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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 2
    • Prothet of Doom
    • By Prothet of Doom 27th Mar 14, 3:25 PM
    • 3,166 Posts
    • 3,818 Thanks
    Prothet of Doom
    I took a ten year fixed rate out at 4.6% in 2004, knowing that the interest rate might go up, and it might go down, and that if it went down, I'd be paying more than people who did not take a fixed rate, and vice versa.
    Isn't that the point ?
  • jonesoswestry
    I took a ten year fixed rate out at 4.6% in 2004, knowing that the interest rate might go up, and it might go down, and that if it went down, I'd be paying more than people who did not take a fixed rate, and vice versa.
    Isn't that the point ?
    Originally posted by Prothet of Doom
    Exactly the point and that's why I did the same and I took out 3 fixed mortgages prior to that and was always higher than the SVR.
    I totally accept that and have never and will never complain about it.

    I still see this scenario as different and therefore the abuse I have had about wanting my cake and throwing the toys out of the pram is untrue.
    • JimmyTheWig
    • By JimmyTheWig 27th Mar 14, 3:41 PM
    • 11,895 Posts
    • 11,424 Thanks
    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.
    Originally posted by jonesoswestry
    Yes it is just one scenario of many. But I feel that it is a likely scenario that you would have gone for if you had realised at the time that the 10 year fix wasn't what you'd wanted.
    What do you think you would have gone for in hindsight?

    Ok, so my guess was a little out. But a 5 year fix at 3.0% with fees less than £600 might not be likely. At 3.6% with no fees you'd be breaking even.

    My point is that while it looks like you are on a really high rate, you haven't done that badly overall.


    If your complaint is upheld then you will be put in the position that you would have been had you not been mis-sold to. That's why I think it is relevant to look at the difference in cost between what you got and what you wuold have had.
    • kingstreet
    • By kingstreet 27th Mar 14, 3:45 PM
    • 35,685 Posts
    • 19,526 Thanks
    kingstreet
    Surely, the question here is could the banks have foreseen the effects of the credit crunch?

    It's quite possible that even if you saw it coming in August 2007, it would have seemed that a ten year fix was a splendid idea, as it was entirely possible that higher rates would follow, not lower rates.

    That's exactly the kind of uncertainty that fixed rates of that duration are perfect to meet.
    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 27th Mar 14, 4:18 PM
    • 98,581 Posts
    • 67,058 Thanks
    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 suggest you read it again as I never said you were sold an endowment. I said mortgage advisers could not sell endowments. So, why would they tell you that is best if they cant actually arrange it?

    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.
    That person you saw would not be a mortgage adviser. Probably a tied FA at a bank or building society.

    Do you believe that Martin Lewis is incorrect in his statement I gave you before?
    I dont know what he says. However, a number of the articles on this site contain or have contained errors which have been corrected when pointed out. If he is saying mortgage advisers get paid for arranging investment contracts then that is wrong as it is not possible.

    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 person on the phone taking details of your complaint will not be the person that decides that. Behind the scenes they will check with the lender to see if you have complained to them first. if not, they will just forward your complaint on. If you have, they will then put it in the queue for an adjudicator. Once the adjudicator looks at it, they will check if it is a complaint they can deal with or not.
    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.
  • jonesoswestry
    Yes it is just one scenario of many. But I feel that it is a likely scenario that you would have gone for if you had realised at the time that the 10 year fix wasn't what you'd wanted.
    What do you think you would have gone for in hindsight?

    Ok, so my guess was a little out. But a 5 year fix at 3.0% with fees less than £600 might not be likely. At 3.6% with no fees you'd be breaking even.

    My point is that while it looks like you are on a really high rate, you haven't done that badly overall.


    If your complaint is upheld then you will be put in the position that you would have been had you not been mis-sold to. That's why I think it is relevant to look at the difference in cost between what you got and what you wuold have had.
    Originally posted by JimmyTheWig
    If I'd have had hindsight the obvious answer would be a 2 or 3 year fix and and maybe a tracker but I fully accept this would never have happened and I have always had fixed.

    At the risk of being shot down in flames I am aware that my 4.98% mortgage is still not a bad deal. That is not my issue.
    I can't help but come back to my reel frustration of how the banks went about their business of no deposit, 110% mortgage buying of bonds with sub-prime mortgages without looking at what they involved, fixing libor rates, PPI etc
    This is what caused the crisis.
    Many people have benefited by the lower interest rates where as we, who have always been prudent, have not. Good luck to them.

    It is like the PPI issues, I don't agree that everyone should get compensation. I took out loans and was told I could not have loans unless I took out PPI, so I went elsewhere.
    That option was available to all.
    I know of someone who had compensation less an amount they had been paid for a claim on the policy. Madness.
    However if people did have it put on without knowing then that is wrong. I managed to go through life and never had it slipped in.

    When we took out our mortgage (and rightly so) we had to pay deposit and indemnity insurance. We had the endowment worries (which we have had to work around) we had standard life endowment promises that were not worth anything in the end as they added provisos that kicked in.
    All in all we have been totally shafted from start to finish.

    I did work out a figure of £4000 to £4500 but it is difficult to come out with an exact figure as we have paid off lump sums at various stages.

    As I said in other threads we'd had 3 fixed rates before and always paid higher and I fully accept this.
  • jonesoswestry
    Surely, the question here is could the banks have foreseen the effects of the credit crunch?

    It's quite possible that even if you saw it coming in August 2007, it would have seemed that a ten year fix was a splendid idea, as it was entirely possible that higher rates would follow, not lower rates.

    That's exactly the kind of uncertainty that fixed rates of that duration are perfect to meet.
    Originally posted by kingstreet
    Agreed on all points but we now know what did happen.
  • jonesoswestry

    Once the adjudicator looks at it, they will check if it is a complaint they can deal with or not.
    Originally posted by dunstonh
    They have checked and are dealing with it whether they agree or not they are therefore the correct body where you said they were not.
    • somethingcorporate
    • By somethingcorporate 27th Mar 14, 5:05 PM
    • 9,119 Posts
    • 8,806 Thanks
    somethingcorporate
    I think you are trying to connect two unconnected issues here.

    1) The rate: Just using your logic, had the rates gone up to 10% would you be happy with the bank knocking on your door asking to increase your rate? You knew what you were signing up to and the fact an unpredicted series of events led to historically low rates you feel hard done by. This was the risk you took on with taking a fixed, had you wanted to benefit from low rates you should have taken a tracker.

    2) The banks conduct: OK, you, me and the whole world abhor how the banks and bankers behaved and continue to behave and far too few punishments have been handed out. It's a fair shout and every tax payer has a right to feel aggrieved at how toothless the government and global community has been to blunt the impact of this wreckless bunch of fools we have at the helm of banks being paid millions for abject failure.

    These two events are not connected. Feel angry with yourself for the first and the banks for the second but in no material way are they related.
    Thinking critically since 1996....
  • jonesoswestry
    I think you are trying to connect two unconnected issues here.

    1) The rate: Just using your logic, had the rates gone up to 10% would you be happy with the bank knocking on your door asking to increase your rate? You knew what you were signing up to and the fact an unpredicted series of events led to historically low rates you feel hard done by. This was the risk you took on with taking a fixed, had you wanted to benefit from low rates you should have taken a tracker.

    2) The banks conduct: OK, you, me and the whole world abhor how the banks and bankers behaved and continue to behave and far too few punishments have been handed out. It's a fair shout and every tax payer has a right to feel aggrieved at how toothless the government and global community has been to blunt the impact of this wreckless bunch of fools we have at the helm of banks being paid millions for abject failure.

    These two events are not connected. Feel angry with yourself for the first and the banks for the second but in no material way are they related.
    Originally posted by somethingcorporate
    I can't feel angry with myself as the unpredicted series of events was in fact a result of the banks, I could never have predicted they were buying up all the bad US mortgages.
    I did know they were selling 110% mortgages and thought this was madness but would top of the madness list.

    I list the other bank issues purely as a way of pointing out exactly what they have been up to that we now know of when people say I'm a conspiracy theorist. These things we now know, we would have said 25 years ago were highly unlikely if not impossible.
    Last edited by jonesoswestry; 27-03-2014 at 5:28 PM.
    • dunstonh
    • By dunstonh 27th Mar 14, 5:34 PM
    • 98,581 Posts
    • 67,058 Thanks
    dunstonh
    http://www.ombudsman-decisions.org.uk/viewPDF.aspx?FileID=30766

    In June 2008 the Bank of England base rate had begun to fall from its peak of 5.75% a year earlier, and was now at 5%. I’m not persuaded HSBC could have known or predicted that the rate would fall to 0.5%, where it has remained for almost four years.

    I do appreciate that if they’d stayed on the reversionary rate in 2008 Mr and Mrs G would now be paying only 1.5% interest rather than HSBC’s variable rate (currently 3.94%). But I’m satisfied that Mr and Mrs G were aware of the implications of staying on the Home Buyer Mortgage variable rate in 2008. I think it likely they took into consideration the possibility of upward movement in the Bank of England base rate when they opted for another fixed rate product.

    My final decision is that I do not uphold this complaint

    ----

    http://www.ombudsman-decisions.org.uk/viewPDF.aspx?FileID=15573

    Mr B complains that the five year fixed rate product he was advised to take out is too expensive. He says that National Westminster Bank Plc (“NatWest”) should have ‘forecast’ what interest rates would be in the future, and have advised him accordingly.

    I appreciate the points that Mr B has made and I agree that, with the benefit of hind-sight, a two year fixed rate followed by a tracker rate product may well have been cheaper.
    However, just because a mortgage product is not the cheapest available, does not necessarily mean that the product recommended was unsuitable, or that a cheaper product should have been recommended. Likewise, I cannot reasonably agree that NatWest could have been expected to have predicted, with any accuracy, what would happen to interest rates.

    My final decision is that I do not uphold this complaint


    ----
    http://www.ombudsman-decisions.org.uk/viewPDF.aspx?FileID=18618

    Mr D says that The Royal Bank of Scotland Plc charged excessive interest on a fixed rate mortgage he took out in 2007. The regulator found that RBS had been guilty of misconduct relating to its submission of rates which formed part of the process of setting the London Interbank Offered Rate, or “LIBOR”. Mr D says that this affected interest rates available in 2007, including his fixed rate
    mortgage.


    Our adjudicators did not recommend that the complaint should be upheld. The second adjudicator pointed out that the initial rate was fixed and the subsequent rate was not linked to LIBOR – it was for Mr D to decide whether to accept the loan on the terms offered by RBS or not.

    In all of the circumstances, I don’t consider that the RBS’s actions have caused Mr D to suffer any loss. In any event, Mr D agreed to a fixed rate mortgage with RBS – I don’t consider it would be fair to treat him as if he had agreed a different rate.

    My final decision is that I do not uphold this complaint.
    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.
    • kingstreet
    • By kingstreet 27th Mar 14, 5:37 PM
    • 35,685 Posts
    • 19,526 Thanks
    kingstreet
    When I first started in the industry in the mid-80s, the only mortgages that were "securitised" into a RMBS were the prime, sub-75% "cream" of the lenders' books.

    These RMBS were AAA rated by S&P and Moody's.

    IMHO had that continued, we would never have had a credit crunch.

    What happened is US lenders had so much money washing around, they started to chase more profitable and at the same time more risky business. They securitised sub-prime stuff, but instead of packaging all the sub-prime stuff together, it was mixed with prime and near-prime, so the buyers of the security didn't know what made up their investment.

    Hence, when problems started to arise with mortgage defaults, none of them new the extent of the potential damage.

    Alongside that, you had the likes of AIG and MBNA selling credit default swaps, insurance which should have been backed by collateral, being allowed to do so simply on their AAA ratings.

    Eventually, the whole house of cards came tumbling down. The weekend of Lehmans demise 14/9/08, we were about I< >I away from a barter economy when HBoS was very close to being unable to open for business on the Monday morning.

    It could have been a lot worse.
    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.
  • jonesoswestry
    In June 2008 the Bank of England base rate had begun to fall from its peak of 5.75% a year earlier, and was now at 5%. I’m not persuaded HSBC could have known or predicted that the rate would fall to 0.5%, where it has remained for almost four years.

    I do appreciate that if they’d stayed on the reversionary rate in 2008 Mr and Mrs G would now be paying only 1.5% interest rather than HSBC’s variable rate (currently 3.94%). But I’m satisfied that Mr and Mrs G were aware of the implications of staying on the Home Buyer Mortgage variable rate in 2008. I think it likely they took into consideration the possibility of upward movement in the Bank of England base rate when they opted for another fixed rate product.

    My final decision is that I do not uphold this complaint

    ----

    [I]Mr B complains that the five year fixed rate product he was advised to take out is too expensive. He says that National Westminster Bank Plc (“NatWest”) should have ‘forecast’ what interest rates would be in the future, and have advised him accordingly.

    I appreciate the points that Mr B has made and I agree that, with the benefit of hind-sight, a two year fixed rate followed by a tracker rate product may well have been cheaper.
    However, just because a mortgage product is not the cheapest available, does not necessarily mean that the product recommended was unsuitable, or that a cheaper product should have been recommended. Likewise, I cannot reasonably agree that NatWest could have been expected to have predicted, with any accuracy, what would happen to interest rates.

    My final decision is that I do not uphold this complaint

    Mr D says that The Royal Bank of Scotland Plc charged excessive interest on a fixed rate mortgage he took out in 2007. The regulator found that RBS had been guilty of misconduct relating to its submission of rates which formed part of the process of setting the London Interbank Offered Rate, or “LIBOR”. Mr D says that this affected interest rates available in 2007, including his fixed rate
    mortgage.


    Our adjudicators did not recommend that the complaint should be upheld. The second adjudicator pointed out that the initial rate was fixed and the subsequent rate was not linked to LIBOR – it was for Mr D to decide whether to accept the loan on the terms offered by RBS or not.

    In all of the circumstances, I don’t consider that the RBS’s actions have caused Mr D to suffer any loss. In any event, Mr D agreed to a fixed rate mortgage with RBS – I don’t consider it would be fair to treat him as if he had agreed a different rate.

    My final decision is that I do not uphold this complaint.
    Originally posted by dunstonh


    I totally agree with the FOS on 1st case as the events had already happened and its his decision not the banks.

    I totally agree with the FOS on 2nd case for the same reason.

    I would need more information on the 3rd case as to when in 2007 he took out the mortgage. I am not sure whether the Libor fixing has affected mortgages either and would need more information.

    Many thanks for the links and proof that the FOS are looking into similar issues to mine.

    One day as with other issues more facts will come to light
  • jonesoswestry
    When I first started in the industry in the mid-80s, the only mortgages that were "securitised" into a RMBS were the prime, sub-75% "cream" of the lenders' books.

    These RMBS were AAA rated by S&P and Moody's.

    IMHO had that continued, we would never have had a credit crunch.

    What happened is US lenders had so much money washing around, they started to chase more profitable and at the same time more risky business. They securitised sub-prime stuff, but instead of packaging all the sub-prime stuff together, it was mixed with prime and near-prime, so the buyers of the security didn't know what made up their investment.

    Hence, when problems started to arise with mortgage defaults, none of them new the extent of the potential damage.

    Alongside that, you had the likes of AIG and MBNA selling credit default swaps, insurance which should have been backed by collateral, being allowed to do so simply on their AAA ratings.

    Eventually, the whole house of cards came tumbling down. The weekend of Lehmans demise 14/9/08, we were about I< >I away from a barter economy when HBoS was very close to being unable to open for business on the Monday morning.

    It could have been a lot worse.
    Originally posted by kingstreet
    Thank you for you extremely accurate summary of the situation as it was.
    These are precisely the circumstances I have been trying to express.
    Who outside the Financial Industry could have predicted any of that.
    • tomtontom
    • By tomtontom 27th Mar 14, 6:56 PM
    • 7,184 Posts
    • 16,347 Thanks
    tomtontom
    Were you advised that this was the best product for you, or were you given a variety of products and chose which one you wanted? The key facts given to you would state whether you were advised or not.

    You're never going to prove whether the banks did or did not know things were going to go tits up. I would not waste your time on such a complaint.
  • jonesoswestry
    Were you advised that this was the best product for you, or were you given a variety of products and chose which one you wanted? The key facts given to you would state whether you were advised or not.

    You're never going to prove whether the banks did or did not know things were going to go tits up. I would not waste your time on such a complaint.
    Originally posted by tomtontom
    Thanks for reply.

    We had come to the end of a deal with Nationwide and were moving property from a house we had just extended.
    We were getting a bigger property but were downsizing our mortgage as we had done up a house in a lovely rural spot.

    We were not advised we looked around all comparison and finance section compares and came to the conclusion this was by far the best deal for what we were looking to do and we paid a fee for the deal.

    We still maintain this was a good deal under the circumstances we were aware existed. I still fail to see why people think this odd.

    I have no complaints on the staff we dealt with in Barclays whatsoever.
    If there was any underhand business (and I haven't stated anywhere I think there was) it would be higher up the chain.

    It is about principal as to why I make the complaint. Everyone's circumstances are different.
  • zizouzidane11
    I still fail to see why people think this is odd.
    Originally posted by jonesoswestry
    I have read every post in this thread and I still fail to see your point.
    • Thrugelmir
    • By Thrugelmir 27th Mar 14, 8:51 PM
    • 65,891 Posts
    • 58,016 Thanks
    Thrugelmir
    I have read every post in this thread and I still fail to see your point.
    Originally posted by zizouzidane11
    A total lack of understanding of how mortgages are financed. Along with a linking of totally unrelated issues.

    I would comment further but I'm beginning to feel like a broken record.

    The common theme these days is the lack of personal responsibility for peoples own decisions.
    ““there really is no such thing as ‘the future’, singular. There are only multiple, unforeseeable futures, which will never lose their capacity to take us by surprise.””
    ― Niall Ferguson
    • tigsly
    • By tigsly 27th Mar 14, 9:38 PM
    • 437 Posts
    • 241 Thanks
    tigsly
    Did you look up what your exit fees were?

    I was locked into a mortgage on a higher rate (i think it was around 5%) and worked out it was cheaper topay the 'lock in fee' .. as on my new rate - the fees would be covered if the rate remained low for 6 months.. that was 2 and 1/2 years ago!

    You can't blame a bank = for you choosing a product and stiking with it for 10 years!
  • jonesoswestry
    Did you look up what your exit fees were?

    I was locked into a mortgage on a higher rate (i think it was around 5%) and worked out it was cheaper topay the 'lock in fee' .. as on my new rate - the fees would be covered if the rate remained low for 6 months.. that was 2 and 1/2 years ago!

    You can't blame a bank = for you choosing a product and stiking with it for 10 years!
    Originally posted by tigsly
    I am totally capable of working out whether it would be cheaper or not at 6% fees it is not.
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