Coronavirus Mortgage Problem

Tokmon

sammyjammy said:

Tokmon said:

ThracianKing said:

Hi all,

This is my 1st post so sorry if it's long winded. I lost my job due to Covid in March last year. We had to go onto Universal Credit (family of 4) and then had to use the 6 month mortgage payment holiday with our provider (Santander). As it was incredibly difficult to find a job, we then ended up having an arrangement with them for just over 50% of the usual monthly payment. I found a new job in June of this year, but we now have arrears on our mortgage account.

The main issue is that our mortgage deal is up in November and Santander will not offer us a new rate (other than their standard follow on rate which is 3.3%) due to the arrears. I have asked them to roll the arrears into the loan, but they will not do that unless there are 6 months of full payments on the account. We will only be able to make 4 moths of payments before the rate changes, and we cannot afford the payments at the new rate.

Surely this cannot be legal? Santander are effectively trapping us into a rate we cannot afford through no fault of our own. This is the second mortgage we have had with them and we have never missed a payment before Covid 19 hit. Are they actually allowed to do this?

Thanks for listening.

Why did it take you 15 months to find a job! I know plenty of people who got jobs after loosing them last year and supermarkets in particular were crying out for workers. Also why is no one else in the house working, are the other three members children?

Taking so long to find a job is your problem, there was no reason it should have taken so long and that's the reason your in such difficulty now.

Not helpful or related to the question OP asked, personal circumstances are none of our business unless OP chooses to share, unlikely after a post like yours.

It's just a bit of a reality check for the OP before they continue to claim it's everyone's fault but themselves plus it's at least just as helpful as your comment on this thread...

TBagpuss

As others have said, the short answer is that yes, they are allowed to do this. 

You might find it useful to post  on the mortgages board https://forums.moneysavingexpert.com/categories/mortgages-endowments to see whether there is anything you might be able to do to improve your chances of successfully re-mortgaging elsewhere, and on the debt board for ideas about cutting your spending and/or boosting income with a view to clearing the arrears more quickly , although I think any lender is likely to want to see several months of full payments, and no arrears, before granting a mortgage, and you may not be able to get the best rates with a history of recent arrears. 

I don't think that having to wait until January rather than November to remortgage would be classed as you being a 'mortgage poisoner' 

Baxter100

I always find this aspect of mortgages so bizarre.

"I'm sorry, you cannot show that you are financially viable so we are unable to offer you a new mortgage deal. In the meantime, even though we don't think that you are financially viable, we have moved you onto our significantly more expensive standard rate. Please carry on paying as you have been. Thanks x".

I get it of course, but if you tried to explain the logic to an alien you'd have a hard time.

Jeremy535897

I don't think that having to wait until January rather than November to remortgage would be classed as you being a 'mortgage poisoner' 

I think the mortgagors are the poisoners. Mortgagees are the prisoners.

Tokmon

Baxter100 said:

I always find this aspect of mortgages so bizarre.

"I'm sorry, you cannot show that you are financially viable so we are unable to offer you a new mortgage deal. In the meantime, even though we don't think that you are financially viable, we have moved you onto our significantly more expensive standard rate. Please carry on paying as you have been. Thanks x".

I get it of course, but if you tried to explain the logic to an alien you'd have a hard time.

I don't think it's that complicated to explain; people who are higher risk and more likely to default pay higher rates and people who are lower risk pay lower rates. So the people who are most likely to default pay more to compensate for this.

ItsComingRome

Baxter100 said:

I always find this aspect of mortgages so bizarre.

"I'm sorry, you cannot show that you are financially viable so we are unable to offer you a new mortgage deal. In the meantime, even though we don't think that you are financially viable, we have moved you onto our significantly more expensive standard rate. Please carry on paying as you have been. Thanks x".

I get it of course, but if you tried to explain the logic to an alien you'd have a hard time.

It's no different than any other form of lending, those who are at a higher risk of defaulting need to be charged a higher rate of interest to cover the cost of those who do default.

The alternative would be charging people who are a lower risk more money, which would fall down flat immediately because they have so many more options.

Jeremy535897

ItsComingRome said:

Baxter100 said:

I always find this aspect of mortgages so bizarre.

"I'm sorry, you cannot show that you are financially viable so we are unable to offer you a new mortgage deal. In the meantime, even though we don't think that you are financially viable, we have moved you onto our significantly more expensive standard rate. Please carry on paying as you have been. Thanks x".

I get it of course, but if you tried to explain the logic to an alien you'd have a hard time.

It's no different than any other form of lending, those who are at a higher risk of defaulting need to be charged a higher rate of interest to cover the cost of those who do default.

The alternative would be charging people who are a lower risk more money, which would fall down flat immediately because they have so many more options.

I disagree. As a lender, you have two very different situations:

• you are choosing whether or not to lend a new sum of money to someone. The choice is whether to lend or not. You check whether you think the borrower can afford to repay the loan. The riskier the borrower, the higher the interest you want
• you are choosing whether to offer a continuance of more generous terms for an existing loan than the standard rate. You are already at risk. There is absolutely no logic in repeating the affordability test. 

In its haste to avoid the mistakes of the past, the government imposed a blanket requirement to check affordability even where the borrowing was not to be increased. This has now been slightly relaxed, but there are still many people trapped in expensive mortgages.

Tokmon

Jeremy535897 said:

ItsComingRome said:

Baxter100 said:

I always find this aspect of mortgages so bizarre.

"I'm sorry, you cannot show that you are financially viable so we are unable to offer you a new mortgage deal. In the meantime, even though we don't think that you are financially viable, we have moved you onto our significantly more expensive standard rate. Please carry on paying as you have been. Thanks x".

I get it of course, but if you tried to explain the logic to an alien you'd have a hard time.

It's no different than any other form of lending, those who are at a higher risk of defaulting need to be charged a higher rate of interest to cover the cost of those who do default.

The alternative would be charging people who are a lower risk more money, which would fall down flat immediately because they have so many more options.

I disagree. As a lender, you have two very different situations:

• you are choosing whether or not to lend a new sum of money to someone. The choice is whether to lend or not. You check whether you think the borrower can afford to repay the loan. The riskier the borrower, the higher the interest you want
• you are choosing whether to offer a continuance of more generous terms for an existing loan than the standard rate. You are already at risk. There is absolutely no logic in repeating the affordability test. 

In its haste to avoid the mistakes of the past, the government imposed a blanket requirement to check affordability even where the borrowing was not to be increased. This has now been slightly relaxed, but there are still many people trapped in expensive mortgages.

When the bank offer their products at a fixed rate for X number of years they determine they are able to offer that rate as long as their customers meet a specific risk profile. If customers become a higher risk due to losing a job for example then if they offer the lower rate to them there is too high a chance the customer will default and they won't make their money back after all the costs of repossessing.

If the customer remains on the higher rate then they will get extra money from them over time to cover this higher risk. So it makes perfect sense they won't just continue to offer the lowest rates to existing customers without any checks.

Jeremy535897

Tokmon said:

Jeremy535897 said:

ItsComingRome said:

Baxter100 said:

I always find this aspect of mortgages so bizarre.

"I'm sorry, you cannot show that you are financially viable so we are unable to offer you a new mortgage deal. In the meantime, even though we don't think that you are financially viable, we have moved you onto our significantly more expensive standard rate. Please carry on paying as you have been. Thanks x".

I get it of course, but if you tried to explain the logic to an alien you'd have a hard time.

It's no different than any other form of lending, those who are at a higher risk of defaulting need to be charged a higher rate of interest to cover the cost of those who do default.

The alternative would be charging people who are a lower risk more money, which would fall down flat immediately because they have so many more options.

I disagree. As a lender, you have two very different situations:

• you are choosing whether or not to lend a new sum of money to someone. The choice is whether to lend or not. You check whether you think the borrower can afford to repay the loan. The riskier the borrower, the higher the interest you want
• you are choosing whether to offer a continuance of more generous terms for an existing loan than the standard rate. You are already at risk. There is absolutely no logic in repeating the affordability test. 

In its haste to avoid the mistakes of the past, the government imposed a blanket requirement to check affordability even where the borrowing was not to be increased. This has now been slightly relaxed, but there are still many people trapped in expensive mortgages.

When the bank offer their products at a fixed rate for X number of years they determine they are able to offer that rate as long as their customers meet a specific risk profile. If customers become a higher risk due to losing a job for example then if they offer the lower rate to them there is too high a chance the customer will default and they won't make their money back after all the costs of repossessing.

If the customer remains on the higher rate then they will get extra money from them over time to cover this higher risk. So it makes perfect sense they won't just continue to offer the lowest rates to existing customers without any checks.

That only makes sense if the risk has not already been taken. We are talking about an affordability check here. A mortgage becomes less affordable if the interest rate is increased, so the likelihood of default rises.

k12479

Jeremy535897 said:

I disagree. As a lender, you have two very different situations:

• you are choosing whether or not to lend a new sum of money to someone. The choice is whether to lend or not. You check whether you think the borrower can afford to repay the loan. The riskier the borrower, the higher the interest you want
• you are choosing whether to offer a continuance of more generous terms for an existing loan than the standard rate. You are already at risk. There is absolutely no logic in repeating the affordability test. 

In the latter case the risk of your loan book would start increasing. You'd then have to either accept returns that are inappropriate for the risk or you'd have to start increasing rates, becoming uncompetitive for lower risk customers, which will then increase the risk of your loan book further...