When The Bell Tolls

How To Turn £16,750 Into £124,000

Hands up anyone who thinks the high street banks are taking the piss.

They go cap in hand to the Bank of England to help them out of their self inflicted mess.  However, expect them to show compassion and good sense in their dealings with ordinary customers and you'll be disappointed.

Margaret Ramage's story typifies their double standards.

Ten years ago she signed up for a Shared Appreciation Mortgage with the Bank of Scotland. A product taht was taken off  the market after just two years.

These mortgages were aimed at older people. No monthly payments and no interest in return for a share of future increase in value sounded a good deal.  It appears, though, that  the terms were hidden in small print and in Margaret Ramages's case not made clear to her.

As a result the Bank of Scotland is now due £107,250 (75% of the increase in value) plus the original loan of £16,750, a total of £124,000. Margaret's original investment of £51,250 in the house has earned her a share of the increased value of £34,750.

I don't care how much the bank insists that they're legally due this share of the house, surely the situation is just plain wrong. This is a deal a loan shark would be proud of.

Watch Your Language

Potential clients, brokers, packagers and secondary lenders are all suffering because of the irresponsible actions of those who run our banking system. We are, of course, partly to blame ourselves. We lapped up the sub prime stuff and the high loan to values without giving a thought to the long term consequences.

I thought that was all bad enough until I read a small news item in Mortgage Introducer magazine. Now you would think that the FSA and the OFT would be trying to help a beleaguered industry and it's consumers with clear advice and statements. So what's this quote in the magazine all about? It's attributed to Phillip Collins, OFT Chairman.

"Last year, the OFT made a commitment to deliver high impact outcomes that would provide real and significant benefits to consumers. In the coming year, we will continue to build on this commitment, working closely with our partners and stakeholders, focusing our resources on effective project delivery and carrying out evaluation of our work with the aim of delivering benefits for consumers in the most effective and efficient way while avoiding unnecessary burdens on business."

Once I properly understand what "high impact outcomes" are, I'm going to order some. After all the OFT say they deliver.

Keep smiling.

 

What A Crazy (Financial) World We're Livin' In

"Dad's gone down the dog track, Mother's playin' bingo, Grandad's swearin' at the telly tryin' to make the thing go.
No one seems to notice me, isn't it a sin. What a crazy world we're livin' in." - Alan Klein.

The credit crisis seems to have generated a degree of insanity amongst lenders' underwriting departments.

We're all having to learn to live with ever changing lender conditions but some of the questions being asked beggar belief.

My colleague, Manuel, is re-mortgaging a farmhouse for one of our clients through a major bank. It's a straightforward deal, or so it seemed. The house has no agricultural tie and the client has no credit problems.

However the underwriter dealing with his case needs to know whether the house has a wall around it. After a number of attempts to get an answer to the question "why?", Manuel was finally told that it's because the surveyor will need to know this before he goes out to the property. As a reply this seems to give no answer at all and raises even more questions.

Does the surveyor have a wall fetish?

Does he have an irrational fear of walls?

During a credit crunch do garden walls have a significant effect, positive or negative, upon property values?

We see more and more lenders restricting the amount of business they wish to take on by adjusting loan to value ratios and tightening up on other conditions. Perhaps this lender has found a more innovative method.

What a great idea, only offer mortgages on properties with walls around them.

Fences are out, open plan front gardens are out and, of course, no flats.

Could work.