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Claiming Compensation From Lenders.

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Can you imagine borrowers trying to claim compensation from lenders because they sold them huge mortgages during the price boom. There are a lot of naive people out there to be taken advantage of.

We nearly took out a huge mortgage not really knowing much about them. If a lender can say you can afford to borrow 6x your salary and you end up losing your home I think they should be made partly responsible.

Like those who took out endownment mortgages.

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Can you imagine borrowers trying to claim compensation from lenders because they sold them huge mortgages during the price boom. There are a lot of naive people out there to be taken advantage of.

We nearly took out a huge mortgage not really knowing much about them. If a lender can say you can afford to borrow 6x your salary and you end up losing your home I think they should be made partly responsible.

Like those who took out endownment mortgages.

I am sure there will be people who will try to claim compensation however, unless there is a specific mortgage with an inherent problem like endowment mortgages then they may find that there is a get out clause for the banks somewhere in the small print.

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I remember reading on one forum (the C4 one)? postings from a first time buyer who genuinely believed that his interest only mortgage only left him liable for the interest and there was no need to/he was not liable to repay the capital to own the home.

Several posters tried to persuade him that this was nonsense and he probably knows better now; you'd hope so.

Perhaps in 25 years we'll see the capital part of his mortgage written off in a 'mis-selling' scandal along with thousands of others when it transpires their mortgage was obviously 'unsuitable'?

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When valuing something, it's the done thing to value it as of today. It is the buyers decision whether to consider what might happen to prices in the future. Seeing as people are very stupid maybe there should be a health warning on all mortgages say "WARNING: House prices may go down as well as up".

But it is very unlikely that the lender can be made responsible. If the surveyor has overvalued the property compared to the price it was worth on the open market on the day he visited it, then he leaves himself open to legal action. But it is not his job to predict the future. It would be like an accountant going over a widget maker's accounts and saying "well, he's made £100k this year but I'll put down a loss of £10k on the annual accounts because I'm sure think he'll sell loads less widgets next year and make a loss. I wouldn't want to encourage prospective share buyers, after all the share price is going to go down next year when they make the loss."

Saying that, valuing is not an exact science. Anecdotally, in a falling market, surveyors will round down, whereas in a rising market they are happy to round up.

ie, comparable evidence (ie recent sales) suggest property is worth £170k to £180k. In a rapidly rising market he'll be happy to value at £180k, maybe even £185k if that is what the buyer has offered. In a falling market the valuation is likely to come back at the £170k mark, or maybe even a less, even though he knows the one next door sold for £180k 2 months ago.

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Why should the intelligent, aware, sensible and prudent millions subsidise the stupid, uninformed and lazy who choose, or claim, not to understand their obligations?

It would mean we could all ignore common sense and legal and moral obligations by ignoring their consequences and/or do anything in the knowledge that our liabilities would be picked up by others.

The good would pay (through increased costs) for the mistakes of the bad.

These days it is naive to pretend people do not understand their basic financial obligations - it is charlatanism for people to blame lenders for their recklessness.

Lenders pay the price for lending to bad risks in the form of loan defaults etc - that is their commercial incentive/disincentive to lend money they could not get back. To heap liability on them for other losses would be unfair.

Fortunately, money and debt bind govts of every persuasion with their electorate - if lenders were ever open to this you would find a permanent credit crunch - and not just for the worst risks but most people. The govt wants us all to be able to borrow lots - that is how our western economies now work - limiting that would affect the economy (rightly or wrongly).

I refuse to allow that faction of the public to affect my freedom to contract in this way (albeit that it might result in more senible house prices!).

Rant over.

Edited by Tempest

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Saying that, valuing is not an exact science. Anecdotally, in a falling market, surveyors will round down, whereas in a rising market they are happy to round up.

ie, comparable evidence (ie recent sales) suggest property is worth £170k to £180k. In a rapidly rising market he'll be happy to value at £180k, maybe even £185k if that is what the buyer has offered. In a falling market the valuation is likely to come back at the £170k mark, or maybe even a less, even though he knows the one next door sold for £180k 2 months ago.

is that right? I'm impressed that there enough experienced surveyors around to appreciate this. I expect all the young whippersnappers to be carried away with the infinitely rising market.

I only know one surveyor on a personal level, and he is in commercial. While he seems very ready to accept that values go down as well as up (he is about 33 I think) and tried to STR for that reason, it didn't stop him racking up phat debts and MEWing in the good times. Mind you, he did have a drink problem.

Can you imagine borrowers trying to claim compensation from lenders because they sold them huge mortgages during the price boom. There are a lot of naive people out there to be taken advantage of.

We nearly took out a huge mortgage not really knowing much about them. If a lender can say you can afford to borrow 6x your salary and you end up losing your home I think they should be made partly responsible.

Like those who took out endownment mortgages.

interesting question and one that is very relevant to me professionally.

It is a political issue really. If a scandal of sufficient viciousness (ie the press manage to whip up a big frenzy in middle Britain) then there may well be a broad move toward making some redress, for the sake of maintaining credibility & faith in financial services.

Rather like endowments in fact.

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Rather like endowments in fact.

Who's idea was it to give even more money to those rich and lucky enough to buy houses with endowment mortgages?

Seems crazy and backwards, like the way we give extra money to rich landowners, or the way police who kill innocent people get suspended on full pay for years. If there was to be any compensation surely it should go to people who lost on their investments (house + fund), not to those who made huge profits.

The banks were hard done by on that one.

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Who's idea was it to give even more money to those rich and lucky enough to buy houses with endowment mortgages?

Seems crazy and backwards, like the way we give extra money to rich landowners, or the way police who kill innocent people get suspended on full pay for years. If there was to be any compensation surely it should go to people who lost on their investments (house + fund), not to those who made huge profits.

The banks were hard done by on that one.

I can't say I wholly disagree with you. Of course, you must remember that this all kicked off 5+ years ago when a lot of the borrowers were still stuck in NE. Endowments were also used to make house purchases more affordable in the late 80s, thereby shovelling more coal into the HPI furnace, so a lot of the "victims" were those who bought in 87-88, i.e. at the peak. They were sold a pup, but a rising markey has bailed them out (for now).

I was discussing this with one of my colleagues today. He is in his late 50s and used to sell endowments, well before they were used to back mortgages. He was busy selling their praises as savings vehicles that did allow people to pay their mortgages off in 10years. He looked quite shaken when I explained that wage inflation did just the same for people in the same period (70s)... goes to show that a lot of these advisors aren't evil manipulative scumbags trying to rip people off - more often than not they've swallowed the propaganda too and are simply guilty of ignorance.

dare I say that the same may even apply to most estate agents. :blink:

just because someone is a "professional" doesn't mean they know any more than the punter.

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I hate this compensation culture. If people are that stupid they deserve to be taken for a ride. Screw em.

Agree

At some point in your life you have to accept responsibility for your actions. You are in charge of your destiny and at any point can take control. If you don't "pay due dilligance" then watch out. Choosing not to choose is a choice as well. :P

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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