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Law could be changed to help mortgage prisoners - MSE News
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Former_MSE_Callum
Posts: 696 Forumite
The Government could make changes to the law which is often blamed for creating mortgage prisoners, Treasury Minister John Glen has said in a letter published today...
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'Law could be changed to help mortgage prisoners'
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'Law could be changed to help mortgage prisoners'
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I am new to this topic, but the law in question simply looks absolutely stupid to me. It does make sense to enforce checking affordability for new loans. If a person already has a loan and switches this debt to a new provider (or within the same provider), then what's the point?
If my understanding is correct, then whose fault is this - the notorious EU jobsworths' or our local UK ones'? The phrase "at least in the UK's interpretation" in the article seems to imply the latter that is very sad to put it mildly, especially in light of Brexit.0 -
I am locked into a lender, I would not pass the affordability test with a new lender.
My partner died, 8 years ago, big house, absolutely no money. I set the house up as a B&B. The lender sees me as being in breech of terms- I should have a commercial loan. So I cannot go to a lower rate or switch, just not enough income. Mortgage up to date, no arrears, 4 years to end of term, interest only. So I loose my home and income. Lender has not started proceedings against me.0 -
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I am new to this topic, but the law in question simply looks absolutely stupid to me. It does make sense to enforce checking affordability for new loans. If a person already has a loan and switches this debt to a new provider (or within the same provider), then what's the point?
Many of the new "providers" have no capacity to underwrite new business. They've simply bought up chunks of the old Lehmans, GE, Northern Rock, Morgan Stanley, Bradford & Bingley (and so on) loan books. From the pre crash days. The idea seems to be to force them to do something, rather than leave people stranded on high variable rates.
The wider issue is how these mortgages would be funded in the wider market if people were able to remortgage. Not the funding to support. The debt bubble is going to take some years to unwind.0 -
I am locked into a lender, I would not pass the affordability test with a new lender.
My partner died, 8 years ago, big house, absolutely no money. I set the house up as a B&B. The lender sees me as being in breech of terms- I should have a commercial loan. So I cannot go to a lower rate or switch, just not enough income. Mortgage up to date, no arrears, 4 years to end of term, interest only. So I loose my home and income. Lender has not started proceedings against me.
Would this apply to me?
Probably not. I believe that the Mortgage Credit Directive only applies to residential mortgages and consumer BTL, and not commercial loans.0 -
I don't see how this answers the question. My understanding is that the existing law doesn't allow any other provider to give a better deal to these people, i.e. to pay the debt to the existing provider. Why on earth? The amount owned by the borrower remains the same, they don't borrow extra.Thrugelmir wrote: »Many of the new "providers" have no capacity to underwrite new business. They've simply bought up chunks of the old Lehmans, GE, Northern Rock, Morgan Stanley, Bradford & Bingley (and so on) loan books. From the pre crash days. The idea seems to be to force them to do something, rather than leave people stranded on high variable rates.0 -
I don't see how this answers the question. My understanding is that the existing law doesn't allow any other provider to give a better deal to these people, i.e. to pay the debt to the existing provider. Why on earth? The amount owned by the borrower remains the same, they don't borrow extra.
I don't believe it does either. There is no issue with capacity.
The EU, bless 'em, decided that, in order to prevent another big financial crash, it would be best to introduce rules that forces lenders to adopt certain affordability criteria in order to ensure that borrowers can repay their loans. The unintended consequence of this is that it equally applies to existing borrowers wishing to remortgage.
I must admit I don't know whether MCD applies in the case of someone who simply wants to switch deals with their current lender, but it certainly applies to remortgages with a new lender. And a number of people who originally took out loans with the NR and B&B for example, now find themselves with NRAM or the likes of Cerebus who don't and can't offer new mortgages, and are (it seems) unable to remortgage elsewhere.
These are the 'mortgage prisoners' and the MCD is blamed for their plight. Although I suspect a number of them will still be stuck even if the law is changed.0 -
These are the 'mortgage prisoners' and the MCD is blamed for their plight. Although I suspect a number of them will still be stuck even if the law is changed.
I agree - for those in genuine difficulty, it will be hard for them to persuade an alternative lender to replace their existing one. It would simply move the credit problem to the new lender. What would be in it for them?0 -
I am locked into a lender, I would not pass the affordability test with a new lender.
My partner died, 8 years ago, big house, absolutely no money. I set the house up as a B&B. The lender sees me as being in breech of terms- I should have a commercial loan. So I cannot go to a lower rate or switch, just not enough income. Mortgage up to date, no arrears, 4 years to end of term, interest only. So I loose my home and income. Lender has not started proceedings against me.
There are a couple of "normal" lenders who will allow you to take out a residential mortgage if your home is a B&B but I think there is a limit to 2 or 3 rooms.
If you have more than that, you are going to struggle to move to a new lender.I am a Mortgage AdviserYou should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.0 -
I am locked into a lender, I would not pass the affordability test with a new lender.
My partner died, 8 years ago, big house, absolutely no money. I set the house up as a B&B. The lender sees me as being in breech of terms- I should have a commercial loan. So I cannot go to a lower rate or switch, just not enough income. Mortgage up to date, no arrears, 4 years to end of term, interest only. So I loose my home and income. Lender has not started proceedings against me.
What happens in 4 years time when the mortage ends? What is/was the plan to repay it?0
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