Best of the Week
Most Popular
1.Election Forecast 2015 - Opinion Polls Trending Towards Conservative Outright Win - Nadeem_Walayat
2.UK Solar Eclipse - End Time Sign, Judgement Day, Doomsday! - Nadeem_Walayat
3.Gold And Silver - When Will Precious Metals Rally? Not In 2015 - Michael_Noonan
4.Preparing for the Next Stocks Bear Market - Forecast 2015-2016 - Gary_Savage
5.Is a Stock Market Crash Imminent? - David Eifrig
6.Gold Price Slumps as US Dollar Soars, What's Next? - Nadeem_Walayat
7.US Dollar Forex Pairs and Gold Chartology - Rambus_Chartology
8.Election Forecast 2015: The Day Labour Lost the General Election - Nadeem_Walayat
9.The ECB Should End QE Next Month - EconMatters
10.Silver Price Poised to Surge - Zeal_LLC
Last 5 days
Reflections in a Golden Eye - Gold Market Rejection, Repatriation and Redemption - 28th Mar 15
Stock Market Inflection Point - 28th Mar 15
Gold And Silver - What Moved Price? Bab el-Mandeb And Uranus Square Pluto. What?! - 28th Mar 15
Stock Market Investment Parachutes; Do You Have Yours? - 28th Mar 15
Peak Gold Misunderstanding, is Gold About to Run Out? - 28th Mar 15
Deflation Watch: Key U.S. Economic Measures Turn South - 27th Mar 15
The Hard-Earned Truth About Recreational Real Estate - 27th Mar 15
Bitcoin Price Still in Important Territory - 27th Mar 15
Stocks Bear Market Conditions - Index Market Range Warning - 27th Mar 15
BEA Leaves Q4 2014 U.S. GDP Growth Essentially Unchanged at 2.22% - 27th Mar 15
Brazil Economy Victim of Vulgar Keynesianism - 27th Mar 15
Gold to Fuel Silver Price Upleg - 27th Mar 15
Gold and Silver Stocks Will Rise Again! - 27th Mar 15
Risk of ‘World War’ between NATO and Russia on Ukraine as Yemen Bombed - 27th Mar 15
FOMC Minutes Turned The Gold Tide - 27th Mar 15
Sheffield Hallam Election Battle 2015 - Lib Dems Go to War Whilst Labour Sleeps - 27th Mar 15
Gold Effect On Mining & Shale Wasteland - 27th Mar 15
How Stock Investors Should Play the 2016 Presidential Race - 26th Mar 15
MidEast Energy Alert: Why the Crisis in Yemen Could Get Ugly Very Fast - 26th Mar 15
Stock Market Downward Spiral of Dumbness - 26th Mar 15
The Monetary Approach Reigns Supreme - 26th Mar 15
Stock Market Large Gap Down, Despite the Algos' Push Back - 26th Mar 15
Crude Oil Surges, Gold price Spikes as Middle East Tensions Escalate - 26th Mar 15
The U.S. Housing Market Recovery Is Fabricated Optimism - 26th Mar 15
Why Yemen Is The Next Saudi-Iranian Battleground - 26th Mar 15
The Crude Oil Price Crash and China Economic Slow Down - 26th Mar 15
Global Financial Markets Are More Distorted Than Ever Before - 26th Mar 15
One More Stock Market Rally and Then a Huge Drop Expected - 26th Mar 15
Danger Will Robinson - Stock Market Crash Warning - 25th Mar 15
Learn the Basics of Corrective Elliott Waves - 25th Mar 15
Why CNBC Is Hazardous to Your Financial Health! - 25th Mar 15
Will Your Retirement Accounts Survive The Coming Tax Code "Revolution"? - 25th Mar 15
US Dollar - Americas Phoenix - 25th Mar 15
California’s Epic Drought: Only One Year of Water Left! - 25th Mar 15
What’s Wrong With Silver? - 25th Mar 15
SPX Futures Appear Weak. WTIC and Gold May Be at Max Retracement - 25th Mar 15
We’re at the Dawn of a “New Energy Age” - 25th Mar 15
A Very Weak U.S. Economic Recovery - 25th Mar 15
Zero UK CPI Inflation Rate Prompts Deflation Danger Propaganda For Fresh Money Printing - 25th Mar 15
Stock Market NYSE Hi-Lo Index Aggressive Sell Signal - 24th Mar 15
Palladium Commodity Price Forecast - 24th Mar 15
Bitcoin Price Gearing Up for a Fall - 24th Mar 15
Safety Deposit Boxes In UK Being Closed By ‏HSBC – Not Closing Gold Vaults - 24th Mar 15
Japan Short Term Gains And Long Term Disaster - 24th Mar 15
China's Fragile Evolution - 24th Mar 15
David Cameron Announces Resignation Even Before Being Re-elected, Handing Labour 6 Seats - 24th Mar 15
City of London's Ownership of American Colonies - 24th Mar 15
Stock Market Reversal May Have Begun - 24th Mar 15
Casey Gathers Top Gold Experts to Share Secrets for Making Money in Any Market - 24th Mar 15
Thoughts on The Current Crude Oil Market - 24th Mar 15
U.S. Economy Still on Life Support - What Your Governments Hiding From You... - 24th Mar 15
UK Election Forecast 2015 - Budget Bribes Fail, SNP Insurgency Catastrophe - Video - 24th Mar 15
Is Stock Market Minor Top Taking Hold? - 23rd Mar 15
Greece and EU Running Out of Time as Bank Runs Intensify - 23rd Mar 15
Stock Market Slightly Negative Expectations Following Last Week's Rally - 23rd Mar 15
This Rising Interest Rates Play Could Make You a Quick 55% - 23rd Mar 15
Platinum Commodity Price False Break Low - 23rd Mar 15
The Real Reason The American Dream is Unraveling - 23rd Mar 15
Election Forecast 2015 - Budget Bribes Fail to Impress Voters, Tory's Lose Seats in Opinion Polls - 23rd Mar 15
Silver Price Reliance During U.S. Dollar Rally - 23rd Mar 15
Gold Price Outlook Dramatic Improvement Following US Dollar Topping Action - 23rd Mar 15
Wall Street Doesn't Want You to Do This - 22nd Mar 15
The "Natural Interest Rate" Is Always Positive and Cannot Be Negative - 22nd Mar 15
Exploring The Gold Market: The Fed, The Charts. The COTS and GLD - 22nd Mar 15
Stocks Bull Market Continues - 22nd Mar 15
Gold And Silver - China's AIIB Spells U.s. Dollar Demise, Not Clear For Precious Metals - 22nd Mar 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

US Economy Still on Life Support

UK Interest Only Mortgage Mis-Selling Scandal - How to Claim Compensation

Housing-Market / Mortgages May 03, 2013 - 03:29 AM GMT

By: Nadeem_Walayat

Housing-Market

First worthless payment protection insurance, then crushing interest rate swaps on small businesses and now the latest unfolding mis-selling scandal that could dwarf them all is the one of over 3 million interest only mortgages taken out by would-be home buyers during the housing boom years as desperate buyers were forced to over leverage themselves to get themselves onto the housing ladder.


The Financial Conduct Authority (FCA) has started the mis-selling ball rolling with their analysis that more than 1 million interest only mortgage borrowers will not be able to repay the loans in full at the end of their mortgage terms.

The above graph produced by the FCA shows that the next 20 years will see an increasing trend of maturing interest only mortgages where as many as 1.3 million of whom will not be able to repay the mortgages in full, and 10% having no plans at all for repaying the mortgages.

Channel 4 TV News ran a good piece which highlighted the issue, representing the victim of the Banks latest mis-selling scandal which is one of enticing home buyers into taking out 3.6 million interest rate only mortgages, where an increasingly large number (15%) are claiming they did not understand when they took out the mortgages that they needed a plan to repay the capital.

The consequences is that those unable to repay the mortgages at the end of the term will either be forced to sell their properties to repay the loans or extend the mortgage terms in perpetuity which means that home owners are in effect nothing more than glorified long-term renters.

Many financial commentators are starting to jump onto this potential mega-mis-selling scandal such as Which

“We're worried that a significant proportion of consumers say they did not know they needed a separate repayment plan on their interest-only mortgage.

We hope the FCA looks into this further to establish whether lenders made it completely clear to interest-only borrowers that they would need a repayment plan, to be sure that there wasn't widespread mis-selling." - Richard Lloyd, Which?

How to Claim for Mortgage Interest Mis-Selling

The test for mis-selling will be that the borrowers were not aware of the fact that the mortgages were interest only and therefore a separate plan needed to be in place such as endowment policies to repay the capital at the end of the mortgage term.

In which respect borrowers will need to deal with the fact that the mortgages were labeled as interest only mortgages on virtually every piece of documentation that was put before them at the time of taking out the loan.

Interest Only Mortgage

INTEREST ONLY MORTGAGE

INTEREST ONLY MORTGAGE !!!

Therefore the only way that the 1-3.6 million of interest only mortgage holders can have any real chance of being successful in a mis-selling claim is if they were to argue the case of being mentally retarded at the time of arranging the mortgage as any other excuse will be deemed to be nothing more than opportunistic clap trap.

The borrowers will need to prove beyond a shadow of a doubt that they are mentally retarded and thus were not able to perceive what the words 'Interest Only Mortgage' mean. I am sure many ambulance chasing firms will soon be springing to cold call everyone!

" Did You take out an interest only mortgage between 2004 and 2008? If so you may have been mis-sold and we can help you cancel your mortgage"

I am sure the mis-selling firms will be offering many strategies such as a DNA tests to detect chromosomal abnormalities etc..

Of course today's publicity should focus the attention of mortgage only interest borrowers who in many cases have more than a couple of decades still to go so should start saving now to cover the outstanding debt or better still to start to make capital repayments on the mortgages as many interest only mortgages actually do allow a certain amount of capital to be repaid each year without penalty.

The bottom line is that interest only mortgages means that you are only RENTING the property at a discount to the market rents with the added bonus that you can expect to get some RENT back on the difference between the mortgage and house value.

Labour's SMI Mortgage Voter Bribe

The last labour government bribed 240,000 vested interest voters by PAYING their mortgages. The public spin on SMI was that it supports those who become unemployed, paying the interest on mortgages for upto 2 years of upto £200,000 at a flat rate of 6.08% which translated into a maximum benefit of £12,160 per year on top of ALL other benefits. This despite the fact that the policy of zero interest rates had long since pushed mortgage interest rates to about HALF the amount of benefit being paid out! So the tax payer had been effectively paying Interest AND Capital as in a typical 3% mortgage rate the benefit covers the interest on a mortgage upto £400,000!

The Collation Government eventually cut the interest paid from 6% to 3.63% which still amounts to an annual benefits payment of mortgage interest to a maximum of £7,260 for what amounts to a life-time mortgage interest payments.

The Real UK Mortgage Market Fraud

There is a real fraud taking place right now in the UK and it is NOT on mortgage borrowers but as a consequence of the inflation inducing money printing debt monetization programme to force down borrowing costs primarily for the government and ALL existing mortgage holders who have seen their mortgage rates slashed by over 50%.

The price paid for this fraud is by ALL Savers where the likes of schemes such as QE4Ever, QQE and Funding for lending have resulted in over FOUR YEARS ! of sub inflation after tax interest payments, with only very brief moments when savers could have locked in rates above the rate of official inflation (RPI), i.e. today the best rates on offer for instant access accounts are all SUB 2%, and even fixed rates are sub 3% with official inflation rate RPI of 3.3%. This is THE fraud as Savers forced to pay for all reckless borrowers.

It is the savers who have a case against the government, Bank of England and Britians Banking crime syndicate for the systemic theft under way that amounts to at least a theft of 14% of their wealth over the past 5 years (gap between Interest after tax and real inflation)

In conclusion, I agree that interest only mortgage borrowers who are medically proven to have been retarded at the time of taking out interest only mortgages should be compensated to some degree for not understanding what they were being signed upto, but as regards with the vast majority of potential claimants, they amount to nothing more than opportunists trying to fund another way to cash in on the britians out of control claims culture, where the real victims are the savers who SHOULD be compensated for the difference between artificially low interest rates and at least CPI inflation if not RPI (after tax).

SOS - Save Our Savers!

Source and Comments: http://www.marketoracle.co.uk/Article40258.html

Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-2013 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of four ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series.that can be downloaded for Free.

The Stocks Stealth Bull Market 2013 and Beyond EbookThe Stocks Stealth Bull Market Update 2011 EbookThe Interest Rate Mega-Trend EbookThe Inflation Mega-trend Ebook

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 600 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2015 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

ShonanTrader
07 May 13, 16:34
Financial Markets

Trust you'll excuse this off topic subject and question, but could you please offer some commentary on the markets of late?

Kind Regards,

Shonan Trader


Nadeem_Walayat
08 May 13, 12:56
UK Housing

Hi

My next analysis will be on housing, immigration and population growth

Best

NW


JustAnotherExBanker
13 May 13, 15:07
The latest mortgage scam

Nadeem, have you noticed that some lenders (EG: The Post Office) are now offering mortgages with a low teaser rate for, say, five years - and then a variable rate for the rest of the loan at the BOE Base Rate + 3.99%!!!

In normal times, the variable rate would be 1% to 1.5% above base. If interest rates rise, some borrowers will be paying a shocking rate of interest with big penalties to exit the mortgage.

Regards, Rob.


Nadeem_Walayat
13 May 13, 20:23
Irrelevant base rate

Hi

I have been writing for several years that the base rate is irrelevant, that it does not reflect market interest rates, so if the base rate rose that would not automatically translate into a like for like mortgage rate rise, especially as in your example the market rates have a lot of slack built into them.

The real driver for market intrest rates is the real inflation rate, which is about 4% in the UK.

Best.

NW


Zipper
18 May 13, 04:32
The UK still grim or light at end of tunnel

Hi Nadeem,

Do you agree with Mervyn's last statment re the UK finally seeing the light? We're thinking of returning to the UK from Aus with an investment in London housing.

I thought for a while that AUD would be fairly safe because the UK situation seemed more grim than ours with all of the stimulus in the UK outweighing the rate cuts in Aus.

Interested to find out what your current forecasts are for British Housing and GBP and more printing (and impacts of election spending). I'm trying to determine whether a change in trend is emerging where the UK may start to see some good news.

Thanks.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014