford rates of 2% and are forced to stick on rates of 5% plus. Of course you should fight against the system when it is wrong. Fortunately, a lot of newspapers have been fighting for these mortgage prisoners with some success. If we all had bigadaj's attitude nothing would ever change.

Congratulations on your many achievements.

Chrysalis

SuzieSue wrote: »

Exactly, which is why I do not understand why they are worried about unsecured lending when the person has liquid assets to cover that lending several times over.

I am just relieved that I took my mortgages out in the days when they only took account of your income and I was therefore able to keep my 0% credit card balances.

It is exactly the same for the mortgage prisoners who are told that they can't afford rates of 2% and are forced to stick on rates of 5% plus. Of course you should fight against the system when it is wrong. Fortunately, a lot of newspapers have been fighting for these mortgage prisoners with some success. If we all had bigadaj's attitude nothing would ever change.

Good point on the interest.

Lenders are like "well we decided we think you wont be able to pay us 5% interest so as a result we will charge you 15%".

I suppose the feeling is if the person is going to default they can claw more money back before it happens, but is better off they dont default at all which is more likely at lower interest rates.