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Calls for govt to help people 'trapped' on SVR after income drop.


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"

Citizens Advice is calling on the FCA to make interventions in the mortgage market as soon as possible, to prevent struggling mortgage customers from paying the loyalty penalty.

Alistair Cromwell, Acting Chief Executive of Citizens Advice, said: “The pandemic has had a devastating impact on household finances."

 

Express: 'I feel completely trapped in my mortgage' Homeowner, 55, on struggle as rate rise nears.
https://www.express.co.uk/finance/personalfinance/1434808/mortgage-uk-rates-mortgages-standard-variable-rate

 

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Why is it deemed as the 'loyalty penalty'?

People know that their mortgage is for a fixed amount of time at one rate, which is shown upfront, after which it goes onto a different rate - which is also known upfront assuming constant interest rates. 

Most people tend to remortgage away to continually lock in the lower fixed amounts, but there are risks in either interest rates rising heavily or not having the income for the new mortgage. So basically this guy wants to take the risk, but not suffer any of the consequences.

It is a bit like me complaining that the 17.9% APR on the credit card after the initial 0% period is a penalty for loyalty. I could carry an extra £10k in money by continually utilising credit card transfers, but that is dependent on other products being available and also passing their credit check. If I lost my job it's unlikely I could get a new credit card and thus be marooned with a £10k debt at 17.9%. Would this gain sympathy or would people simply say I those are the risks I took?

One question you can put to people like this is why have SVR at all? The fixed interest rate parts are low because of competition. But getting rid of them and just offering a blended rate would mean that nobody would face this type of scenario where the mortgage jumps by a few %, unless interest rates went crazy. 

Like the cladding stuff people would say no even though it would prevent these sort of situations. 

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1 hour ago, Si1 said:

"

Citizens Advice is calling on the FCA to make interventions in the mortgage market as soon as possible, to prevent struggling mortgage customers from paying the loyalty penalty.

Alistair Cromwell, Acting Chief Executive of Citizens Advice, said: “The pandemic has had a devastating impact on household finances."

 

Express: 'I feel completely trapped in my mortgage' Homeowner, 55, on struggle as rate rise nears.
https://www.express.co.uk/finance/personalfinance/1434808/mortgage-uk-rates-mortgages-standard-variable-rate

 

What does  "as rate rise nears." mean ?

The free market tories will be all too happy to meddle in the market, their market

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13 minutes ago, simon2 said:

Why is it deemed as the 'loyalty penalty'?

People know that their mortgage is for a fixed amount of time at one rate, which is shown upfront, after which it goes onto a different rate - which is also known upfront assuming constant interest rates. 

Most people tend to remortgage away to continually lock in the lower fixed amounts, but there are risks in either interest rates rising heavily or not having the income for the new mortgage. So basically this guy wants to take the risk, but not suffer any of the consequences.

It is a bit like me complaining that the 17.9% APR on the credit card after the initial 0% period is a penalty for loyalty. I could carry an extra £10k in money by continually utilising credit card transfers, but that is dependent on other products being available and also passing their credit check. If I lost my job it's unlikely I could get a new credit card and thus be marooned with a £10k debt at 17.9%. Would this gain sympathy or would people simply say I those are the risks I took?

One question you can put to people like this is why have SVR at all? The fixed interest rate parts are low because of competition. But getting rid of them and just offering a blended rate would mean that nobody would face this type of scenario where the mortgage jumps by a few %, unless interest rates went crazy. 

Like the cladding stuff people would say no even though it would prevent these sort of situations. 

Depends on the company. My BS don't do any checks to change a mortgage product as an existing customer, the wife and i could be sitting at home with 100k credit card debt and no jobs. You can pick any of their current rates, fixed, discount, tracker, offset, and just pay a £200 fee to change the rate. 

They only look at your finances if you want to borrow more. 

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I dont buy the big sob story. Rates even at current mortgage SVR are still at historical lows. And lets face it, more than likely, his interest rate repayment is still far less than rental values in the area. His bank has provided options for a holiday but that obviously has a cost associated with it. Title should read "man wants cake and wants to eat as well! " But what do you expect from a brexity, tory backing paper. Tories are friends of the banks, so I expect no further action is intended. 

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53 minutes ago, wighty said:

Obviously can no longer afford to buy a house. Will have to sell up and rent then. 

No they could buy a smaller place but I am sure this will be passed so he needs to stay put 

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I have more sympathy towards renters with no job security nor housing security......rents have only been going up all the while interest rates going down......their cash savings are also vulnerable, whereas savings in house equity is not taken into consideration for help....protected. ;)

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Dear Taxpayer. My income has significantly dropped due to Covid and I can no longer afford to shop at Waitrose. Can I have a Waitrose subsidy as I'm not the sort of person that shops at Aldi?.

btw my 4X4 finance deal is coming to an end. Any chance of a sub as I definately can't be seen in a Dacia?.

Edited by wighty
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17 minutes ago, markyh said:

Depends on the company. My BS don't do any checks to change a mortgage product as an existing customer, the wife and i could be sitting at home with 100k credit card debt and no jobs. You can pick any of their current rates, fixed, discount, tracker, offset, and just pay a £200 fee to change the rate. 

They only look at your finances if you want to borrow more. 

OK fine, but that seems to me to be a discretionary thing.

If it was written in the T/Cs that you could change to another product by just paying a fee with no checks then this man should be complaining to the FCA for the mortgage company not adhering to what it promised, but I'd imagine the T/Cs are not like this.

The guy still knew that one day his mortgage would increase in rate and there was a risk he may not be able to get a refinance. Two ways that can happen is loss of income, or loss of value of house giving bad LTV... not sure what basis he has to complain. Saying that other people have done it is a bit like complaining that other banks are dishing out 95% LTV so therefore your own mortgage company should do the same.

I suspect that maybe this man was a bit too honest.... for a credit card application it asks your salary and I don't think anyone checks to see if the number is real or not. He probably called them up and told them this situation first.

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15 minutes ago, crescent said:

No they could buy a smaller place but I am sure this will be passed so he needs to stay put 

If his income is now so small he'll get housing benefit etc. He should get on the gravy train.

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This is just the risk of taking a short term mortgage discounted rate of some sort.

What annoys me is there is an actual call for the govt to 'do something about it'

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1 hour ago, wighty said:

If his income is now so small he'll get housing benefit etc. He should get on the gravy train.

You have no idea how much he earns any more than I do.

Or how much equity he has :) 

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