Sunday, August 23, 2009

Your money spent screwing the elderly

Controversial SAM mortgages go on trial

HBOS and Barclays have been up to their tricks, duping elderly people out of their homes. A fightback to bring them to court and justice has started, but now the banks are trying every tactic to delay or increase legal costs beyond the reach of normal citizens. HBOS are throwing taxpayer money at trying to wriggle out of it. Complain to your MP NOW!

Posted by fraccy @ 12:50 PM (1189 views)
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10 thoughts on “Your money spent screwing the elderly

  • japanese uncle says:

    Excuse me, experienced elderly generation must know better than to take up such ‘exotic’ scheme, running a risk of losing your house.
    Those sticking to the traditional and concervative way will not lose in the long run.

    Reply
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  • Complain to your MP NOW!

    Hang on there a second.

    First of all, hello fraccy, welcome to the site. As JU points out, the only reason this loan has turned sour is because house prices have appreciated significantly and these owners appear to resent that the bank has taken most of those profits in accordance with the mortgage contracts they have in force.

    I don’t object to such arrangements per se on the caveat emptor argument, but I do resent these banks attempting to stop a fair hearing.

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  • Sometimes you have cases where you feel sorry for the banks. These people took bets for money upfront, hoping that their homes wouldnt appreciate in value. They lost the bet and now they want the banks to carry their lost bets.

    I have no sympathy. The contracts look fair. If house prices had fallen then these people would have had cash for free. It was the risk they took and lost.

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  • If people have genuinely been mis-advised, then they have a case. However it seems likely that they simply regret the decision because house prices have risen so much. (Not that that would have actually made them any richer, they still need somewhere to live.)

    Flash back to an article from 1998:

    Independent: Personal finance: Skip the rent and boost the pension

    The problem: Gordon, who is 57 and divorced with no dependents, is currently paying £750 a month to live in rented accommodation in central London.

    The advice: The Shared Appreciation Mortgage (SAM) from Bank of Scotland answers many of Gordon’s problems. He can fix the interest rate for the life of the mortgage, which can be repaid on death by the sale of the property. In return for a very preferential interest rate, the borrower shares a percentage of the future increase in the value of the home. In effect, this subsidises the low interest rate.

    For example, if the maximum loan of 75% is taken on a flat costing £85,000…. [were flats in central London really that cheap in 1998?]

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  • Well, Ive seen the paperwork. They have been mis-advised, it would make hilarious reading if it werent so wicked.

    They were sold the idea that hey, if the value of the house rose, the banks would be paid back more, but you would have more. They key thing that was not obvious is the way the equity disappeared over time. Its all about the equity.

    Add to that the fact the banks dictate both the entry and the exit valuations, and then say to yourself as you did paul, Hang on there a second, is paying over 40% per annum on fully secured debt reasonable, *regardless* of what happened to the market, or is someone perhaps being fleeced?

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  • The way the SAM worked was for 3 times the amount you borrowed. eg if you borrowed 25% of the value of the property they took 75% of the increase in value of the property. IF prices had gone down then these people would have had an interest free loan (im not sure if they would share in the negative values). So no, no need to complain. If you want to complain, about that you might as well complain for a whole generation who have been priced out of family homes and priced into rabbit hutches.

    Surely these two groups interests are the same.

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  • Is there any evidence that these deals were mis-sold?

    If not, tough. A contract is a contract.

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  • No sympathy. Trust the Mail to play the ‘elderly’ card.

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  • Equity release is not such a brilliant idea as people think. You only get about 30% of the value of the house (plus of course you get to live in it until you pop your clogs).

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  • honest valuer says:

    I carried out lots of these valuations for BOS in the mid/late 1990’s and invariably the “elderly people” taking out these loans lived in very nice houses and were unwilling to live within their means by trading down to a smaller property/ less expensive area. A bit of a generalisation but they were often upper midddle class without enough pension/savings to live the lifestyle and thought the SAM scheme was a great idea. Basically the same mentality as the younger generation who MEWed and are now in the sh*t – just a different accent!

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