JM Barrie created the story of the boy who never grew up and lived a place aptly referred to as Neverland – I say ‘aptly’ because, broadly speaking, ‘The New Generation’ (TNG) work on the premise of putting their debt on the ‘never-never’.
It could be argued that debt is an inevitable trap for those falling academically short of university, yet those brighter sparks who hoped to be excluded are still offered the seemingly attractive option of student loans. So collectively they are entrenched in the quagmire of debt from day one of adulthood, irrespective of their status.
Furthermore, unlike the little green-dressed pixie (who flies for free), they need a car to travel – walking and public transport are a drag with a hangover. TNG don’t do ‘old bangers’ either – those car stickers from a previous era should be replaced with ‘my other Porche is also on tick’. With 125 per cent loan-to-value (LTV) secured loans available, the funds are available at the drop of a pirate’s hat.
The TNG culture could best be typified by credit card applicants and providers, the latter finding it hard to operate with governance as, unlike the UK credit information bureaus, many providers are overseas. But surely it’s ludicrous to offer someone infinite cards?
The wise cardholders among them will perpetually transfer to zero balances with the more astute taking advantage of the cashbacks by clearing their balances on time every time. But the majority will adopt a ‘never-never’ approach – and why not? We’re not talking about the culture of lender’s red letters asking for money back – in fact the opposite, with providers enticing you to borrow more.
Sometimes you must be frank with the borrower by renaming the columns on a statement as follows (maybe not as professional, but it might hit home):
This is the amount you borrowed with us originally.
This is the amount we have subsequently sucked you into.
This is the profit we have made out of your hardship
This is the profit we typically make out of your foolishness every month.
This is the amount you need to increase your monthly payment by to rid yourself in six months from being taken for a mug.
Health warning: everything you have bought with this card is effectively ours. You are the borrower: we make money, you lose money. So do all credit card providers. Don’t be like the masses: act responsibly today.
But never-never does not end here. According to the Official Insolvency Statistics, 13,501 bankruptcies were filed in the 4th quarter of 2005 – an 11 per cent rise on the previous quarter and 38% more than 2004. Although a calculated last throw of the dice to end their difficulties, the lenders will probably actually never get their money back. Moving closer to home (mental note: bad choice of phrase, Stokesy), possession orders during the 1st quarter of 2006 shot up to 33,442 – 29 per cent more than 2005, partly due to the relaxation of lender’s credit policies, where seemingly even the most unworthy are considered a viable risk.
I accept customers can fall into difficulties after life-changing events like a failed business or marriage, but some products seem to actively encourage non-payment, accepting unlimited arrears even though they took out an identical deal six months earlier.
Maybe this view is too simplistic, but if I lent someone a fiver, which they didn’t pay back, and then they asked me for another fiver in six months time, my response would be unprintable. Now replace my fiver with £150,000 and put yourself in the lender’s shoes. You’d think their response would also be unprintable, but this is exactly what some big names are doing, with increasing numbers queuing up to offer identical schemes – a sort of Celebrity Doom Island.
But what’s this I see on the horizon? A hero accustomed to finding such islands with a pinch of fairy dust: the Financial Services Authority’s (FSA) Peter Pan is due to begin it’s investigation into the non-conforming market in September and surely arranging credit for non-payers cannot help anyone’s ‘Treating Customers Fairly’ (TCF) charter.
Mainstream
Northern Rock’s 4.49 per cent fixed to 1/3/08 still exists. Britannia’s 4.74 per cent fixed for two years is up to 95 per cent LTV. Yorkshire has a two-year discount at 4.25 per cent to 95 per cent.
Northern Rock has implemented a fundamental change to the early repayment charge length on its infamous ‘Help with Costs’ facility – a useful separate loan to the tune of £750 (previously £1,000) aiding the initial costs of setting-up the mortgage. But previous criticism (suggesting that three and a half years’ early repayment on the loan made two-year mortgages untidy to sell) has been re-addressed – the loan for remortgage transactions is now two years. Northern Rock also ‘guarantees’ not to request any additional documentation to verify income for qualifying remortgages and second-time buyer applications.
Dunfermline has launched a 100 per cent LTV first-time buyer product in Scotland without higher lending charge.
Buy-to-let
Mortgage Trust has been keen on price this year but the recent SWAP changes threw it for a while. It is, however back on song with a 5.09 per cent two-year fix with flat £699 completion fee.
CHL Mortgages follows into the 90 per cent LTV territory, but uniquely lends to Republic of Ireland residents purchasing in England with a good rental calculation at 115 per cent.
Kensington joins the prime buy-to-let market for the first time via selected outlets. It will allow the letting agent to verify the rental return, which could be more advantageous than a valuer.
Self cert
Kensington Mortgages are renowned for placing no restriction on the length of employment or self-employment – a policy being transferred to their new prime self cert criteria.
Adverse
London Mortgage Company returns with its first product range for ages. It managed to retain its criteria nugget ‘the non-requirement of CAIS information’.
Preferred Mortgages is expanding its social housing criteria to include Social Homebuy and New Build HomeBuy including properties in Northern Ireland. The products, launched mid-month, are restricted to packagers who run the Partnership model.
Edeus Mortgage Creators, which announced its launch for September, is keeping its cards close to its chest, but has hinted at technical enhancements in the process.
