Law could be changed to help mortgage prisoners - MSE News

Thrugelmir

grumbler wrote: »

I don't see how this answers the question. My understanding is that the existing law doesn't allow any other provider to give a better deal to these people, i.e. to pay the debt to the existing provider. Why on earth? The amount owned by the borrower remains the same, they don't borrow extra.

After the takeover of HBOS by LLoyds in 2008. Lloyds took 6 months to conduct a thorough review of HBOS's mortgage books. Lloyds determination was that they wouldn't have written around around 30% of the business. As didn't wouldn't have met their internal lending criteria. Far from being as black and white as simply moving lender.

Thrugelmir

antrobus wrote: »

I don't believe it does either. There is no issue with capacity.

HSBC underwrite around £15 billion of new business a year. They are major market players. Capacity would be an issue.

csgohan4

Aggi wrote: »

I am locked into a lender, I would not pass the affordability test with a new lender.
My partner died, 8 years ago, big house, absolutely no money. I set the house up as a B&B. The lender sees me as being in breech of terms- I should have a commercial loan. So I cannot go to a lower rate or switch, just not enough income. Mortgage up to date, no arrears, 4 years to end of term, interest only. So I loose my home and income. Lender has not started proceedings against me.

Did your partner have life insurance or company benefits in place?

If not that is something for future readers to consider when taking out such a huge debt with no contingency for their spouse

SouthLondonUser

grumbler wrote: »

If my understanding is correct, then whose fault is this - the notorious EU jobsworths' or our local UK ones'? The phrase "at least in the UK's interpretation" in the article seems to imply the latter that is very sad to put it mildly, especially in light of Brexit.

The Directive dates to 2014. Member states had to adopt it by 2016. Also bear in mind that, for a number of reasons, mortgages in the UK tend to be fixed-rate for much shorter periods than in many, if not most, EU countries (and no, this is not caused by a decision by evil Bruxelles) so it would have been up to the UK lawmakers to address a point which affects the UK more than other nations.

You can find the text of the Directive here: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32014L0017

It talks about irresponsible lending, lending in other currencies etc. It is very generic and, as far as I can see, it does not mention anything about mortgage prisoners - that's something that was caused by the peculiarity of the UK mortgage market (rates fixed for short periods) and the sloppiness of the UK lawmakers/regulators who didn't anticipate this problem. But I am of course happy to be proven wrong by those who have the time, patience and competence to read through the entire Directive. Shame that the internet and social media , if used responsibly, could make it very easy to go back to the source, but are instead used mostly to spread fake news.

Anthorn

There are also credit card prisoners who get no help at all: For example someone has a credit card debt of £3000 at 18.9% which is being paid off over 2 years and wants to transfer it to a 0% 24 month card to save interest. But s/he has overall debt which is equal to income and so is judged to not being able to afford the BT card even though transferring the debt would not cause an increase in overall debt.

I actually initially misinterpreted the title of the article and read it as prisoners being mortgaged. Hey I'll have a couple ROFL

csgohan4

Anthorn wrote: »

There are also credit card prisoners who get no help at all: For example someone has a credit card debt of £3000 at 18.9% which is being paid off over 2 years and wants to transfer it to a 0% 24 month card to save interest. But s/he has overall debt which is equal to income and so is judged to not being able to afford the BT card even though transferring the debt would not cause an increase in overall debt.

I actually initially misinterpreted the title of the article and read it as prisoners being mortgaged. Hey I'll have a couple ROFL

Credit is now more tightly regulated and the key thing now is affordability, if your debt equals your income, why would a new credit issuer, give you the credit and take on the risk of defaulting as well?

The borrower also needs to take responsibility, while stoozing is a good thing, it just kicks the can down the road, you'll need to pick it up later down the line.

Anthorn

csgohan4 wrote: »

Credit is now more tightly regulated and the key thing now is affordability, if your debt equals your income, why would a new credit issuer, give you the credit and take on the risk of defaulting as well?

The borrower also needs to take responsibility, while stoozing is a good thing, it just kicks the can down the road, you'll need to pick it up later down the line.

You quoted my post but perhaps you didn't read it.

If there is credit card debt which is in good standing then it must have been approved. It makes little sense to reject a balance transfer on the grounds of affordability because transferring the debt doesn't increase the overall debt which I repeat is in good standing.

The above is hyperthetical.

SouthLondonUser

Anthorn wrote: »

There are also credit card prisoners who get no help at all: For example someone has a credit card debt of £3000 at 18.9% which is being paid off over 2 years and wants to transfer it to a 0% 24 month card to save interest. But s/he has overall debt which is equal to income and so is judged to not being able to afford the BT card even though transferring the debt would not cause an increase in overall debt.

I don't find this comparable to "mortgage prisoners".

First of all, no bank is, nor should be obliged, to grant credit at all costs. If you are paying 5% interest to bank X, bank Y should accept you as a client for its 2% deal if you meet its criteria, not because you are struggling to make the payments at 5% but could manage if the interest were 2% - that is your problem, not that of bank Y or its shareholders!

If I understand correctly, the problem with mortgage prisoners is with respect to the same lender: eg you are now paying 5% to your lender; the same lender also has a 2% deal, but you no longer qualify because the lender has changed its criteria.

This is also different from the "credit card prisoners" you describe. Paying 0% on a credit card for some months is a way to attract new customers, because the bank isn't making any money by keeping you at zero %. The zero-rate period of a credit card is therefore something which, by its very nature, is limited in time and isn't renewable (not with the same lender). The fixed-rate period of a fixed-rate mortgage is different: the bank does make money. Key difference: mortgage borrowers can and do continuously refinance from a fixed-rate mortgage to another, sometimes with the same lender. This does make the bank money. Credit card borrowers cannot continuously refinance their credit card debt from a zero-rate period to another zero-rate period - at least not with the same lender!

Anthorn wrote: »

If there is credit card debt which is in good standing then it must have been approved. It makes little sense to reject a balance transfer on the grounds of affordability because transferring the debt doesn't increase the overall debt which I repeat is in good standing.

See above: transferring to whom? To the same lender? You cannot transfer from a zero-rate deal to another zero-rate deal within the same lender forever - the lender would never make any money! Transfer to another lender? Well, the borrower you are describing doesn't meet the criteria of the new lender; that it would be cheaper for the borrower to be on the zero-rate deal is the borrower's problem, not (again) that of the bank or its shareholders!

Anthorn wrote: »

The above is hyperthetical.

Why such archaic words?