Northern Rock End of Mortgaged Deal (Merged Threads)

mutron_2

I just spoke to Northern Rock. The ERC repayments end tomorrow so, unless you are completing a move to a lender for a larger mortgage today, you will not qualify.

garbaldisham

Hi, I'm a newbie so please be kind!

We've been on an NR mortgage for five years nearly, and our fixed rate expires in October. We're up to date with it, have 25% equity, we're both fortunately in full time employment. So I rang them and asked if we could fix for another five years - no, they said, as it seems we're with the "Bad" bit of NR, so it's SVR for us forever unless we switch to another lender.

A potential problem is that we have a debt management plan through CCCS (long story, sudden change of circumstances a while ago and abruptly couldn't support repayments, getting our act together now) - how likely are we to be able to get another deal? As I said, we've always prioritised mortgage and utilities and have no arrears with any of them, and we're demonstrably dealing with the other debts, but we don't want to be at the mercy of a "pariah" bank for another 20 years.

Thank you in advance for all advice

MarkyMarkD

NRAM's SVR isn't particularly high. Nor are you going to save huge amounts by switching to a fixed rate somewhere else, at least in the short term. They are not a "pariah" bank at all - they just have the NR securitised mortgages which are no different to any other NR mortgages.

But, like anyone with any lender who has a dodgy credit history, you are going to find it hard to remortgage elsewhere. So, continue "getting your act together", clean up your history, and in a few years' time you'll have the option of remortgaging.

shebanjoed

Garbalisham - My NR fixed rate ends in October as well so looking into all options - one being interest only for a maximum 12 months giving you some breathing space.

Paul_Gatenby

Hi Forum,

Sorry is this has been raised before, my partner and I have a fixed rate interest only mortgage with NR, I called them on Monday as I wanted to look around at another deal, our current deal expires in Aug 2011, I was told that we would not be offered another product when this expires as I expected, but how can they still hold you to the penalty clause of £4500 when they are not going to extend your business with them?

Our current rate is 5.19% and the best deal I have found to switch to a repayment is 2.13% with ING Direct - why are they being so worthy?

Any ideas how to tackle this issue?

Best wishes

Paul

semanticist

Paul_Gatenby wrote: »

but how can they still hold you to the penalty clause of £4500 when they are not going to extend your business with them?

Keep in mind that refusing to offer you another deal isn't the same as not doing business with you. The contract you signed was for an initial fixed rate period, and then the remainder of the term on a variable rate. It wasn't for a series of fixed rate deals. Nothing's changed at all on the contract you agreed, and if you don't switch to another lender at the end of your fixed rate period you'll just go onto their standard variable rate.

Don't really see why you should be able to get out of the contract early just because Northern Rock are now perceived as 'bad'. Either pay the penalty and switch now, or wait until the fixed term is over, depending on which one makes the most financial sense for you. Depending on your mortgage, a 3% cut now might it worthwhile to pay out the penalty clause.

CSC1

While I think your arguments are logical and rational, I'm not sure I agree with you and for other people posting don;t give up hope just yet, especially given the recent return to profit of the so called "bad Bank".

Northern Rock made promises to its customers that "once you are an existing customer, you can change to another deal...... you can transfer to any of the mortgages [sic] deals available to our new customers at any time...."

The problem with the aproach NR is taking is that it trapping people onto an SVR when said people have absolutely no hope of going to another lender because of high LTVs and just as likely high linked elements of unsecured borrowing.

Irrespective of whether the current rate of interest (the current SVR) is relatively high or relatively low, or about right, you, me and just about eveyone else knows that interest rates will only go one way - up. Not allowing people to enter into a fixed rate deal and so insure against the inevitable is, in my view, anti-competitive, morally wrong, and down-right irresponsible when you think that Together product holders are probably the highest geared, the most vulnerable and the most at risk from losing their homes should rates rise sharply in future.

It is important to remember, these people do not have a choice. Many cannot go to another lender, because no lender will touch a Together [re]mortgage. And even where LTV is <90%, the delinking of the unsecured element penalises customers with a 5 - 8% hike which'll probably eat up any savings made on a lower mortgage deal.

Personally, I happen to think that Northern Rock is guilty of:

1: Unfair contracts
2: breach of contract
3: Anti-competitive practices
4: Irresponsible and illigitimate lending practices
5: Not treating customers fairly

The bottom line with this as I see it is that most Together customers don't want to get out of paying their mortgage, or shirk their responsibilities as the borrower who got it wrong. They just want to be treated the same as any other customer and have access to alternative products (Northern Rock or other) which puts them in control of their destiny. Ultimately - to have a choice.

The ironic thing about this is Northern Rock's statement yesterday insomuch that the Bad Bank is borrowing very cheaply from the wholesale markets and is therefore making a killing on the interest rate differential. Of course it's borrowing cheaply, these are Government backed securities. However, none of that is being passed on which is highly unethical given where this bank was 3 years ago. If Northern Rock can lend to new customers at 2 to 3%, then it can damn well help Together customers stuck on an SVR which will only go one way.

Semanticist you are a realist and a pragmatist, but to those who feel they've been and continue to be unfairly treated.......all is not lost just yet. Keep pursuing whatever action you feel is necessary and keep talking to NR.

semanticist

CSC1 wrote: »

Personally, I happen to think that Northern Rock is guilty of:

1: Unfair contracts
2: breach of contract
3: Anti-competitive practices
4: Irresponsible and illigitimate lending practices
5: Not treating customers fairly

If you honestly believe that, then write to Northern Rock Asset Management to complain, and when they don't agree, take it to the FOS.

Despite what you might read, the FOS does rule against banks when they're in the wrong. I don't think they would in this case, since almost none of your accusations actually make any sense.

Was the contract unfair when you signed it? What's changed in the contract since then? How, exactly, is it unfair?

How have they possibly breached your mortgage contract? That's a serious accusation to make against a company, so I hope that you've got an actual explanation for it.

How can it possibly be 'anti-competitive' to not offer competitive deals? You don't understand what 'anti-competitive' means. If Lloyds Banking Group or HSBC used their market size to artificially force lending costs down, so as to drive their competitors out of business, that would be anti-competitive.

Competition laws are not about consumer protection directly, they're about preventing monopolies from emerging. This is not the case here.

The argument about irresponsible lending is the only one that I think you could really make, but I'm not sure what benefit it gives you to make it. Many banks engaged in this, and most of the people complaining the loudest only have mortgages because of the banks irresponsible lending.

And while it is legitimate to place some blame on the banks for giving money out to people who couldn't realistically pay it back, at the same time no one held a gun to your - or my - head and forced you to take out a mortgage you couldn't afford. If I was still earning what I was earning when I got my mortgage, I'd be on the street by now. But that's not the fault of Northern Rock, or my mortgage broker. I signed the paperwork. I knew what the repayments would be. It was a bad decision, but it was one that I made.

People need to take personal responsibility for their poor choices and not blame others - the government, or banks, or the tooth fairy or whatever.

Finally, 'treating customers fairly' is about treating all customers the same and not showing preferential treatment. I don't see any sign that NRAM aren't doing just that.

I understand that it's an emotive issue, but people never seem to be able to explain why NRAM are 'unfair' or 'wrong'. It's just taken as read that the bank is automatically bad, just for being bank and following the terms of the contract.

One last thing: if anyone thinks that you should be able to change the terms of a mortgage contract because it no longer suits them, think about this: if you have that right, so would the banks. If your mortgage contract doesn't give you multiple fixed-rate terms, then the same power that would let you write it in later would let the banks do pretty much anything they liked.

Much better all round to just have a contract, read it at the start, and remember that anything that's not in the contract isn't guaranteed to happen.

Suziebear_3

Can anyone tell me if it is such a bad thing to stay with Northern Rock Asset Management on the SVR.

I know that we are stuck with them for a while as i took out 100% mortgage with them for an £87,000 property although it's split £77,000 is mortgage and £10,00 is a loan from them?. Anyway our house is luckily still worth what we paid for it and our fixed deal is due to end so i wouldn't have to pay them to leave but we do have a bit of trouble with our credit rate at the moment so i don't think we would be offered a new mortgage with anyone else and furthermore most lenders are only offering 85% mortgage now and we don't have a couple of thousand saved as a deposit.

Anyway back to the original Q, our rate will fall from 5.85 to 4.75 meaning we should actually save a bit of money so is that such a bad thing or does everyone get the feeling something bad may be imminent to happen. The feeling i get is that northern rock asset management want to keep the SVR rate fairly low as they know a majority cannot go elsewhere and would like to make it easier for people to afford their payments making sure they get the maximum amount back and that people actually pay instead of being forced into going bankrupt by a high rate.

Or are we just thinking they want rid of all of northern rock asset managements mortages even though they are making a profit now and feel they are going to do something like massively hike up the SVR at some point? Because form where im sitting 4.75 seems quite competitve so im quite happy with it, just trying to predict the future!

CSC1

Thanks for this and yes it's an emotive subject. It's also very easy for people (like me) to become completely obsessed by this because it's our livelihoods at stake, but also good to hear the opposing view. Ok, my view of the world is this (and by the way I have complained and will go to FOS, dependent on NR's view of course). Note I am not (as you might have gathered) versed in legal affairs or contracts and have not sought any legal advice at this stage.

But I do feel I owe you and other readers an explanation of my views. Many might disagree; hopefully some will agree. Anyway, this is what the little men in my head are telling me!

Unfair contracts - I was not aware that a contract could only be considered unfair at the point of signing. The contract is, in my view, unfair due to several reasons:

- I do not have a choice to move to other mortgage deals, as NR literature promised at the time
- I am saddled with a contract (and debt) where 100% of the control / power (call it what you will) rests with the lender and the debtor has no power to end that contract. NR could raise its SVR to 15% tomorrow and I have no option but to pay it.
- See below 'illegitimate and irresponsible lending' - the contract should never have still been available in the market



Breach of contract - the breach occurs because when I signed the contract NR advised that I could move to another mortgage deal once my introductory rate deal finished. Of course, this isn't in the loan agreement, just the supplementary literature, so therefore not the "contract" itself. NR will of course argue that it can vary terms and conditions; withdraw offers etc etc. But, I would argue that, in equal amounts, the contract did not state that, on maturity of the discounted variable rate introductory offer, I would only be able to able to have a mortgage linked to SVR for the remainder of the term. Emphasis of course on the word "only".



Anti-competitive - my allegation of NR being anti-competitive is not diectly linked to their reluctance to offer Together Product holders a competitive rate. It's anti-competitive practices are their abuse of their Government backed position in the markets. They can borrow extraordinarily cheaply because their creditors get AAA rated Bonds in return backed by UK Plc. This has, in itself, created a false money market, where a bank (let's remind ourselves - with debts of £22bn) can borrow more cheaply than, say HSBC, Standard Chartered etc on the money markets. The consumer protection element and related anti-competitive practice falls squarely with Northern Rock's ability to then derive higher than market norm / average interest rate margins from customers who cannot, because of their LTV ratio, go to any other competitor. It's not about the rate they offer, it's about their ringfencing up to 400,000 customers - plenty of whom do not have the luxury of an alternative product choice. Where a bank can make this amount of money in a falsely created market and not allow its customers to choose a product and where the market dictates that customers cannot move to a competitor - that is anti-competitive. The biggest crime of all is that the [past] Government legislated to allow this to happen, even though there's a clear conflict of interest. Think about it. The Government backs NRAM so it can borrow cheaply on the markets. NRAM sets whatever rate it damn well likes for customers who cannot move their mortgages. NRAM makes above expectation profit and repays more of its Government debt - and round and around it goes.


Irresponsible and illigitimate lending practices - aye your right about the "gun to the head". No-one did. But, the NR credit director has been fined (a record amount) for false accounting and, specifically, hiding from public view and in particular the FSA the extent of the bad debts and arrears position of NR mortgages - moreover it's Together product mortgage range. Instead, they continued to sell the Together product mortgage range hoping the position might correct itself (what did we learn from Nick Leeson and Barings?!!), when a public airing of the true figures could arguably have led to the Regulator demanding a withdrawal of the product, or at least a redesign of its features.

An analogy - not a good one, but food for thought - If a bank's investment manager sold a particular investment and the finance director lied about its performance, while continuing to sell it, might the FSA take the view that it was wrong to do so?

I haven't "lost" anything of course. I just hold the view that NRAM needs to stop treating Together product holders as if it's all their fault and start offering some flexibility and greater product choice, so they don;t "lose" out.


Treating customers fairly - quite simple really and reasons outlined above. Together product holders should be treated same or similar to other customers, especially those who have not defaulted or fallen behind. For those that have, they of course need bespoke help, outside of the standard product range. You mention not treating customers preferentially; equally customers should not be discriminated against just because they happen to have a particular mortgage with a particular company.


Well that's my view of the world.

Best,