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  • FIRST POST
    • lebowski111
    • By lebowski111 10th Aug 18, 2:25 PM
    • 14Posts
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    lebowski111
    NRAM standard variable rate scam
    • #1
    • 10th Aug 18, 2:25 PM
    NRAM standard variable rate scam 10th Aug 18 at 2:25 PM
    Hi all, so I'm going to try and take on NRAM and win! Need some advice though.

    When I took out my 95% interest only mortgage in 2007 with Northern Rock for 123k, it was fixed for 2 years. The mortgage illustration gave an example of what the payments would be after the fixed period using their standard variable rate at the time. These SVR in the illustration/mortgage offer was 2.1% over the Bank of England Base Rate (BOEBR). Since then, we had the crash and my flat was in negative equity. Northern Rock folded and my debt was taken on by NRAM. After the 2 years, as I was in negative equity I couldn't afford to sell but nor were there any products I could swap to as NRAM were there just to facilitate the debt. This meant I was a prisoner of their SVR. My issue here is whilst I think that it's crap to be in that situation, after the 2 years fixed their SVR I went on to was no longer 2.1% above the BOEBR but 4% above. Therefore I'm going to try and claim back the difference between 2.1% above base rate which I think I should have paid and the 4% which I have paid plus interest on the amount.

    I'm just selling the property now as I've just about made enough overpayments to bring it out of negative equity meaning I can finally afford to sell and have this nightmare over. I'm disguted that NRAM is funded by the government and they are still screwing people who are stuck in a situation with no options. Any advice? Especially regarding how and if they are well within their rights to double the difference in the SVR to the base rate? Whilst I know they can change it surely this jump is not justifiable??

    Thanks in advance
    Last edited by lebowski111; 10-08-2018 at 2:28 PM.
Page 1
    • Nasqueron
    • By Nasqueron 10th Aug 18, 2:34 PM
    • 5,206 Posts
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    Nasqueron
    • #2
    • 10th Aug 18, 2:34 PM
    • #2
    • 10th Aug 18, 2:34 PM
    Don't waste time or money on this, it's not a scam and you have no chance of getting this money back, though feel free to come back and post in 6 months time about how you were given all the money back, plus interest and a personal apology from the bank owner.
    • dunstonh
    • By dunstonh 10th Aug 18, 2:39 PM
    • 93,861 Posts
    • 61,623 Thanks
    dunstonh
    • #3
    • 10th Aug 18, 2:39 PM
    • #3
    • 10th Aug 18, 2:39 PM
    When I took out my 95% interest only mortgage in 2007 with Northern Rock for 123k, it was fixed for 2 years. The mortgage illustration gave an example of what the payments would be after the fixed period using their standard variable rate at the time.
    The verifies that NR complied with the regulators requirements at the time. So, all good there.

    My issue here is whilst I think that it's crap to be in that situation
    It is but that is just one of the risks you can suffer when borrowing money against a house. Risk warnings exist because risk events can happen.

    Therefore I'm going to try and claim back the difference between 2.1% above base rate which I think I should have paid and the 4% which I have paid plus interest on the amount.
    NRAM took on the high risk/bad mortgages of NR (or what it perceived to be the higher risk ones as not everyone with NRAM is a bad risk). It is not a retail lender. It has no products to offer. They have complied with your contract terms that you agreed when you took out the mortgage.

    I'm disguted that NRAM is funded by the government and they are still screwing people who are stuck in a situation with no options.
    You are lucky that NRAM is funded by the taxpayer because the alternative was to call in the mortgage. Something that has not happened for a very long time in this country.

    You are not being screwed over. You are paying the going rate for a high risk mortgage. Taxpayers are not there to pay your mortgage.

    Any advice? Especially regarding how and if they are well within their rights to double the difference in the SVR to the base rate?
    You are on a hiding for nothing. They are within their rights.

    Whilst I know they can change it surely this jump is not justifiable??
    The jump is justifiable.

    I know that isnt what you want to hear but don't you think by now that if you had a case, something would have been done about it a decade later?

    People in the 90s had to pay 15% interest rates but didnt get government support. The Govt cant bail out individuals making bad decisions or getting unlucky and being unprepared.
    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 10th Aug 18, 2:43 PM
    • 59,480 Posts
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    Thrugelmir
    • #4
    • 10th Aug 18, 2:43 PM
    • #4
    • 10th Aug 18, 2:43 PM
    Unfortunately as a closed mortgage book. The costs of administering what's left has become increasingly higher. The Government wouldn't be popular if it forced other taxpayers to contribute to the cost.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • lebowski111
    • By lebowski111 10th Aug 18, 2:59 PM
    • 14 Posts
    • 4 Thanks
    lebowski111
    • #5
    • 10th Aug 18, 2:59 PM
    • #5
    • 10th Aug 18, 2:59 PM
    Thanks Dunstonh for such a comprehensive response. Whilst I agree with most of what you have written, I still don't understand why the jump from 2.15% above base rate to 4% is justifiable? You have said it is but do you have any reasonings? My mortgage was no more high risk than it was when I took it out (I had and have excellent credit rating and have never missed a payment). And to double the % over base rate seems disproportionate when the interest rate was at an all time low?

    And I would NEVER expect the taxpayer to pay my mortgage. But it was bad luck on my part that the company I chose to lend with collapsed through no fault of my own. I expect to pay my mortgage but also expect to have the same options as other people in the country to either swap to a better deal or pay the interest rate increase on the SVR that was sold to me at the time of the mortgage. I definitely don't want something for nothing.
    • lebowski111
    • By lebowski111 10th Aug 18, 3:04 PM
    • 14 Posts
    • 4 Thanks
    lebowski111
    • #6
    • 10th Aug 18, 3:04 PM
    • #6
    • 10th Aug 18, 3:04 PM
    Unfortunately as a closed mortgage book. The costs of administering what's left has become increasingly higher. The Government wouldn't be popular if it forced other taxpayers to contribute to the cost.
    Originally posted by Thrugelmir
    So only the taxpayers who were unfortunate enough to choose Northern Rock should foot the bill on their own? Seems unfair when we did nothing wrong. I had excellent credit rating and have never missed a payment. I pay my taxes and claim no benefits. Why should I not receive the same options that other people have? Whilst I appreciate the government bailed Northern Rock out so they should have, they were the ones who allowed the country to get into this mess in the first place.
    • lebowski111
    • By lebowski111 10th Aug 18, 3:08 PM
    • 14 Posts
    • 4 Thanks
    lebowski111
    • #7
    • 10th Aug 18, 3:08 PM
    • #7
    • 10th Aug 18, 3:08 PM
    Don't waste time or money on this, it's not a scam and you have no chance of getting this money back, though feel free to come back and post in 6 months time about how you were given all the money back, plus interest and a personal apology from the bank owner.
    Originally posted by Nasqueron
    Hmm thanks for the uneccessary sarcasm, but should I be successful I'll let you know straight away and copy out the banks apology for you verbatim. I considered maybe buying you a drink with the money but due to your tone I dont think I'll bother!
    • Nasqueron
    • By Nasqueron 10th Aug 18, 3:12 PM
    • 5,206 Posts
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    Nasqueron
    • #8
    • 10th Aug 18, 3:12 PM
    • #8
    • 10th Aug 18, 3:12 PM
    Hmm thanks for the uneccessary sarcasm, but should I be successful I'll let you know straight away and copy out the banks apology for you verbatim. I considered maybe buying you a drink with the money but due to your tone I dont think I'll bother!
    Originally posted by lebowski111
    Unfortunately this forum has plenty of examples of people who post about their impossible situations, get answers they don't like then resurface after a period magically having supposedly got everything back, your post just smacks of this sort of thing, if you accept the advice and move on then good on you.
    • Thrugelmir
    • By Thrugelmir 10th Aug 18, 3:12 PM
    • 59,480 Posts
    • 52,798 Thanks
    Thrugelmir
    • #9
    • 10th Aug 18, 3:12 PM
    • #9
    • 10th Aug 18, 3:12 PM
    I still don't understand why the jump from 2.15% above base rate to 4% is justifiable?
    Originally posted by lebowski111
    While the Government stepped in with a loan. UKAR has still relied heavily on wholesale funding since NR was nationalised. External parties won't be lending money at BOE base rate or anywhere close. Due to the overall nature of the loan book.

    You've made overpayments to eradicate the negative equity. Many won't have done. Ultimately the full amount of debt may not be recovered from those that finally remain.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • dunstonh
    • By dunstonh 10th Aug 18, 3:19 PM
    • 93,861 Posts
    • 61,623 Thanks
    dunstonh
    Whilst I agree with most of what you have written, I still don't understand why the jump from 2.15% above base rate to 4% is justifiable?
    A lender will have a range of quality on their books. The nice low risk stuff and a certain degree of higher risk stuff. A good quality mortgage book will have mostly clean safe mortgages with only a small proportion going bad. So, the interest rates will be lower.

    The high risk lending creates high risks of loss of money. More people in arrears, defaults and repossessions. A normal lending back will see these offset by the higher quantity of low-risk borrowers. So, there is an element of cross-subsidy. i.e. safe borrowers are paying for the smaller number that are going to fail.

    NRAM is the bad book of NR. So, a far higher proportion of is going to go bad. it lacks the cross-subsidy of the lower risk borrowers. The risk is spread over a smaller number of borrowers (and that number is getting smaller all the time) and the borrowers that remain are viewed as an increasingly high risk.

    Think of it like this....
    If you were to lend 10,000 to 100 people and you believed that 5 of those would fail to repay fully and create costs of 8,000. You would spread that 8,000 cost over the other 95 people. If you had a lending book the quality of NRAM, you are looking at around 50-60 of them failing and the costs of those being spread over the other 40-50 people. i.e. increased costs and less people to pay those increased costs.


    My mortgage was no more high risk than it was when I took it out (I had and have excellent credit rating and have never missed a payment). And to double the % over base rate seems disproportionate when the interest rate was at an all time low?
    The above explains why the interest rate is higher. If you dont get it, we can throw some more examples/variations at you to see if that helps.

    However, you are higher risk as you are now in negative equity. That puts you higher risk than someone that is say 80% LTV. The problem though was that NR failed to analyse and cost in risks when it lent money. That is why it failed. It should have either charged you more from the start or refused to lend it to you. Or not so much you as 95% at point of sale is not bad. The problem is more the 125% mortgages on interest only basis. You got dragged down because of NR and others.

    Going back to the 90s when negative equity last happened and people had just paid 15% interest rates, the only way to get out was to overpay the mortgage and wait for house prices to recover.
    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.
    • lebowski111
    • By lebowski111 10th Aug 18, 3:19 PM
    • 14 Posts
    • 4 Thanks
    lebowski111
    While the Government stepped in with a loan. UKAR has still relied heavily on wholesale funding since NR was nationalised. External parties won't be lending money at BOE base rate or anywhere close. Due to the overall nature of the loan book.

    You've made overpayments to eradicate the negative equity. Many won't have done. Ultimately the full amount of debt may not be recovered from those that finally remain.
    Originally posted by Thrugelmir
    Thanks for the reply. Whilst I understand your point, perhaps if people had been able to switch to a new competitive rate they would have had the money to pay back the loan? you can't get blood from a stone and putting people in a hopeless situation is crackers. As you say luckily I've been able to overpay but there are some poor people in a sitaution far worse than mine. Even if I'm likely to fail i feel I need to try for myself and them alike! Thanks for your considered answers, it's nice to have some perspective
    • lebowski111
    • By lebowski111 10th Aug 18, 3:23 PM
    • 14 Posts
    • 4 Thanks
    lebowski111
    Unfortunately this forum has plenty of examples of people who post about their impossible situations, get answers they don't like then resurface after a period magically having supposedly got everything back, your post just smacks of this sort of thing, if you accept the advice and move on then good on you.
    Originally posted by Nasqueron
    Of course this forum has posts from plenty of people in impossible situations for, isnt that what it's designed for - so that we can try and help each other rather than spending our day being a keyboard warrior posting unuseful things to those seeking help, often people at their lowest point. I would suggest if you haven't got anything constructive to say you scroll on to the next post and leave the posting to those who are trying to give comprehensive answers and help! Fingers crossed you accept the advice and move on!
    • Thrugelmir
    • By Thrugelmir 10th Aug 18, 3:28 PM
    • 59,480 Posts
    • 52,798 Thanks
    Thrugelmir
    Whilst I understand your point, perhaps if people had been able to switch to a new competitive rate they would have had the money to pay back the loan?
    Originally posted by lebowski111
    Before the GFC interest rates were higher across the board. Base rate was 5.5%. Few people are paying higher than that even now some 10 years later. As a consequence should have been able to find some money to start repaying the capital owed. Every 10 repaid off the balance would have reduced the interest charged the following month. Over time the speed of repayment would naturally accelerate. With mortgages there's no quick answer to repaying them. Just a long hard slog.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • Nasqueron
    • By Nasqueron 10th Aug 18, 3:50 PM
    • 5,206 Posts
    • 3,149 Thanks
    Nasqueron
    Of course this forum has posts from plenty of people in impossible situations for, isnt that what it's designed for - so that we can try and help each other rather than spending our day being a keyboard warrior posting unuseful things to those seeking help, often people at their lowest point. I would suggest if you haven't got anything constructive to say you scroll on to the next post and leave the posting to those who are trying to give comprehensive answers and help! Fingers crossed you accept the advice and move on!
    Originally posted by lebowski111
    You've been given the correct information already by several people - it is helpful, it's just not what you want to hear hence this post. You won't get money back, move on and stop worrying.
    • lebowski111
    • By lebowski111 10th Aug 18, 3:59 PM
    • 14 Posts
    • 4 Thanks
    lebowski111
    Before the GFC interest rates were higher across the board. Base rate was 5.5%. Few people are paying higher than that even now some 10 years later. As a consequence should have been able to find some money to start repaying the capital owed. Every 10 repaid off the balance would have reduced the interest charged the following month. Over time the speed of repayment would naturally accelerate. With mortgages there's no quick answer to repaying them. Just a long hard slog.
    Originally posted by Thrugelmir
    Yes agreed but the issue and the reason people are trappped is the house price crash, so couple both aspects together and you have a hopeless situation. I have been paying off considerably more than the initial fixed mothly price and it has taken me 10 years to get to a point where I am out of negative equity. Had I been able to move to a reasonable rate and do a product swap it would have taken me far less time to bring it out of negative equity. I just dont agree that I was not able to either swap to a product on a fair interest rate or have the svr at the same elevations from base rate as in the illustration. If i was deemed a high risk at the point i took the mortgage the illustrations should have reflected this. Thanks again for your input, appreciate having another perspective
    • lebowski111
    • By lebowski111 10th Aug 18, 4:09 PM
    • 14 Posts
    • 4 Thanks
    lebowski111
    A lender will have a range of quality on their books. The nice low risk stuff and a certain degree of higher risk stuff. A good quality mortgage book will have mostly clean safe mortgages with only a small proportion going bad. So, the interest rates will be lower.

    The high risk lending creates high risks of loss of money. More people in arrears, defaults and repossessions. A normal lending back will see these offset by the higher quantity of low-risk borrowers. So, there is an element of cross-subsidy. i.e. safe borrowers are paying for the smaller number that are going to fail.

    NRAM is the bad book of NR. So, a far higher proportion of is going to go bad. it lacks the cross-subsidy of the lower risk borrowers. The risk is spread over a smaller number of borrowers (and that number is getting smaller all the time) and the borrowers that remain are viewed as an increasingly high risk.

    Think of it like this....
    If you were to lend 10,000 to 100 people and you believed that 5 of those would fail to repay fully and create costs of 8,000. You would spread that 8,000 cost over the other 95 people. If you had a lending book the quality of NRAM, you are looking at around 50-60 of them failing and the costs of those being spread over the other 40-50 people. i.e. increased costs and less people to pay those increased costs.




    The above explains why the interest rate is higher. If you dont get it, we can throw some more examples/variations at you to see if that helps.

    However, you are higher risk as you are now in negative equity. That puts you higher risk than someone that is say 80% LTV. The problem though was that NR failed to analyse and cost in risks when it lent money. That is why it failed. It should have either charged you more from the start or refused to lend it to you. Or not so much you as 95% at point of sale is not bad. The problem is more the 125% mortgages on interest only basis. You got dragged down because of NR and others.

    Going back to the 90s when negative equity last happened and people had just paid 15% interest rates, the only way to get out was to overpay the mortgage and wait for house prices to recover.
    Originally posted by dunstonh
    Again great response thanks. Totally understand where you are coming from but my LTV was rubbish at the time I applied for the mortgage, sureley i should have been deemed high risk then and the parameters set accordingly? I suppose what I'm saying is I was given figures at point of sale, since then through nothing I have done and I have been considered high risk and the figures altered to reflect that. Should I not have had elevated figures to start with then I could have made an informed decision?? Do you see what I mean? In essence I'm now paying for everyone else's bad debt when I have broke my back to fulfil my obligations and have managed to scrimp and overpay to get myself out of the situation
    • dunstonh
    • By dunstonh 10th Aug 18, 4:19 PM
    • 93,861 Posts
    • 61,623 Thanks
    dunstonh
    Again great response thanks. Totally understand where you are coming from but my LTV was rubbish at the time I applied for the mortgage, sureley i should have been deemed high risk then and the parameters set accordingly?
    if you look at deals today, you will see that the lower the LTV, the better the interest rate. Problem is that NR completely failed when it came to risk assessment.

    Should I not have had elevated figures to start with then I could have made an informed decision??
    Today you would be paying more. But we cant change the past.

    In essence I'm now paying for everyone else's bad debt when I have broke my back to fulfil my obligations and have managed to scrimp and overpay to get myself out of the situation
    And life sucks. I am about to get my annual FCA levies. Over 10,000 I have to pay and its to cover the bad firms that do things that I would never dream of. Its not fair but that is the nature of costs being spread over a certain number of people. The current generation are paying for the spending habits of the state in the 60s & 70s. The next generation will be paying for the debt we rack up today. Loads of things are unfair.

    At some point, there will be a way to deal with mortgage prisoners. Probably too late for you. But there is no scheme or method to help you and as there is no contract breach, there is no wrongdoing.
    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.
    • lebowski111
    • By lebowski111 10th Aug 18, 4:48 PM
    • 14 Posts
    • 4 Thanks
    lebowski111
    [QUOTE]
    if you look at deals today, you will see that the lower the LTV, the better the interest rate. Problem is that NR completely failed when it came to risk assessment.
    Originally posted by dunstonh
    Agreed, I should never have been ggiven the mortgage in hindsight but hey ho.



    Today you would be paying more. But we cant change the past.
    No we can't but my point is they are changing the past arent they, by not giving me illustrations or figures reflective of a high risk when selling it to me but then deeming me high risk once i had the product?


    [QUOTE]
    And life sucks. I am about to get my annual FCA levies. Over 10,000 I have to pay and its to cover the bad firms that do things that I would never dream of. Its not fair but that is the nature of costs being spread over a certain number of people. The current generation are paying for the spending habits of the state in the 60s & 70s. The next generation will be paying for the debt we rack up today. Loads of things are unfair.
    thats a lot of money. Yes i know it sucks I just feel it's a double blow dealing with the inflated svr in addition to the negative equity. Wouldn't think of complaining had there not been better svr rates available at the time. Seems unfair to hike those of people who don't have the option to go elsewhere.


    Also with regards to no contractual breach, I agree there hasn't been but when the bank charges thing first kicked off, there was no "wrong doing" or contractual breach but the fees were deemed disproportionate to the actual costs. I was hoping to go along the same vane of the interest rate being disproportionately to that quoted at point of sale?
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