Northern Rock End of Mortgaged Deal (Merged Threads)

beingjdc

Thanks Martin. The problem stems from the allowance for impairment on Northern Rock's mortgage book. They were planning for a default rate of 0.06% - clear madness! I don't know how we can get out of it.

Writing loans for the excess equity so people can remortgage at 95%, and guaranteeing those loans so that the new lender doesn't balk at the prospect is one way, but would risk leaving us back where we started plus a large taxpayer loss.

What I will say again though is that after this period of shameful ramping by estate agents, banks, TV channels, etc, is that for at least a limited period anyone on a residential mortgage at over 100% LTV (when taken out, not including people who have 'withdrawn equity' to go on a cruise!) should be allowed to walk away and call it quits.

Rachman_2

beingjdc wrote: »

What I will say again though is that after this period of shameful ramping by estate agents, banks, TV channels, etc, is that for at least a limited period anyone on a residential mortgage at over 100% LTV (when taken out, not including people who have 'withdrawn equity' to go on a cruise!) should be allowed to walk away and call it quits.

Are you serious ? People were adult to take the money and spend it (and only some spent it all on a house (as you say)). You seem to be advocating that it's someeone else's fault and people should be allowed to just forget it. Personal responsibility - they wanted the money and they wanted the upside - but you seem to say they ought to be allowed to walk away without the down. No chance.

The best you will possibly see (and I suspect is already an unwritten policy) is that they won't be quite so quick to repossess if you fal lbehind. If you think about it, the people stuck on SVR who DO pay their mortgage are fantastic customers - the problem with them is the risk that they stop paying, especially if they are 100% plus borrowers - the bank won't see its money back, so it's far more likely NOT to repo someone who owes more than their house is worth in a repossession sale (provided that person is making attempts to meet the payments).

Interesting that Martin agrees with the 'commercial ones' on here - usually we get a bit annoyed by the 'woe is me and it's all someone else's fault' crowd, but I get the sense that Martin's been looking at it the same way - NRK cannot be sustained and the 100% plus borrowers who overstretched to buy just to buy top get on the ladder without logic or even contemplating that house prices may fall or mortgage costs may rise (and that is a fair number of us, if we are honest - we just looked at the upside) will struggle and a lot will fall by the wayside.

There are three real bodies in the UK that can save these people they are :

the government - won't care unless sentiment moves - but has a massive financial exposure
the FSA - toothless, disorganised, underskilled and undermanned and not independent
the courts - less independent than you might think.

There is not much that can be done - the lending was reckless - the borrowing was just as reckless - so all parties (sadly) will have to take what's coming.

poppy10_2

beingjdc wrote: »

What I will say again though is that after this period of shameful ramping by estate agents, banks, TV channels, etc, is that for at least a limited period anyone on a residential mortgage at over 100% LTV (when taken out, not including people who have 'withdrawn equity' to go on a cruise!) should be allowed to walk away and call it quits.

How ridiculous. People have (or at least should have) gone into this with their eyes open - the signs were all there, there's no excuse for not doing even basic research before making the biggest financial decision of your life.

Yes estate agents and media were ramping property, but that doesn't excuse blatant greed and stupidity by the general public. If you saw the repeat of Property Ladder last night, you'd have seen two prime examples - one couple bought a house after they had seen it in passing in an estate agents window, without bothering to view it or check out the local area. They planned to fix it up and sell it on for a £100,000 profit. The guy stated he wanted "the kind of lifestyle I could never achieve with a regular 9-5 job". When Beaney asked him why he thought property was easy money, he said (this is true) "because all the property programmes say so!"
As the programme was made a few years ago, he actually exceeded his target profit, but those who went into property investment last year will not be so lucky, and deserve everything that comes to them.

beingjdc

poppy10 wrote: »

How ridiculous. People have (or at least should have) gone into this with their eyes open

Ditto PPI, ditto Bank Overdraft Charges, ditto Mortgage Exit Fees, ditto any number of scams.

Of course both parties to a 100%+ mortgage could have foreseen that there would be a loss at the end.

I just think more of that loss should be borne by the party which employs highly-paid surveyors, economists, actuaries, traders and statisticians, than by the consumer.

Crokeria

That's a pretty harsh last sentence poppy10. My point is that all of us on the Together Mortgage would be absolutely fine IF Northern Wreck had not decided to scrap it overnight. They should stop it for new customers but keep it for existing customers...throwing those with no equity onto SVR will just lead to reposessions...yes they may be reluctant to repossess but they could help us and themselves by avoiding this scenario NOW and coming up with a package to assist THEIR CUSTOMERS. Some of you here seem almost to be gloating at this misfortunes of others, many of whom are not out to make a fast buck, just buy a home, but were not in a fortunate position to be able to save for a massive deposit. I'm glad you are enjoying telling everyone "I told you so" but unfortunately that will not help us.

If anyone gets into trouble I suggest obviously contacting NR, make sure you keep us the payments on the mortgage bit - the unsecured loan can wait. Simplistic view but its the mortgage that is more important. If prices fall so be it, its only a problem if you wanted to sell! Just sit tight and ride it out..if like me you will be trapped on SVR then (hopefully) it won't be for ever. My fixed rate doesn't run out til June 09 when my payments increase by £102. I shall be making overpayments NOW in order to get used to paying a higher amount.

Its early days, but as some have suggested NR will not want to be repossessing and my guess is that eventually some kind of package will be put together. But its important for Together customers to find a voice and MAKE A FUSS. I am going to write to NR asking for them to ensure Together customers are not abandoned:

Northern Rock
Northern Rock House
Gosforth
NEWCASTLE UPON TYNE NE3 4PL

Please write in. In the meantime thank you to Martin and all the other contributors. If anyone else wants to post suggesting that we caused the mess, were foolish, deserve it, etc etc then go ahead but its not actually VERY HELPFUL.

jamesd

Crokeria wrote: »

SURELY this is unethical?

It's entirely ethical. You signed up for a mortgage deal that started out with one rate then switched to another rate. Northern Rock are completely honouring the deal you signed up for.

Crokeria wrote: »

We have done NOTHING WRONG.

You did several things wrong, at least:

1. You assumed that Northern Rock would be willing and able to offer you a new discounted deal instead of honouring the terms of your original deal.
2. You assumed that if Northern Rick didn't offer you another deal, someone else would.
3. If switching to SVR hurts, you assumed that Bank of England interest rates would remain below SVR so you could get a mortgage deal that was as cheap as your current one.

Those were risks that you took. You may not have realised that you were taking them but you still did take them. More usually you'd face those risks if you became ill and couldn't repay for a while, then had bad credit so nobody wanted to lend to you. As now, that could force you to stick with the same lender and pay SVR.

You could have avoided this remortgage risk (1 and 2). Life of mortgage tracker deals are readily available and make it completely unnecessary to remortgage. But this may have meant that you would have had to delay buying and/or pay a higher interest rate initially.

Crokeria wrote: »

I suggest NR immediately honours exisiting rates for another 2 years

You're suggesting that the taxpayers subsidise your mortgage by lending to you are a rate lower than Northern Rock has to pay for the money it's lending to you. That's not fair to the taxpayers who would be paying the subsidy bill.

The shareholders already lost almost all of their money by doing that subsidising when the cost of money increased. That was their risk, via NR management: that rates would not increase above the rate you were being charged. They lost that bet, just as you might lose yours, but I think your deal is ending far enough in the future that you'll be OK.

Crokeria wrote: »

for those of us happily meeting our repayments I fail to see why this has caused Northern Wreck a problem

Northern Rock borrowed money on short term money markets to raise the money to lend to you. That meant that it had to regularly reborrow the money. When the credit markets dried up it was unable to do so. Those who have perfect payment records are a problem because it still has to raise that money somehow, paying much high rates to savers, the government or the money markets than it used to have to pay. And that's why it's no longer in a position to offer you a new discounted deal: that deal would be below the price it's paying to borrow the money.

Crokeria wrote: »

Do you think Rachman, the FSA will have anything to say about this?

Of course not. Northern rock are fully honouring the terms of the deal that you accepted.

Your deal expiration is far enough in the future that you may well find good alternative deals available again before this directly affects you. This means that you're a pain to Northern Rock: they have to continue to reborrow the money to pay for the money they lent you but your mortgage deal is at a rate far below the one they are paying for the money. Yours is one of the mortgages that's making this so painful because other people have to pay more to Northern Rock so they have a chance of making the books balance between your low rate and SVR. They'd love it if you left so they could stop losing the money that your deal is costing them now.

Anyone with a deal like yours who can get a good deal elsewhere can help the situation by remortgaging once they can get that decent alternative deal. That'll reduce the number of mortgages that those paying SVR have to subsidise.

It's a mess and those to blame are the US lenders who had far too lenient lending standards, combined with dodgy brokers and valuers and the misfortune of a bursting US property price bubble.

Rachman_2

Writing to NRK is a waste of time. Your local MP is better - he owns it now.

Can I ask you guys, what would you do if you had lent someone £100 and then you became short of cash and NEEDED it back. Would you want it back ? Or would you think "oh, it's tough for them too".

Now multiply that so 100 people owe you £100, then a million, then 5 million, etc.

NRK has to do the best thing for its creditors - and that is the government these days, not the borrowers. There's no point gloating, there's no pointing pontificating, but by the same token the borrowers have to also accept that it's also their 'fault' as well - not simply going after everybody else in the hope of a miracle - because I fear there's more chance of winning the lottery.

NRK would have been better left to fail apart from Gordon desperate for it not to happen on the pretence that it would knock confidence in the UK as a place to do business (read be an damning indictment on his chancellorship). Rubbish (in my semi informed view). Now they'd nationalised it, it will be an absolute disaster for the UK, for our wallets and for the borrowers who can't move. So go after your MP, they are far more likely to be listened to than the customer service team at NRK (who will mostly be losing their jobs, BTW).

Crokeria

Thanks guys. Yes I realise NR have every right to do what they are doing. But all banks have the right to enforce repossession for non payment etc, but the Mortgage Council and FSA etc make sure the banks follow a code of conduct and have to be seen to help, so repo's are the last resort. That's all I'm asking for them to do now. Having lots of people lose their homes is going to help no one except speculative property developers. Consumer power does count for something...didn't a better deal for Equitable Life customers come about because they made a stand?

kingkano

jamesd wrote: »

snip

Yours is one of the mortgages that's making this so painful because other people have to pay more to Northern Rock so they have a chance of making the books balance between your low rate and SVR. They'd love it if you left so they could stop losing the money that your deal is costing them now.

Anyone with a deal like yours who can get a good deal elsewhere can help the situation by remortgaging once they can get that decent alternative deal. That'll reduce the number of mortgages that those paying SVR have to subsidise.

snip

I dont understand it because everybody (press etc) keeps saying NR want shot of their mortgages. For reasons similar to the above, and also just to reduce their book etc. But anybody who phones NR and asks to leave their deal early has no joy. Pay the ERC they say. yet surely if they wanted shot of people costing them so much from the SVR they'd let you out of your deal early, waive the ERC, to accomplish this end? Letting you go elsewhere and getting their money back.. But they won't. SO I'm not sure I can quite believe this?

Also remember not everyone who went to NR is sub prime borrowed over 100% etc. They did offer very competitive long term fixed rates all last year. These people on the long term fixes must be hurting NR in the same way as you describe??

lotto-dreamer

Jamesd:

1. You assumed that Northern Rock would be willing and able to offer you a new discounted deal instead of honouring the terms of your original deal.
2. You assumed that if Northern Rick didn't offer you another deal, someone else would.
3. If switching to SVR hurts, you assumed that Bank of England interest rates would remain below SVR so you could get a mortgage deal that was as cheap as your current one.

...Northern Rock's directors also did a lot of assuming too - but at least the government has kindly helped them out :rolleyes: