'We feel abandoned' – 13,000 mortgage prisoners transferred from Co-op Bank subsidiaries

MSE_Kit

Already sold down the river, around 13,400 mortgage prisoners have been sold off by the Co-op Bank – but not under its own brand – to a new inactive (in other words, no competition, no options) lender. We speak to those affected and explain what it means for you.

Read the full story:

'We feel abandoned – 13,000 mortgage prisoners moved from hidden Co-op Bank inactive lenders to another inactive lender'

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silvercar

Reading the article, these mortgage prisoners were with an inactive lender before and have now been sold to another inactive lender, so little has changed for them?

Isn't this just a paper exercise, now that co-op are part of the Coventry, to tidy up their inactive mortgage lending? So what was 5 different lenders are now one inactive lender? Has anything actually changed for the borrowers?

MWT

https://forums.moneysavingexpert.com/discussion/comment/81996728#Comment_81996728

That is what it looks like to me.

I would expect that the majority of these 'mortgage prisoners' are likely to be on interest only products with no hope of being able to cover the outstanding balance when these mortgages reach their end date over the next few years…

Those who were not in negative equity and who did not have a history of missed payments have had routes out to other lenders for a few years now, for the rest, I'm not sure what solution they are hoping for as it seems that the end of the tracks is well in sight now…

silvercar

I suppose they are hoping for some redress for the extortionate interest they have been charged. If some of that interest was considered to be a capital repayment, their outstanding balance would be far lower and they would have been able for them to re-mortgage elsewhere.

As it is, having paid interest at a much higher rate than other comparable mortgages they have spent money with nothing to show for it. For some, negative equity will have meant that as well as being mortgage prisoners, they have been unable to sell.

MWT

https://forums.moneysavingexpert.com/discussion/comment/81997289#Comment_81997289

Are there other 'comparable mortgages' though?

Obviously I have no knowledge of the details of the entire cohort, but the ones that pop up on here from time to time all seem to follow a similar pattern of being mostly self-certified interest only products with no ability to meet the same affordability requirements as other mortgages, and often negative equity preventing them from selling early on.

The position they are in is certainly unfortunate, but I'm not sure what the lenders have done wrong in the circumstances.

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/81997447#Comment_81997447

Have to agree.

There seems to have been a reasonably large cohort of individuals who entered into interest only mortgages with either no plan to pay off the principle at the end of the term or seemingly under the mistaken impression they could continue an interest only mortgage indefinitely.

I know of two people in that exact circumstance. In the first case the lender eventually repossessed leaving the person in desperate straits which they never recovered from (they died of a heart attack). In the current case the person is in denial with regard to the consequences of failing to repay the capital next year and to make matters worse they are currently in arrears. Coincidentally both are/were single women although gender does not appear to be a determining factor, and I am sure there are as many men as well as women who have unwisely availed themselves of interest only mortgages with no exit plan.

As it happens I am a fan of interest only mortgages and plan to have one running until I die as a form of IHT planning to mitigate a large IHT exposure. However as a single male with no dependents, no one else will be affected by my decision in this regard.

silvercar

I think we are confusing two separate categories of mortgage holders here. Those that have interest only mortgages drawing towards the end of their term with no repayment plan (or a plan that has failed to materialise) aren’t mortgage prisoners. Mortgage prisoners are those that have a mortgage from a lender that no longer offers mortgages and so has no competitive products and the borrower is in a position where they can’t take a new mortgage elsewhere.

The former group would over the years been able to take a new deal with their current lender and so keep their interest rate low, the latter group have been stuck on high rates with no escape. This has cost them so much money over the years that could otherwise have been used to reduce the capital owed and allowed them to escape.

MWT

https://forums.moneysavingexpert.com/discussion/comment/81997692#Comment_81997692

I'm not sure we are confusing two groups, the last FCA numbers I saw suggested around 56% were on interest only mortgages, so for them the clock is ticking rather loudly now, and they are prisoners due mainly to being unable to meet the criteria for switching to interest only elsewhere which has trapped them with closed book lenders…

silvercar

https://forums.moneysavingexpert.com/discussion/comment/81997704#Comment_81997704

I think the difference is those who aren’t with closed book lenders have been paying far less in interest and that is what is unfair. Some of the prisoners have been stuck for 15+ years, that’s a lot of extra interest.

MWT

https://forums.moneysavingexpert.com/discussion/comment/81997710#Comment_81997710

Even with open book lenders there will not have been new self-certified mortgage products for many years. Existing customers will have been encouraged to move to other products which in turn is where the lower rates come from.

If they could meet the same qualifying terms as the others on cheaper loans they could have simply moved to the other lender.

They are trapped by their inability to meet the conditions for a lower rate so it is not intrinsically unfair I suspect, but that is the core of the argument.

RelievedSheff

https://forums.moneysavingexpert.com/discussion/comment/81997710#Comment_81997710

But surely in those 15 years house prices have increased which would have allowed them to sell up and pay of their mortgages while still leaving an amount left over?