Mortgage rip off - 5.8%?

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onekeano

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Happened to be in a shop today and what started as a very casual conversation quickly led to the person in the shop telling me that they bought a new house last year.

Because they were seperated and had custody of the kids they were "not able to get a mortgage from one of the high st banks, and the lender was charging 5.8%" (mortgage was circa 200k).

Maybe I am very niaive but I was astonished that her was a woman running her own business who was paying a premium of 70% more than the standard which is circa 3.4%?

Is this the norm for people who don't neatly fit the criteria of the high st banks?

thanks
Roy
 
Did she mention whether or not her credit rating was otherwise 'impaired'?

I don't think I'd rush into making too many assumptions on the basis of a casual conversation, there could be any number of factors driving the rate charged on the mortgage.
 
Because they were seperated and had custody of the kids they were "not able to get a mortgage from one of the high st banks,
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being seperated and having custody does not preclude anyone from obtaining a mortgage with a prime lender..its more likely that this individual has a loaded rate from Gem or Start based on what they refer to as a self certified mortgage. I.e. you are declaring your capacity to repay a mortgage by way of supplying bank statements. As this person is self employed its therefore likely that the figures in the bank statement are more favourable that their accounts, therefore allowing them obtain a highger mortgage facility than they would get based on income declared in their annual accounts. The lender has probably allowed for additional income like maintenance payments from ex spouse and or any social welfare payments they be in receipt of which a prime lender would not take into account.
its not a rip off if the individual was offered a loan facility and chose to accept it at the rate quoted.
 
I worked for a financial institution that used to load peoples mortgage rate by .25% or by .5% depending on what "class" these people fitted in to.
This was based on type of employment and whether the person was borrowing 75%+ or 90%. The problem with this was that after a few years a persons circumstance might have changed in so far as the value of their house would have increased so their borrowings to market value would have dropped below 75%. Their employment situation might also have improved.
Many of these people are still being loaded by a .25% or .5% despite that fact that their borrowings pose no risk whatsoever to the financial institution.
 
Many of these people are still being loaded by a .25% or .5% despite that fact that their borrowings pose no risk whatsoever to the financial institution.
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Surely its up to the individuals to inform their bank of their improved circumstances, and re-negotiate/switch lenders accordingly?
 
The original post is too anecdotal and unverified to comment meaningfully on the situation. Perhaps if more details could be posted about the individual's situation and the reasons for not being able to get a loan from a more competitive/mainstream lender it would help?
 
Sherman. I agree. But the financial institution has to play some part. I recently withdrew a largish sum of money from my First Active Account that I had parked longer than intended in a demand low interest bearing account. As I was taking it out the cashier said to me "can I interest you in our 2.25% product, Gee, I never knew you had so much money there, otherwise I would have brought this to your attention sooner". This was despite the fact that he used to update my passbook on a monthly basis and would have been well aware of the balance. He didn't get my business.
 
ClubMan said:
The original post is too anecdotal and unverified to comment meaningfully on the situation. Perhaps if more details could be posted about the individual's situation and the reasons for not being able to get a loan from a more competitive/mainstream lender it would help?
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That's not possible - it started with a conversation of where people were holidaying this year - or not in the case of this lady. As a lay person I was just very surprised that such a rate could be charged relative to what I would consider the norm. Obviously from some of the other posters feedback there are products that match these kind of rates - I suppose it's just unfortunate that people who are probably strained financially end up getting creamed even more.

Roy
 
onekeano said:
- I suppose it's just unfortunate that people who are probably strained financially end up getting creamed even more.
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Misfortune may not be the cause of their financial strain..........
 
onekeano said:
I was just very surprised that such a rate could be charged relative to what I would consider the norm.
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Lenders can charge what they like up to certain limits. We can't tell from the information posted if, in fact, (a) the individual was paying the rate quoted (perhaps they didn't know for sure - many people don't) (b) that was the only rate available to them and (c) if this was the case what the reason was.
 
onekeano said:
there are products that match these kind of rates - I suppose it's just unfortunate that people who are probably strained financially end up getting creamed even more.
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They can charge what they can get away with up to 22.9%, just like the ESB do if you buy a fridge .
 
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