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

MWT

https://forums.moneysavingexpert.com/discussion/comment/81997979#Comment_81997979

… at what cost though… ?

Especially for the interest only customers with no viable repayment vehicle, holding on and paying high interest rates just delays the inevitable.

Waiting 20 years in the hope that someone else is going to pay for the original poor judgement and bad luck doesn't feel like a plan.

RelievedSheff

https://forums.moneysavingexpert.com/discussion/comment/81997921#Comment_81997921

We bought a house in 2007 using a Northern Rock 105% mortgage. No sooner had we moved in then house prices crashed and we were in negative equity.

At no point did we complain it was someone else's fault. We just got on with it and paid the mortgage, despite the rates being high, when seemingly everyone else was on super low 1% rates we were paying over 6%.

In 2019 we eventually managed to have enough equity to move away from that situation.

At no point would we have described ourselves as mortgage prisoners. We were in a situation that we had put ourselves in. It was up to us to get out of it, no one else.

MWT

https://forums.moneysavingexpert.com/discussion/comment/81998035#Comment_81998035

Glad to hear you managed to work your way out of the problem, it truly was a most unfortunate time to be getting into the property market.

RelievedSheff

https://forums.moneysavingexpert.com/discussion/comment/81998052#Comment_81998052

We have a habit of choosing to buy a house just before a crisis 🤣

First house was 2007 just before the banking crisis, second house was 2019 just before Covid and we have literally just moved again so who knows what's coming this year but we have definitely jinxed it!

silvercar

https://forums.moneysavingexpert.com/discussion/comment/81998013#Comment_81998013

I have friends who bought with interest only mortgages. Their life plan is to downsize once the kids have left home. Some kids are staying longer than anticipated, that is impacting their plan., but in principle it’s a reasonable plan. It gives you a larger home while you need the room, hopefully some gain in equity along the way that can go towards buying a home for later life. If the plan for the downsize was part the equity growth in the house price and part having some savings brought about by low mortgage interest rates then the difference between the interest rate charged by a close book lender and elsewhere could make a difference.

In my area at least, flat prices are falling whereas larger houses are doing OK, so now may be the perfect time to enact the plan, providing they can push the fledglings out of the nest!

MWT

https://forums.moneysavingexpert.com/discussion/comment/81998318#Comment_81998318

Totally valid way to plan, but it comes with some risks attached, over time your ability to justify the mortgage you have taken out may change and your property value may not do as well as you would like…

So when you combine that risk with taking out a mortgage over 100% or at a 6x multiple of salary, or just self-certified for example, you really are pushing the edges of the envelope and make it highly unlikely that you'll be able to get that same deal with another lender.

… and that is where those who did this at the time found themselves when Northern Rock went under.

Yes it is unfortunate, but I still fail to see it is 'unfair' what happened next as there was no market for similar mortgage to compare the interest rates with, and nobody willing to take on this basket of loans with an open book.

I guess we will see if anything ever does emerge in response to the various claims out there, but you have to admire those like RelievedSheff that owned the problem and worked hard to deal with it.

silvercar

I am among a group of friends who bought in the mid/ late 80s and then hit a property crash. Some of us moved on the basis of a NR 110% mortgage to get a bigger property to start a family. In the long term that opportunity has paid off for some, who then moved up the ladder and now have properties mortgage free worth well over £1m. Others took the risk and it didn't pay off and sold at a loss or didn't take the risk and sold up and rented and lost out by not getting back into home ownership until after the next boom and have much smaller properties as a consequence.

I also know some who didn't have the self discipline needed for an IO mortgage and now have large mortgages with little chance of repaying other than downsizing dramatically.

A lender would have found it impossible to tell which group were worth lending to and which not when we were all starting out. And for some that NR 110% mortgage proved a very good risk.

(Not me, We discovered offset mortgages and used them to our advantage, but that is a whole other conversation.)

anyway, we've probably had enough of a dialogue.

ACG

It is such a tricky situation and although I do genuinely feel for the people caught up in this, there is more than a small number who are probably less deserving of empathy.

I did some work with a group who were fighting MAS5 a while back.

When I spoke to some of the people it was fairly clear there were different groups:

People who could have moved away had they consulted a mortgage broker. They maybe did not have the pick of lenders but with a bit of work a broker could have got them away. Some of those people had been to their bank, their bank said no and they knocked it on the head. But a broker specialising in income stretches or bad credit etc might have been able to get them something.

People who were unfortunate and life had thrown them a raw deal - ill health, redundancy, divorce etc and were genuinely unable to get away.

People who probably should never have taken out the mortgage in the first place. They could not afford it then and still cant now. Thank god self cert mortgages are gone!

Another thing that cropped up was that there were people in a position to overpay but seemed reluctant to.

Overpaying has a snowball effect, the sooner and more you overpay, it compounds and by overpaying the same amount it has a bigger and bigger effect. But people were unwilling to do that because it was not instant and would have meant sacrifices elsewhere.

I wouldnt wish this sort of thing on anyone as it does put your life on hold to some degree. But I also think it should not be possible for lenders to take the P either. Rates should have come down unless there was a genuine reason for it not to - profit isnt a genuine reason in my opinion.

But anyone reading this, I woudl suggest speaking to a good experienced broker.

MWT

https://forums.moneysavingexpert.com/discussion/comment/82000114#Comment_82000114

But I also think it should not be possible for lenders to take the P either. Rates should have come down unless there was a genuine reason for it not to - profit isnt a genuine reason in my opinion.

That seems like a well balanced point, given your experience overall, would you say it might be reasonable to compare the interest rates these customers have suffered against the rates offered by adverse lenders rather than the rates offered to those meeting all the normal lending requirements over the years?

I don't think it can be argued that these books offer the same quality of covenant as the normal high st loans over the same period, so you would have expected higher rates, but perhaps not as high or as slow to react as some of them seem to have been?