Northern Rock End of Mortgaged Deal (Merged Threads)

jessypotter

Me and my partner bought our house with Northern rock in October 2007 - just before everything happened. We are on a five year fixed deal.
Since then, our circumstances have changed - my partner works from home, and we are expecting a baby, so could really do with a larger house. My wage has doubled since we got the mortgage, so that should not be a problem - the problem is Northern rock can't lend us anymore money, yet if we move the mortgage we have to pay £4500.
I understand what other people are saying - that technically Norhern rock are not breaching a contract, because we didn't sign to say we could increase the mortgage, it was just understood as an option for the future.
However, it has left us and countles others in an awkward position. I have written a formal complaint to northern rock asking them if they could waiver the fee as a good will gesture (!) Not sure what to expect, but if you don't ask..

semanticist

CSC1 wrote: »

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.

I'd just like to reinforce the point that I'm not in a different position than anyone else posting here. I have ~£30,000 of negative equity and absolutely cannot move mortgage providers. I'm actually in a worse position than many, and suspect/fear that somewhere down the line I'm going to have to default on the mortgage.

CSC1 wrote: »

I was not aware that a contract could only be considered unfair at the point of signing.

It's not that it's 'only' unfair at the point of signing - it's that the contract hasn't changed. It's a fixed legal document. If it wasn't unfair when you signed it, then it cannot have become unfair since then, unless 'unfair' is a synonym for 'doesn't give me what I think I'm entitled to'.

CSC1 wrote: »

- 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

Did the literature promise another mortgage deal? Do you have copies of the literature that says this?

I'm genuinely curious, as we got our mortgage through a broker and didn't see any of Northern Rock's sales literature at all. Our broker certainly made implicit promises about what we could do in future, but those aren't contractual obligations.

How is your situation different from a normal mortgage? If I have any non-fixed-rate/tracker mortgage the lender could put the rates up to 15% and I'd have no option but to pay it, until I could sell the house or move to another lender. If neither of those options are available it's either because I borrowed too much or was caught in a falling market. I don't see how either makes the mortgage contract unfair.

CSC1 wrote: »

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".

If you have documentation which mentions taking out a further fixed rate term, you might be able to put together a good case for breach of contract. If all you have is recollections of what a sales guy said to you, then you've got nothing. Sales guys are liars - it's their job. You cannot believe anything they tell you. (This goes across all industries! Selling and politics are the careers for professional liars!)

As far as 'only' having the SVR - that's just madness. The contract also doesn't say that Northern Rock will give you an elephant for your birthday, or that if you pay off your loan early they'll put a ribbon around the moon. A contract promises only what it specifically says it promises (plus a limited number of statutory things). If it doesn't say 'you have the option to do X', then you don't. Again, this goes across pretty much every contract you'll ever sign, even employment contracts! (Although there's a load of stuff that's statutory there that you get by default.)

CSC1 wrote: »

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.

This is all a bit paranoid and seriously ill-informed. The government's buying of NR isn't why it has cheap money - every bank has access to nearly free money right now. Also, NRAM's SVR hasn't moved since NRAM was formed. (Plug! Follow @northernrocksvr on Twitter to see if it changes.) It's not especially high, either.

Northern Rock doesn't have 'government debt' - it's OWNED by the government. It's not like RBS or Lloyds Banking Group who sold shares to the government but remain otherwise normal public companies. Northern Rock will probably be sold to another bank at some point. That was the whole point of splitting NRAM out. NRAM will never be sold - if your mortgage is with NRAM then it's a 'toxic debt'. NRAM isn't lending any money, so its income (from mortgage payments and people paying off loans) only has to cover its running costs and written off bad debt from mortgage defaults. It'll likely make big profits right now, but in the long term these will have to offset defaults over the lifetime of the mortgages.

That, incidentally, is why NRAM won't offer you - or anyone else - more money or fixed-rate terms. They want you off their books. The quicker people leave the quicker the company can be wound down. Realistically, the government potentially faces and overall loss on NRAM, although it might make it back through a canny rehabilitation and sale of Northern Rock. It won't be possible to tell until all the NRAM mortgages are over, which could take 20 years.

CSC1 wrote: »

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.

The analogy doesn't hold. While the FSA would definitely be unhappy about a bank under-reporting, say, default rates on a mortgage product, it doesn't change YOUR position. When you took out your mortgage Northern Rock was either the best deal or the only deal that you could get - otherwise why would you have taken it out? In that case, if their deal was withdrawn you would either have no mortgage at all (and most likely would have been on here, complaining that no one would give you a mortgage!) or you'd have exact the same position with another, non-state-owned, bank.

If you think you'd be better off without the mortgage, then sell your place and pay it off. If you have negative equity then either take out a personal loan for the difference or default on it. Either option will leave you out of pocket - but you have to accept at least SOME responsibility for signing the contract. Even if you don't agree with me entirely you can't possibly put all the blame for your situation with your bank.

CSC1 wrote: »

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.

I don't understand how they're not. Everyone with a mortgage now owned by NRAM is being treated the same. Those mortgages were selected based on LTV ratios, risk levels, probably also if the mortgage had been 'productised' (horrible word), etc. If you fall into those categories it's unfortunate, but not unfair. Unless 'unfair' means 'doesn't give me what I think I'm entitled to'.

CSC1 wrote: »

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.

BMW are really really unfair. Their cars cost so much more than Hyundai. Why should car buyers be discriminated against just because they happen to want a particular car from a particular company?

IcklePickle_2

Have any of you tried to get a settlement fee for the UNSECURED part of the Together mortgage only? From NRAM. Just wondering if anyone has asked for this recently, not sure if it's the same as any other loan settlement fee or if the whole NRAM thing makes any difference to whether we're able to settle early without settling the whole Together product?

CSC1

No haven't tried it, but have been re-reading all my documentation recently. I am pretty certain it's just an unsecured loan, so no different to a personal loan. You can make overpayments when you like and all round it's pretty flexible - I am not aware of their being any charges to repay early.

I happen to be of the opinion that NRAM will probably bite your hand off if you have the funds to repay it. Many view the Together product in a sinister way e.g. if the mortgage element is 95% LTV and the additional unsecured element is a further 15% of the house value, then some might say your true LTV is 110% which = negative equity and is NRAM's eyes that's high risk. And high risk is not good for their mortgage and loans book.

You're probably much more likely to be able to move your mortgage or have greater flexibility in the market place if you don;t have the unsecured element hanging round your neck. Also if you do move your mortgage and maintain the unsecured loan with NRAM, then they can hike the interest rate you pay for de-linking the loans.

I urge you to speak to NRAM to get absolute clarity and then speak to a mortgage adviser or FPM regarding what's your best course of action, as they'll take into account all of your circumstances and options.

Good luck.

dvr80

Interestingly I called NRAM earlier to ask about the possibilty of moving from our current house worth about £150k wioth outstanding balance of about £150k (ie 100% ltv) and buying a lower value property at say £120k obviously again with a £120k mortgage and therefore still 100% ltv.

Not possible says the good lady at NRAM which as I explained to her seemed a bit backward - if they're basing their decisions on risk then surely the risk is exaclty the same in % terms however the actual value at stake is 25% less by only borrrowing 120k and not 150k?

\I'm probably looking at this too simplistically as a borrower but I haven't set my heart on it or made any plans, the idea simply ocurred to me this evening and I thought I'd ask the question.

Anyway, back to the TV

semanticist

dvr80 wrote: »

Not possible says the good lady at NRAM which as I explained to her seemed a bit backward - if they're basing their decisions on risk then surely the risk is exaclty the same in % terms however the actual value at stake is 25% less by only borrrowing 120k and not 150k?

They're not deciding based on risk. NRAM aren't giving out new loans to anyone, and what you're wanting to do is effectively pay off one mortgage and take out a new one.

Doesn't matter your risk, or your LTV ratio, or anything. NRAM aren't creating any new contracts!

Renfield

dvr80 wrote: »

Interestingly I called NRAM earlier to ask about the possibilty of moving from our current house worth about £150k wioth outstanding balance of about £150k (ie 100% ltv) and buying a lower value property at say £120k obviously again with a £120k mortgage and therefore still 100% ltv.

Not possible says the good lady at NRAM which as I explained to her seemed a bit backward - if they're basing their decisions on risk then surely the risk is exaclty the same in % terms however the actual value at stake is 25% less by only borrrowing 120k and not 150k?

\I'm probably looking at this too simplistically as a borrower but I haven't set my heart on it or made any plans, the idea simply ocurred to me this evening and I thought I'd ask the question.

Anyway, back to the TV

Assuming you have the £30k to reduce the balance and the additional funds to cover legal fees etc, and also have kept your nose clean (ie not in arrears, missed payments) it is very possible to do that.

Assuming you meet the criteria above, the lady was incorrect

Renfield

semanticist wrote: »

They're not deciding based on risk. NRAM aren't giving out new loans to anyone, and what you're wanting to do is effectively pay off one mortgage and take out a new one.

Doesn't matter your risk, or your LTV ratio, or anything. NRAM aren't creating any new contracts!

While technically they are not creating new contracts, NRAM will allow you to "port" your existing mortgage to a new property. (without lending any more, or increasing LTV)

jwil

Renfield wrote: »

While technically they are not creating new contracts, NRAM will allow you to "port" your existing mortgage to a new property. (without lending any more, or increasing LTV)

Actually NRAM would not allow us to do that, even though we had an agreement in principle with them before they split. When we actually came to do it, just after the split we were refused.

We were moving from a house sold for £137,500, with a mortgage of £132,000 to a house valued at £180,000 and wanting to port our existing mortgage with no additional borrowing. We had no repayment issues with them throughout the time we had the mortgage.

Renfield

Something doesn't add up.

I won't mention my employer, but I KNOW Northern Rocks mortgage policy. And know that your scenario is done all the time.

There must have been an underwriting issue which prevented it.

Had you bad credit/missed payments elsewhere?