Simon Lambert, Assistant Editor, This is Money, replies: Northern Rock became infamous for its 125% Together mortgage and was at the forefront of the 100%-plus mortgage movement.
However, while it had a chunk of customers with little equity, or none at all, it also had plenty of customers with good credit histories and substantial equity.
Since then a 20% fall in property prices has hit and this has caused major problems for those who took out mortgages with little or no deposit.
They are now in negative equity – their mortgage is worth more than their property - and will find it difficult to remortgage or move home.
But being in negative equity does not mean you will default on your mortgage or lose your home, as long as you can keep up with monthly payments and preferably start overpaying to chip away at the debt.
And this is where Northern Rock's bad debt problem comes in.
Northern Rock's bad mortgage debts have been exacerbated by the decision to encourage remortgaging customers to leave Northern Rock following its nationalisation: with the carrot of telling them they could get better deals elsewhere and the stick of failing to lower standard variable rates in line with the base rate.
This led to large numbers of good borrowers deserting Northern Rock for better rates at other lenders, but those who had borrowed large amounts found themselves unable to get mortgage deals from rivals.
These borrowers are now stuck with Northern Rock and despite Government calls on lenders to lower mortgage rates as the base rate fell, the taxpayer-owned bank has been one of those that failed to pass on all the cuts, leaving its already struggling borrowers paying over the odds.
How Northern Rock's SVR compares
• When the base rate stood at 5.75% at the end of 2007, just before Northern Rock was nationalised, the bank's standard variable rate was 7.84% - a difference of 2.09%
• The base rate now stands at just 0.5%; Northern Rock's SVR is 4.79% - a difference of 4.29%
This SVR compares very poorly to the SVRs of other major mortgage lenders: Nationwide's is 2.5%, Lloyds/C&G's is 2.5%, Halifax's is 3.5%, RBS' is 4%, HSBC's is 3.94% and Abbey's is 4.24%.
Compounding the sense of injustice for borrowers is that Northern Rock has been accused of aggressively pursuing repossessions and selling on job lots of properties at knockdown prices.
Repossessed by Northern Rock, Philip Wilkinson
Repossessed: Philip Wilkinson lost his home to Northern Rock
- Read his story
According to Northern Rock's results 22,141 customers were three months or more behind with their mortgage payments in June, 3.92% of its borrowers, up from 3.67% at the end of March and 2.92% at the end of 2008.
Arguably, this would not be rising by anywhere near as much had Northern Rock cut its standard variable rate further.
If the SVR had fallen in line with the bank rate, to 2.59%, borrowers with a £100,000 repayment mortgage on the SVR would be paying £453 per month rather than £572. If prudent, they could put the money saved towards paying off their negative equity.
The decision to actively push more customers of a taxpayer-owned bank into arrears through high rates appears perverse, but behind the scenes there is a business decision being made.
Obviously higher rates get the taxpayer loan paid off quicker, although losses through bad debts and the human and social cost of repossession is a major downside to this.
Furthermore, the plan is to divide Northern Rock into good and bad bank. The first will carry out new lending and hold the savings book, while the latter will hold the struggling mortgage book and the Government loan used to keep Northern Rock afloat. By keeping the SVR high, Northern Rock has essentially divided its mortgage book into good (new borrowers on strict lending criteria) and bad (old borrowers stuck with the lender). This will help in a future sale.
The plan is that the good and bad banks will be sold to the private sector, although the Government may get stuck with the bad one. This would take some or all of the bank off the taxpayer's hands and allow the Government to claim it made a success of handling Northern Rock.
However, that will be of small comfort to those who were encouraged to take out super-size mortgages and now find themselves on the brink of repossession thanks to Northern Rock's high rates.
Source
Monday, September 28, 2009
Tuesday, September 15, 2009
You Can Still Apply For A Bad Credit Loan Or A Bad Credit Remortgage.
Many people in the UK are struggling under the burden of a pile of debt because they think that loans which could offer them a glimmer of hope in the dark tunnel in which they find themselves are simply not available. They convince themselves that there is no financial help available. This is simply not correct. There are still funds available for all kinds of loans whether it is a debt consolidation loan, a secured loan, a homeowner loan, a car loan, etc. etc.
Many people with a good credit rating are of this belief, so what about the others with a poor, or even an extremely poor rating? They struggle on thinking that no lender would as much as grant them a second look. Due to the present economic climate their household income has been reduced due to overtime hours having been cut or one household member only now working part time hours for example. For the first time in their life they, through no fault of their own, have defaults registered against their name due to making late payments on their credit cards and loans. In the process of robbing Peter to pay Paul, some mortgage payments have been missed resulting in mortgage arrears being registered against them with credit reference agencies such as Equifax and Experian. They struggle on and no longer have the priviledge of enjoying a really good night's sleep. This is giving yourself needless torment. Granted if you are a tenant it will be virtually impossible to get help with your financial struggle,as unsecured lender, Welcome Finance, who specialized in sub prime loans is no longer lending. However if you are a homeowner bad credit loans are still available.
The interest rates are actually quite high, but who can expect anything else to be the case when these adverse credit loans are available to homeowners with unlimited adverse points registered against them? The oldest UK secured loan lender, which in 2002 became known as Prestige Finance, are offering bad credit loans to homeowners at up to 60% LTV, that is, loan to value, and up to 55% LTV for the self employed. At this LTV up to a maximum of four missed mortgage payments in the course of the past year are acceptable. If however the four missed payments occured in four consecutive months the application will have to naturally be referred for prior approval to the bad credit loan lender.Unlimited adverse in mortgage arrears, defaults, CCJ's are accepted at 50% LTV. This means that if your property is worth £300,000 and your mortgaqe balance is £120,000 you can borrow up to £30,000. The bad credit loans are available from £5,000 minimum to a maximum loan of £30,000.
Self certification of income is available for those who are self employed. However if this self employed individual has more than four months mortgage arrears, an accountant's certificate is required to back up the self declaration. Therefore for those crushed under a heavy mountain of debt these bad credit loans are a God send, and offer the poor suffering homeowner a much needed breath of relief, and should see them through the credit crunch when their working hours return hopefully to normal If repayments are kept up, and remember to make sure that you can afford the repayments, and that the loan will 100% alleviate your financial situation,you will in the future , be eligible again, with this tidying up of your debts and credit,thanks to the bad credit loan, to apply for status finance for loans, credit cards, etc.If it is a remortgage that you prefer,the good news is that bad credit remortgages are still available and these offer you the same life altering peace of mind changes as do the bad credit loans.
Two of the main bad credit remortgage lenders are Platform &The Mortgage Works. They also accept self declarations of income for the self employed, but be warned that they do reserve the right to ask for back up proof of income in the form of an accountant's reference or even full accounts. Both these types of bad credit borrowings should enable you to come out of the tunnel at the end of the credit crunch in a healthier state than you are in at present, that is in a healthier state financially and also in your mental well being. Just make sure before applying for either of these bad credit loans that you can afford the repayments, and that they will definately help your financial struggles, and take you out from under the burden of debt. The apply for the bad credit loan, and enjoy your new peace of mind.
Source
Many people with a good credit rating are of this belief, so what about the others with a poor, or even an extremely poor rating? They struggle on thinking that no lender would as much as grant them a second look. Due to the present economic climate their household income has been reduced due to overtime hours having been cut or one household member only now working part time hours for example. For the first time in their life they, through no fault of their own, have defaults registered against their name due to making late payments on their credit cards and loans. In the process of robbing Peter to pay Paul, some mortgage payments have been missed resulting in mortgage arrears being registered against them with credit reference agencies such as Equifax and Experian. They struggle on and no longer have the priviledge of enjoying a really good night's sleep. This is giving yourself needless torment. Granted if you are a tenant it will be virtually impossible to get help with your financial struggle,as unsecured lender, Welcome Finance, who specialized in sub prime loans is no longer lending. However if you are a homeowner bad credit loans are still available.
The interest rates are actually quite high, but who can expect anything else to be the case when these adverse credit loans are available to homeowners with unlimited adverse points registered against them? The oldest UK secured loan lender, which in 2002 became known as Prestige Finance, are offering bad credit loans to homeowners at up to 60% LTV, that is, loan to value, and up to 55% LTV for the self employed. At this LTV up to a maximum of four missed mortgage payments in the course of the past year are acceptable. If however the four missed payments occured in four consecutive months the application will have to naturally be referred for prior approval to the bad credit loan lender.Unlimited adverse in mortgage arrears, defaults, CCJ's are accepted at 50% LTV. This means that if your property is worth £300,000 and your mortgaqe balance is £120,000 you can borrow up to £30,000. The bad credit loans are available from £5,000 minimum to a maximum loan of £30,000.
Self certification of income is available for those who are self employed. However if this self employed individual has more than four months mortgage arrears, an accountant's certificate is required to back up the self declaration. Therefore for those crushed under a heavy mountain of debt these bad credit loans are a God send, and offer the poor suffering homeowner a much needed breath of relief, and should see them through the credit crunch when their working hours return hopefully to normal If repayments are kept up, and remember to make sure that you can afford the repayments, and that the loan will 100% alleviate your financial situation,you will in the future , be eligible again, with this tidying up of your debts and credit,thanks to the bad credit loan, to apply for status finance for loans, credit cards, etc.If it is a remortgage that you prefer,the good news is that bad credit remortgages are still available and these offer you the same life altering peace of mind changes as do the bad credit loans.
Two of the main bad credit remortgage lenders are Platform &The Mortgage Works. They also accept self declarations of income for the self employed, but be warned that they do reserve the right to ask for back up proof of income in the form of an accountant's reference or even full accounts. Both these types of bad credit borrowings should enable you to come out of the tunnel at the end of the credit crunch in a healthier state than you are in at present, that is in a healthier state financially and also in your mental well being. Just make sure before applying for either of these bad credit loans that you can afford the repayments, and that they will definately help your financial struggles, and take you out from under the burden of debt. The apply for the bad credit loan, and enjoy your new peace of mind.
Source
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