Reply to: Contractor Financials

[_V_]

I think the problem is Banks and building societies have sold mortgages on to brokers who have sold them to other brokers but only for a short term eg 5 years, those buyers are now coming back expecting the brokers to buy those mortgages back and very few are willing to rebuy the debt and take on the risk.

For brokers read some investment ****** with large bonus.

Northern Rock problems happened when they could not off load anymore old mortgages to get money to fund new mortgages.

Also known as buying a pig in a poke.

[alreadypacked]

I thought that was half of the currrent problem with the mortgage market in general? Banks and building societies have sold mortgages on but only for a short term eg 5 years, those buyers are now coming back expecting the banks to buy those mortgages back and very few are willing to rebuy the debt and take on the risk

I think the problem is Banks and building societies have sold mortgages on to brokers who have sold them to other brokers but only for a short term eg 5 years, those buyers are now coming back expecting the brokers to buy those mortgages back and very few are willing to rebuy the debt and take on the risk.

For brokers read some investment ****** with large bonus.

Northern Rock problems happened when they could not off load anymore old mortgages to get money to fund new mortgages.

[Bagpuss]

Lack of liquidity in the interbank credit market?

No it's the way I'm stood

[Moscow Mule]

I wonder how NR got into credit difficulties?

Lack of liquidity in the interbank credit market?

[Moscow Mule]

They say:



Sounds quite good to me...

P

If you like the idea of instant negative equity.

[_V_]

The Northern Rock will happily work from your contract rate rather than
needing accounts

In other words, a Liar mortgage.

"We don't need any accounts, what is you rate, as junior 1st line support monkey?"

"£1500 per day"

"no problem, your £950,000 mortgage is approved"



I wonder how NR got into credit difficulties?

[Bagpuss]

They say:



Sounds quite good to me...

P

more competitive
rate of 6.69% with an arrangement fee of £1995

taking the APR to around 8% (which is why the arrangement fee is excluded)

ask for the APRs then you will see the real cost

[Peter Loew]

Out of interest, what are NR offering?

They say:

If you were looking for a 100% (or even 100%+) mortgage from a contractor
friendly lender, the Northern Rock have an excellent scheme called the
“Together” Mortgage. Basically they lend 95% of the value of your property
as a mortgage and you have a choice of Fixed or Variable rates, and they
then can lend up to an additional 30% (up to a maximum of £30000) in the
form of an unsecured loan but over the same term and at the same rate as the
mortgage. Whilst the interest rate is slightly higher it enables you to
borrow in excess of the property value, so you could cover all the costs
involved with moving, consolidate any credit cards or loans you may have or
even buy furniture for your new home. The scheme also allows, unlimited
overpayments (even on the fixed rate schemes, as long as they are not
redeemed completely within the fixed rate period), underpayments and payment
holidays (funded from overpayments) and even a redraw facility (at the same
rate as the mortgage). Effectively the mortgage loan will be £232750 +
£30,000 as a personal loan.

The variable rate option is often very popular with clients as it has no
redemption penalties at any time, so if after 12 months the value of the
property had increased, sufficiently, it would be possible to remortgage
over to a non 100% property, without penalty, normally on a more competitive
rate of 6.69% with an arrangement fee of £1995. This can be added to the
loan.

The Northern Rock will happily work from your contract rate rather than
needing accounts, and they don’t charge a High Loan Fee for mortgages over
90%, unlike most lenders, which saves you thousands. We can process an
Agreement in Principle with the Northern Rock. If you would like us to do
this, let me know the best number to get you on and I will get my colleague
XXX to call you and take the details.

Sounds quite good to me...

P

[BlasterBates]

If Northern Rock is the cheapest option currently, then beware, because it is possible that your mortgage could be taken over by another company, in effect Northern Rock would end their contract and a new company offers you awful conditions or demands immediate repayment.

[Spacecadet]

Thats not going to happen. Most mortgages have a securitisation clause. That means they have already sold your mortgage to someone else.

I thought that was half of the currrent problem with the mortgage market in general? Banks and building societies have sold mortgages on but only for a short term eg 5 years, those buyers are now coming back expecting the banks to buy those mortgages back and very few are willing to rebuy the debt and take on the risk

[Fran]

NR aren't actually likely to go bust, that's why Bank of England supported them!

If they get taken over I'm fairly sure you wouldn't be forced to move to a worse product, there has been too much publicity and the government have promised to help the customers.

I would borrow or save with NR with out any concerns.

[alreadypacked]

I expect if no-one took on the debt, the mortgage indemnifiers would re-possess the house or demand payment.

Thats not going to happen. Most mortgages have a securitisation clause. That means they have already sold your mortgage to someone else.

[alreadypacked]

I wonder what the legals are round this. Say you get a mortgage with NR with a 2 year tie in (for example) at 5%. After 1 year NR get bought by New Bank and NB say your mortgage is going to be migrated to their product which charges 6%. Surely you can't still be held to the 2 year tie in when the terms of the product have changed? At that point you can then go and find a new deal somewhere else non?

I think they would wait until the fixed term was finished before they uped the rate, but if you tried to move, you might have to pay a large fee.

[Bagpuss]

I expect if no-one took on the debt, the mortgage indemnifiers would re-possess the house or demand payment.

[_V_]

Read the small print. Who knows what that says and what you are agreeing to.