Northern Rock Takes Repossession Extension on Board
Following on from yesterday’s post regarding the RBS extending the allowance of missed payments prior to repossession, Northern Rock has followed suit. Although they are clear that this will not greatly impact their current processes as on average, they work with their customers for a period of 15 months from when they first fall into arrears. Northern Rock chief executive Gary Hoffman states:
“In the vast majority of cases, where repossession regrettably does take place, we have been working with the customer for well over six months. We will now formalise our policy and agree not to repossess a property for a period of at least six months from the point of arrears.”
RBS has recently been critisized in the press for the 6 month package being regarded as a marketing ploy.
Read more - Northern Rock follows RBS with six-month reprive
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6 Months Grace on Repossessions
The Royal Bank of Scotland has extended the previous 3 month deadline to 6 months of missed mortgage payments before properties are repossessed. The announcement comes days after the Government took control of RBS having bought 58% of it’s shares. Ministers are beginning to apply pressure to other lenders to loosen the 3 month stronghold.
As repossessions and the amount of missed mortgage payments have been on the rise, this move has given some borrowers some much needed breathing space… Or has it?
Financial analyst Richard Northedge expressed concern regarding the initiative on his Director of Finance blog The Edge yesterday:
Given the time it takes courts to act, that could mean arrears of at least nine months before the bank gets its hands on its collateral.
Simply adding the missed interest to the principal over that period would increase a loan by 5 per cent – which with house values falling by 15 per cent a year would plunge many of the defaulting borrowers into negative equity.
The premise that those in financial trouble now will be in greater trouble later seems to be an ongoing theme among the response to the extension.
Read more here:
RBS, Repossessions and Recovery - bbc.co.uk - Preston’s Picks
Repossession: Q&A - Telegraph.co.uk
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Are Banks Treating Customers Fairly? FSA says No!
The Telegraph.co.uk is reporting that banks are not ‘treating customers fairly’ regarding Mortgage arrears. The FSA has issued letters to the ‘offending’ lenders that are showing ‘weaknesses in arrears and repossession handling’, especially to those banks that specialise in grant mortgages to borrowers with poor credit histories. Jon Pain, the retailing manager from the FSA says,
Conditions in the mortgage market are difficult and it seems likely that these conditions will persist for some time. In such a challenging operating environment it is particularly important for senior management to ensure the fair treatment of customers including when they go into arrears.
The Pre-Budget report states all major mortgage lenders will not start to repossess homes within 3 months of the mortgage holder falling into arrears. Banks are supposed to repossess home only when all other reasonable attempts to resolve the financial problems have been exhausted.
The FSA proclaims this issue will remain a top priority moving into the new year.
Read more at Mortgage Arrears: banks ‘not treating customers fairly’ - Telegraph.co.uk
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Borrowing For a Mortgage? Have a Deposit!
You can save up to £2,200 a year if you have a deposit of up to 40% of the property value. Those who have a lower deposit are paying up to this amount on the same loan!
According to new research released by mform.co.uk, on a 2 year tracker mortgage of £150,000, borrowers with a 40% deposit can get rates as low as 3.99%. If the borrower only has a 20% deposit, the rate rises to 5.99%.
Including all fees, this makes for a significant difference in the true cost of mortgage deals. The average cost of a 60% ltv, 2 year tracker is £20,907 compared to £24,746 for 80% ltv. That’s a difference of £1,919 year.
It’s great sign that a couple of these deals are trickling through however it’s still disappointing the options are still minimal for those with smaller deposits, especially First Time Buyers.
Read more at:
LTV Difference Causes £2000 a Year Mortgage Gap - Money Marketing
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First Time Buyers - Not Getting the Full Picture
New market analysis compiled by mform.co.uk has revealed that mortgage lenders are not always making their best rates available to first time buyers. With the Bank of England base rate cut, the standard variable rate has come down, however lenders are denying access to the better rates for new mortgage products.
Typically, the SVR deals acted as default products for those who couldn’t or wouldn’t search for better deals, ie they were a last resort but were still attractive due to the lack of fees attached. Not only are some lenders not reflecting the base rate cut in their mortgage options, arrangement and early redemption fees have started to pop up on these SVR products, making it even more unappealing to first time buyers.
Read more on this topic…
Lenders barring applicants from SVR deals - Mortgage Strategy
SVR disappearing to new borrowers - Mortgage Solutions
Some of the best SVR mortgages unavailable to new customers - Fair Investment
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