How much ??

negativenick


Joined: 10/11/2008
Posts: 6023

Message Posted:
31/01/2009 20:25

Thousands poised for 8p-a-month mortgages as lenders caught out by base rate cutsPatrick Hosking, James Charles and Grainne Gilmour

The 8p-a-month mortgage is set to become a reality for thousands of borrowers next week because of over-generous loan terms offered by banks and building societies in the benign era just before the credit crunch hit.



Thousands of borrowers on tracker deals struck in the early summer of 2007 will pay almost no interest and could even be in a position to demand payment from their banks on a strict interpretation of the fine print.



Their effective mortgage rate is set to fall close to or even below zero if, as expected, the Bank of England cuts base rate from 1.5 per cent to an unprecedented low of 1 per cent next Thursday.



The biggest beneficiaries will be thousands of Cheltenham & Gloucester borrowers who took out a tracker product in July 2007 which charges base rate minus 1.01 per cent. Lloyds Banking Group, now 43 per cent owned by the taxp

negativenick


Joined: 10/11/2008
Posts: 6023

Message Posted:
31/01/2009 20:28

43 per cent owned by the taxpayer and also the owner of C&G, said that there was a zero floor to the deal and that because its computer systems could not cope with zero, it would be temporarily charging 0.001 per cent if base rate is cut to 1per cent.



For borrowers on a £100,000 interest-only mortgage that would translate into a monthly interest payment of 8p. Those on repayment mortgages will continue to pay more as principal repayments are included in their monthly bills.



Borrowers would later be refunded the 0.001 per cent overcharge, Lloyds said.



Other banks facing the prospect of lending for almost nothing include state-owned Bradford & Bingley, which offered tracker mortgages at base rate less 0.75 per cent and HSBC and Halifax, also part of Lloyds, which priced tracker deals at base rate less 0.51 per cent.

cooper


Joined: 23/10/2007
Posts: 3386

Message Posted:
31/01/2009 20:29

I hope Garry monger's got a mortgage with the C&G



Cooper

negativenick


Joined: 10/11/2008
Posts: 6023

Message Posted:
31/01/2009 20:29

Some lenders, but not all of them, put in place safeguards known as “collars” to prevent the effective interest rate turning negative, which in theory could oblige them to pay interest to the borrower.



One lending chief told The Times that he and many other institutions had been taking legal advice to establish the position if base rate was cut further. They are confident that the courts would support them in ruling that it was not reasonable to expect a lender to pay interest to a borrower.



Some lenders have slipped up by failing to alert borrowers to any floor in the rate in the Key Facts Illustration, a legal document that accompanies every mortgage offer. The Financial Services Authority established the precedent that floors had to be in the KFI when it told HBOS it could not enforce a floor set out in its fine print.



The Council of Mortgage Lenders (CML) has called on the Government to impose an industry-wide collar on existing base-rate tracker mortgages held by more

rowlo



Joined: 12/10/2008
Posts: 4796

Message Posted:
31/01/2009 20:38

the major banks are now being supported with tax payers money// highly unlikely they will also pay nagative interest?? goverment will only raise taxes elsewhere and further weaken economy not a good time for savers ??best buy some property in trnc oops here comes negs lol

karakum5c



Joined: 18/03/2008
Posts: 1021

Message Posted:
31/01/2009 22:42

negativenick---yes good for a very small number who do not have any clause in their small print but more importantly for the other 98% of mortgage holders the banks have doubled their margin in the last year (the figure that they borrow money in and lend out)

This means the banks have doubled their profit margins on all mortgages they have--- on an average mortgage of £100,000 you are paying an extra £750 per annum than you should be.



Who thinks the banks wont survive this crisis!

rowlo



Joined: 12/10/2008
Posts: 4796

Message Posted:
01/02/2009 00:27

theyll always survive ?? thats why theyre banks its not a crisis for them only a crisis for the customers