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Results: Is it fair banking institutes have gained with fixed rate mortgages just before sub-p

Yes

70.59% • 24 votes

No

23.53% • 8 votes

Don't know

5.88% • 2 votes

You may not vote on this poll

34 votes in total.

  • FIRST POST
    jonesoswestry
    fixed mortgages should banks gain from their sub-prime fiasco
    • #1
    • 26th Mar 14, 5:57 PM
    fixed mortgages should banks gain from their sub-prime fiasco 26th Mar 14 at 5:57 PM
    We have an issue with a 10 year fix we took out in 2006, on 2 fronts.
    We have been in touch with the Woolwich and the FSA (now FOS ).

    When we took out our 10 year fix with the Woolwich we were obviously unaware, and would not expect, that the banks had been involved in a sub-prime lending ticking bomb which would affect future interest rates for the next decade. Our decision to take out the mortgage

    At the time, 23rd august 2006, and I still have the documentation to prove this, the Woolwich was offering a better rate for a ten year fix than a 3 year fix and 5 year fix and better than their variable rate at the time.
    How often will you see one lender offer a 10 year fix interest rate lower than their 3year or 5year fix.

    Our issues are:-

    A. It has always seemed unfair that we have suffered by paying a higher rate and the banks have benefited as a result of their bad financial practices.
    B. Did they know this was about to happen and where therefore offering lower rates to entice as many people in before the event.

    Wikipedia states that the banks became aware of the sub-prime bomb in the summer of 2006.

    Do people think Woolwich knew and is it fair they have gained from the banking bad practise they were part of.
    This may refer to other lending institutes.
    Last edited by jonesoswestry; 27-03-2014 at 11:01 AM. Reason: pedantic reply
Page 1
    • amnblog
    • By amnblog 26th Mar 14, 6:27 PM
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    amnblog
    • #2
    • 26th Mar 14, 6:27 PM
    • #2
    • 26th Mar 14, 6:27 PM
    You were offered a fixed rate for 10 years, details of which you were probably made aware of and you accepted.

    If mortgage rates had risen would you expect the Bank to come back to you looking for extra interest because your pricing seemed too modest.
    I am a Mortgage Broker

    You should note that this site doesn't check my status as a Mortgage Broker, 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.
    • kingstreet
    • By kingstreet 26th Mar 14, 6:30 PM
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    kingstreet
    • #3
    • 26th Mar 14, 6:30 PM
    • #3
    • 26th Mar 14, 6:30 PM
    Mortgage products are usually funded from external sources like the money markets and the rates for fixes depend on a market counterparty offering a rate-swap.

    The lenders will simply agree to the rate, fees and penalties and will make a fixed profit regardless of what happens to rates with the market counterparty taking the risks.

    Buying a fixed rate is all about payment certainty and not about trying to second-guess the money markets.

    I don't think anyone saw a period of four years plus where base rate was 0.5% anytime before 2009
    Last edited by kingstreet; 26-03-2014 at 6:32 PM.
    I am a mortgage broker. You 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. Please do not send PMs asking for one-to-one-advice, or representation.
    • dunstonh
    • By dunstonh 26th Mar 14, 6:58 PM
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    dunstonh
    • #4
    • 26th Mar 14, 6:58 PM
    • #4
    • 26th Mar 14, 6:58 PM
    A. It has always seemed unfair that we have suffered by paying a higher rate and the banks have benefited as a result of their bad financial practices.
    Absolute codswallop.

    B. Did they know this was about to happen and where therefore offering lower rates to entice as many people in before the event.
    Put your tin foil hat back on.

    Do people think Woolwich knew and is it fair they have gained from the banking bad practise they were part of.
    You bought a product knowing the terms. They arranged funding to allow them to offer those terms. Whats the problem?
    You buy a fixed rate to give you certainty of payment amount. Not to get the cheapest rate.

    Your issue is that you dont understand how it works and want to have your cake and eat it. Would you be saying the same if rates had risen and the bank thought it unfair that you were better off?

    We have been in touch with the Woolwich and the FSA.
    The Food standards agency will not be interested.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • Thrugelmir
    • By Thrugelmir 26th Mar 14, 8:27 PM
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    Thrugelmir
    • #5
    • 26th Mar 14, 8:27 PM
    • #5
    • 26th Mar 14, 8:27 PM
    Wikipedia states that the banks became aware of the sub-prime bomb in the summer of 2006.
    Originally posted by jonesoswestry
    That's with reference to the USA not the UK. While much lending practice was extremely poor in the UK. Certainly not on the scale of subprime lending in the USA.
    “Risk comes from not knowing what you are doing. – Warren Buffett”
  • jonesoswestry
    • #6
    • 27th Mar 14, 8:35 AM
    • #6
    • 27th Mar 14, 8:35 AM
    Whilst I am pleased for everyone to have their own views I need to clear up several inaccuracies about our knowledge of how mortgages work and add a bit more background information.

    We took out a ten year fix in 2006 because it would see us to the end of the mortgage on our home and we would be loan free at the end.
    amnblog, you are perfectly correct we were offered a fixed rate for 10 years, details of which we were made aware of (not probably) and we fully understood the contract.
    That is how we are in the position where we have nearly paid for our house and never missed a payment, even though we were badly let down at the start (when we were green) by overpaid mortgage advisers telling us that endowments were the way to go, we all know that one.
    We were happy in the knowledge that if the interest rates dropped we would be paying more (this doesn't mean we wished this to happen) because as dunstonh correctly pointed out it gave us the security we were looking for. However why dunstonh thinks FSA stands for Food Standard Agency and not Financial Services Authority (and makes him an authority) I have no idea. However I do apologise for accidentally referring to a body that was dismantled due to the fact they fell asleep during the financial crisis I write about.
    You are correct Kingstreet, mortgage products are funded from external sources like the money markets and the rates for fixes depend on a market counter party offering a rate-swap, but we now know the banks have been fiddling these rates as well, but this is still not my issue.

    None of these comments, however, answer my original post.

    Additional information
    In the Daily Mail on 24th January 2014 Mark Carney refers to the fact that prior to the crisis (when we made our decision) the interest rates were averaging 5%.
    So a 4.98% fix for 10 years was a perfectly sensible choice, especially as a 2 year fix and 5 year fix were 5.49%. and the SVR was 6.59%.... (I do apologise for not taking into consideration that Barclays Bank/Woolwich had been complicit in buying up bonds that included sub-prime loans)

    Since March 2009 the interest rate has been 0.5% (I know this is not the rate available before you tell me).

    Conclusion
    We have paid a higher rate than what has been available for the past 5 years (correct)
    The Banks have benefited from the disaster they created. (correct)

    In reply to dunstonh ‘Would you be saying the same if rates had risen and the bank thought it unfair that you were better off.’.... Look at the 6,700 borrowers who had West Bromwich B.S tracker mortgages that tracked the 0.5% base rate and then comment.

    So it’s OK for the banks to have their Bollinger and drink it.
    • dunstonh
    • By dunstonh 27th Mar 14, 9:16 AM
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    dunstonh
    • #7
    • 27th Mar 14, 9:16 AM
    • #7
    • 27th Mar 14, 9:16 AM
    even though we were badly let down at the start (when we were green) by overpaid mortgage advisers telling us that endowments were the way to go, we all know that one.
    Mortgage advisers never sold endowments and the average income of mortgage advisers is under £25k. Its not a well paid job for most (although some do succeed and make a very good living out of it).

    However why dunstonh thinks FSA stands for Food Standard Agency and not Financial Services Authority (and makes him an authority) I have no idea.
    Because there is no Financial Services Authority. There is the FCA. That is the Financial Conduct Authority. However, the FSA initials stand for Food Standards Agency.

    We have paid a higher rate than what has been available for the past 5 years (correct)
    So what?

    The Banks have benefited from the disaster they created. (correct)
    Yes, I am sure Northern Rock, Bradford and Bingley, Royal Bank of Scotland, Lloyds TSB and others all feel much better off.

    In reply to dunstonh ‘Would you be saying the same if rates had risen and the bank thought it unfair that you were better off.’.... Look at the 6,700 borrowers who had West Bromwich B.S tracker mortgages that tracked the 0.5% base rate and then comment.

    So it’s OK for the banks to have their Bollinger and drink it.
    Tracker rates are not fixed. They are not financed the same way. I have a sympathy with those that have seen increases over their contract terms and that does leave a sour taste in the mouth. However, you got exactly what you asked for. Certainty of payment for the mortgage period.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • El Torro
    • By El Torro 27th Mar 14, 9:25 AM
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    El Torro
    • #8
    • 27th Mar 14, 9:25 AM
    • #8
    • 27th Mar 14, 9:25 AM
    4.98% for a 10 year fixed sounds like a good deal to me. If you were getting a 10 year fixed now it wouldn't be much less than that.

    I'm not really sure what you're complaining about.
  • jonesoswestry
    • #9
    • 27th Mar 14, 10:23 AM
    • #9
    • 27th Mar 14, 10:23 AM
    dunstonh has a very good way of taking little snippets of a post and twisting or misquoting it.
    I never said mortgage advisers sold endowments...read again
    (they did however receive large commission from the companies who did and wrongly, unquestionably, advised)
    He missed off the part where I mentioned the FSA was disbanded due to being asleep at the wheel. This may give some sort of perverted glory in finding a slight mistake and turning it into an incorrect fact but they did exist.
    I suppose I'm meant to feel sorry for the banks he lists but (although not a financial expert like him) 9 years ago when banks were offering no deposit and 110% mortgages I can be quoted as saying this was a recipe for disaster. There position is however irrelevant to my circumstance and my complaint but due to their greed.

    I never said the tracker was a fixed rate, it should however track what it was set up to track. Even though he agrees, he tries to find issue with something that wasn't there.

    In reply to El Torro 4.98% would be a reasonable 10 year fix now, we are not looking at 10 year fixes now but we were 8 years ago prior to the crisis.
    What I am complaining about is I have estimated that we have paid between £4000 and £4500 more than what we would have paid had we not taken the 10 year fix before we were made aware of the disastrous policies the banks were involved in.
    Last edited by jonesoswestry; 27-03-2014 at 11:00 AM. Reason: typo
    • dunstonh
    • By dunstonh 27th Mar 14, 11:22 AM
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    dunstonh
    dunstonh has a very good way of taking little snippets of a post and twisting or misquoting it.
    lets see shall we....

    I never said mortgage advisers sold endowments...read again
    in post #6 you said: even though we were badly let down at the start (when we were green) by overpaid mortgage advisers telling us that endowments were the way to go, we all know that one.

    (they did however receive large commission from the companies who did and wrongly, unquestionably, advised)
    No they didnt. Mortgage advisers are mortgage advisers. They are not authorised to set up or advise on investment products. They cant receive commission from them as they do not hold the regulatory permissions.

    He missed off the part where I mentioned the FSA was disbanded due to being asleep at the wheel.
    Only after I mentioned food standards... Plus, I see you have edited your post to say the FSA was replaced by the FOS. The FOS has not replaced the FSA.

    I suppose I'm meant to feel sorry for the banks he lists but (although not a financial expert like him) 9 years ago when banks were offering no deposit and 110% mortgages I can be quoted as saying this was a recipe for disaster. There position is however irrelevant to my circumstance and my complaint but due to their greed.
    The credit boom showed a lack of responsibility. You had irresponsible banks giving money to irresponsible borrower. However, that has nothing to do with your issue. Mistakes in one area do not mean that every other area is wrong as well.

    In reply to El Torro 4.98% would be a reasonable 10 year fix now, we are not looking at 10 year fixes now but we were 8 years ago prior to the crisis.
    So, if you didnt like the rate, why did you buy it?

    What I am complaining about is I have estimated that we have paid between £4000 and £4500 more than what we would have paid had we not taken the 10 year fix before we were made aware of the disastrous policies the banks were involved in.
    Complain to yourself then as it was your decision. Has the bank broken any terms? No. Has the bank given you what you asked for? yes.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • JimmyTheWig
    • By JimmyTheWig 27th Mar 14, 11:40 AM
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    JimmyTheWig
    Are you (now) on a repayment mortgage, OP?
    If so, I suspect that you are better off with your 4.98% 10 year fix than you wuold have been with a 5.49% 5 year fix followed by, say, a 3% 5 year fix.
    • mrginge
    • By mrginge 27th Mar 14, 11:48 AM
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    mrginge
    This is very interesting.
    Are you accusing the woolwich of deliberately misleading you by not telling you that their lending practices would result in a global financial crash?

    I'm sure a good lawyer would be interested in this accusation.


    ...Until you tell them you got your evidence from wikipedia FFS.
  • jonesoswestry
    in post #6 you said: even though we were badly let down at the start (when we were green) by overpaid mortgage advisers telling us that endowments were the way to go, we all know that one.

    Where does this say a mortgage advisor sold me an endowment. The overpaying refers to the commission they received for bad advice. (Endowments paid large commissions to advisers) that little piece in the brackets is off Martin Lewis on his section about mis-sold endowments


    No they didnt. Mortgage advisers are mortgage advisers. They are not authorised to set up or advise on investment products. They cant receive commission from them as they do not hold the regulatory permissions.

    The criteria around what mortgage advisers can and can't do changed as a result of mis-sold endowements. So are you telling me they did not, at the time, get commission? again refer to Martin Lewis quote in brackets.

    Only after I mentioned food standards... Plus, I see you have edited your post to say the FSA was replaced by the FOS. The FOS has not replaced the FSA.

    I changed as a result of your pedantic thread and I changed to FOS as that was who I meant to put in the first place as the body I have complained to.

    The credit boom showed a lack of responsibility. You had irresponsible banks giving money to irresponsible borrower. However, that has nothing to do with your issue. Mistakes in one area do not mean that every other area is wrong as well.

    The irresponsible banks lending to irresponsible borrowers (someone who may have difficulty repaying the loan) is precisely why the financial collapse happened and that is what sub-prime lending is.

    So, if you didnt like the rate, why did you buy it?

    You really need to read more clearly I never said I wasn't happy with the rate (at the time). What I am unhappy with is the rates that I have been unavailable to obtain since and I'm paying the rate that was applicable prior to the financial crisis.
    Last edited by jonesoswestry; 27-03-2014 at 1:43 PM.
  • jonesoswestry
    This is very interesting.
    Are you accusing the woolwich of deliberately misleading you by not telling you that their lending practices would result in a global financial crash?

    I'm sure a good lawyer would be interested in this accusation.


    ...Until you tell them you got your evidence from wikipedia FFS.
    Originally posted by mrginge
    To mrginge not everything on wikipedia is incorrect. The banks had to know at some point the financial crisis was going to happen. You tell me when this was. As the banks certainly will not.

    To all
    I never at the start of my post said they had, I was simply asking was it possible.
    If you did not think so why didn't you just say instead of sarcasm

    My argument is twofold even if they didn't know they have still profited.
    • dunstonh
    • By dunstonh 27th Mar 14, 2:14 PM
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    dunstonh
    Where does this say a mortgage advisor sold me an endowment. The overpaying refers to the commission they received for bad advice. (Endowments paid large commissions to advisers) that little piece in the brackets is off Martin Lewis on his section about mis-sold endowments
    The posts are there. Your information is wrong. Perhaps you can provide some evidence of these commissions paid to mortgage advisers for investment backed products as that would breach regulator rules as they would be acting outside remit and unlawfully.

    The criteria around what mortgage advisers can and can't do changed as a result of mis-sold endowements. So are you telling me they did not, at the time, get commission? again refer to Martin Lewis quote in brackets.
    Mortgage advisers have never been able to recommend or set up endowments. It required investment authorisations to do that.

    You really need to read more clearly I never said I wasn't happy with the rate (at the time). What I am unhappy with is the rates that I have been unavailable to obtain since and I'm paying the rate that was applicable prior to the financial crisis.
    If you are happy with the rate then why you are complaining about it? Your complaint will thankfully fail as it is a daft complaint and your allegations are outside the remit of the FOS as they have no ability to rule in commercial decisions. All they will do is make sure the disclosure documents at the time matched what you got.

    You seem to want your cake and eat it. You were happy with the rate when you bought it. You knew it gave you certainty of payment whether rates went up or down. No doubt had rates gone up, you would still be happy with it. However, as rates have fallen you believe that they have done something wrong despite completely adhering to the terms of the contract you were more than happy to enter into.

    Your complaint has to rank as one of the daftest i have seen. Throwing your toys out of the pram and quoting unrelated things and wiki entries does not aid your complaint either.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • antrobus
    • By antrobus 27th Mar 14, 2:19 PM
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    antrobus
    ....How often will you see one lender offer a 10 year fix interest rate lower than their 3year or 5year fix. ....
    Originally posted by jonesoswestry
    It happens whenever there is an inverted yield curve, i.e. the expectation is that interest rates will be lower in the future.

    ...Do people think Woolwich knew and is it fair they have gained from the banking bad practise they were part of....
    Originally posted by jonesoswestry
    I suspect that if Woolwich (aka Barclays) had known in 2006 what was about to happen in a year or two, they probably would have shut up shop, and not lent you any money at all.

    But I see where you're coming from. Because you locked yourself into what now seems to be an expensive 10 year fix in 2006, you think that your lender is somehow 'profiting' from your error. The truth is that banks act as financial intermediaries in that they take deposits from one set of people to finance loans which are extended to a completly different set of people. If Woolwich/Barclays was offering a particular rate on a 10 year fix in 2006, that would be because they had raised (or knew they could raise) matching funding at that rate minus a margin. Woolwich/Barclays are still making their margin, but the real winners would be whoever had given them the money in the first place.
  • jonesoswestry
    Are you (now) on a repayment mortgage, OP?
    If so, I suspect that you are better off with your 4.98% 10 year fix than you wuold have been with a 5.49% 5 year fix followed by, say, a 3% 5 year fix.
    Originally posted by JimmyTheWig
    I would have been exactly £600 better off with the 2x 5 year fix option of your choice, however I don't see that that is relevant.
    • JimmyTheWig
    • By JimmyTheWig 27th Mar 14, 2:36 PM
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    JimmyTheWig
    I would have been exactly £600 better off with the 2x 5 year fix option of your choice, however I don't see that that is relevant.
    Originally posted by jonesoswestry
    If that is not relevant then I really don't see what your point is.
  • jonesoswestry
    The posts are there. Your information is wrong. Perhaps you can provide some evidence of these commissions paid to mortgage advisers for investment backed products as that would breach regulator rules as they would be acting outside remit and unlawfully.



    Mortgage advisers have never been able to recommend or set up endowments. It required investment authorisations to do that.



    If you are happy with the rate then why you are complaining about it? Your complaint will thankfully fail as it is a daft complaint and your allegations are outside the remit of the FOS as they have no ability to rule in commercial decisions. All they will do is make sure the disclosure documents at the time matched what you got.

    You seem to want your cake and eat it. You were happy with the rate when you bought it. You knew it gave you certainty of payment whether rates went up or down. No doubt had rates gone up, you would still be happy with it. However, as rates have fallen you believe that they have done something wrong despite completely adhering to the terms of the contract you were more than happy to enter into.

    Your complaint has to rank as one of the daftest i have seen. Throwing your toys out of the pram and quoting unrelated things and wiki entries does not aid your complaint either.
    Originally posted by dunstonh
    Coming back with the same response time and again is getting us nowhere, where did I say the mortgage advisor sold me my statement was
    'overpaid mortgage advisers telling us that endowments were the way to go'
    Unless you are misreading telling for selling.
    I can only tell you what happened when we went for advice on our mortgage in 1993. and I don't recall you being there.
    We were advised that our best option was an endowment. This was based on the the same facts that everybody else who have had payouts for mis-selling was obviously told.
    They arranged the endowment and they would have received the commission as we did not pay any money for this advice.
    Again you still fail to tell me how else they get paid.
    Do you believe that Martin Lewis is incorrect in his statement I gave you before?
    You again ask why I am complaining about the rate I don't believe I could put it in a different that would sink into that skull.
    If you disagree fine but dont ask me to explain what I already have.
    The FOS are already looking into the claim and may or may not agree, if it fell outside their remit they would have said at the start as I have discussed this over the phone.
    The wiki entry may not aid anything but I cannot find anywhere else on the web where I can get the information as to exactly when the banks were aware.

    answer these questions
    how else did they get paid.
    Do you believe that Martin Lewis is incorrect in his statement Endowments paid large commissions to advisers
    Last edited by jonesoswestry; 27-03-2014 at 3:18 PM.
  • jonesoswestry
    If that is not relevant then I really don't see what your point is.
    Originally posted by JimmyTheWig
    I say that is not relevant because it is just one scenario of many but you never stated whether you were in any agreement with me but came up with an option and a prediction I was better off as I was, which was wrong.
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