fixed mortgages should banks gain from their sub-prime fiasco

jonesoswestry · 26 March 2014 at 6:57PM

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.

amnblog · 26 March 2014 at 7:27PM

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.

kingstreet · 26 March 2014 at 7:30PM

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

dunstonh · 26 March 2014 at 7:58PM

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.

Thrugelmir · 26 March 2014 at 9:27PM

jonesoswestry wrote: »

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

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.

jonesoswestry · 27 March 2014 at 9:35AM

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 · 27 March 2014 at 10:16AM

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.

El_Torro · 27 March 2014 at 10:25AM

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 · 27 March 2014 at 11:23AM

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.

dunstonh · 27 March 2014 at 12:22PM

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.

JimmyTheWig · 27 March 2014 at 12:40PM

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.

fixed mortgages should banks gain from their sub-prime fiasco

Is it fair banking institutes have gained with fixed rate mortgages just before sub-p 34 votes

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