Monday, Mar 23, 2009
Money For Nothing
Evening Standard: Couple with 1p a month mortgage
The building society today admitted that the couple should in fact be paying nothing on their mortgage but a computer glitch is forcing them to pay 1p a month. Computers at mortgage companies have been unable to process the zero interest. "That's why we're paying one pence," said Mr Cameron, an estate agent!
Posted by yoyo1 @ 12:54 PM (1386 views) Add Comment
16 Comments
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1. Mr G said...
If Mr Cameron is an estate agent he might not be in a job for much longer, then he really will need the money he has saved.
His mortgage is with Cheltenham & Gloucester, which is no longer a building society as stated in the article but an organisation whose mortgages are provided by Lloyds TSB Bank plc and administered by C & G.
More bad news to surface from Lloyds when they are lending money for nothing?!!
2. little professor said...
They're on interest-only. They could use this opportunity to switch to a repayment mortgage and pay the debt down, but no, that would be too sensible.
"It has been tempting to blow the extra money on a holiday, but it seemed irresponsible when we're about to become parents and we may be in negative equity because our house has fallen in value"
They don't have any 'extra money.' They bought their £400,000 house pretty much at the peak, in December 2007. Given an (optimistic) 20% fall in house prices since then, they've already lost £80,000. Saving a couple of hundred pounds each month doesn't make up for this huge capital loss. Plus with the inflation monster looming, rates may well head up into double digits, which would leave this sorry couple well and truly pwned, as they will be unable to move onto a fixed rate when they are in negative equity.
3. Mansmoking said...
So the goverment lowers interest rates and the country is in a dire situation but some people now have more disposable monthly incomes than ever before, sounds ridiculous because it really is and in the long term these exceptions will be short lived
4. pelethar said...
Well said LP!
5. Bubble_court said...
Would be interested to go back to this in 6 months time.
When time for remortgage comes the valuation will come in at, say, -30%, so £280K. They will need to go to 90% at least LTV, so they will need to cough up at least another £68K to be able to get a repayment mortgage at, say, 4.5%, to get their repayments at £1400K pcm.
That's after paying already £80K to 'snap up' the house.
Good luck to them... I hope they have it!
6. Maddison said...
I agree it is absolute madness not to use this opportunity to pay down debt. The cost of money isn't always going to be zero for sure!!
7. Gooders said...
My bet is they have no means to pay off the 400K they will owe at the end of the term either!!!
8. 51ck-6-51x said...
Whilst I wouldn't mind a 1p a month rent, I'd really be prompted to pay off as much of the £320K debt (assuming they have not made net payment or withdrawal since to 20% deposit) as I could.
I feel sorry for their unborn baby who is probably going to be a new toddler when they have to move into temporary accommodation.
9. yoyo1 said...
It's nice to see some banks getting caught out though.
10. 51ck-6-51x said...
Pretty sure that this is the house (26 Avenue Road):
on Google's Street View
£418K, 03-Dec-2007 nethouseprices.co.uk
Looking at the area's current asking prices for similar properties (not many on!) the current 'ask value' would be somewhere between £290K & £340K.
11. d'oh said...
Bought in Dec 07 ... oh dear ...anyone who bought after June/August 2007 when it was clear that this mess was unfolding to anyone who read a newspaper deserves everything they get.
Still, it is sad to see a family soon to be destroyed.
12. letthemfall said...
51ck is watching you
13. enuii said...
Nice simple quote from Garth in the comments; 'People say that renting is dead money, but interest only mortgages are suicide money.'
Well said Garth.
14. Marcus B said...
You've got to look at the folks paying low interest rates like they're frogs in a slowly heating pan of water - they should be jumping out, sticking their houses on the market, slashing prices and then moving into rented accomodation, thats the only way to avoid what's coming. But no, with interest rates so low they are suckered into thinking they are winning and so won't even try to sell up, in a couple of years they will realise their folly but by then the water will be boiling...
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16. gone-to-colombia said...
The people who are paying for this are honest savers who are earning nothing on their savings accounts.