Mortgages - a bit of a con?!

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Queen Jess

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#1
I'm relatively new to the world of mortgages and not really had any debt before, but it seems to me that the world of mortgages is one that is unfair and rigged substantially in the favour of the financial institutions.

I understand that lending people money is risky (different risks for different people, amount lent, circumstances etc, etc) and so the borrower does have to pay a premium for that. This makes sense to me. Maybe I was naive, but when I was growing up I always thought that you get a mortgage for 20-25 years and yes you may have to pay a fee to get it initially (i.e. an admin type fee), but then you were "set".

If I look at HSBC (who I have a mortgage with), their SVR is totally ridiculous (4.19%) and therefore they basically force you to get some sort of deal. They then make sure there is one (so no choice...) which has no booking fee and the rest have a booking fee which feel extremely high (generally £1,000+) just for a 2 year period (yes, you can do 3, 5 and 10 too). I tried to calculate the different deals earlier and concluded that the one without the booking fee is about the same as the cheapest one with the booking fee, so some light at the end of the tunnel there.

I do feel like they are trying to trick you into paying massive fees each time and basically screw you out of every penny that they can. Plus they force you into these fixed deals (NB - even the tracker is only for 2 years and also has a massive fee) to stop you overpaying too much so they can guarantee to maximise their investment out of you for as long as physically possible.

Maybe I am just a very cynical person, but it does not seem like a fair system to me. Some time ago the government tried to make it easier to change current account and there was the whole discussion around unreasonable fees... why aren't they doing something for mortgages?
 

Petlamb

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#2
I do feel like the landscape seems to have changed for mortgages recently. The likes of my parents did (to my knowledge) only ever have one mortgage "deal", for the life of the mortgage, but now the likes of my friends and my brother in law have already had to renegotiate and lock in again, after just a few years. Mind, this could be partly related to the way we all tend to shop around more for financial products these days?

On the other hand, as a renter, I feel super envious of friends/family who own. I hate the carpets here (they're old and were pretty worn when we moved in, now 4 years later they're certainly no better, and they're definitely "rental carpets") and we pay a fair bit more than friends in owned homes.

But, that's reality for us, at least for the next 7 or so years minimum. We'll see, I guess!
 

Queen Jess

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#3
I do feel like the landscape seems to have changed for mortgages recently. The likes of my parents did (to my knowledge) only ever have one mortgage "deal", for the life of the mortgage, but now the likes of my friends and my brother in law have already had to renegotiate and lock in again, after just a few years. Mind, this could be partly related to the way we all tend to shop around more for financial products these days?

On the other hand, as a renter, I feel super envious of friends/family who own. I hate the carpets here (they're old and were pretty worn when we moved in, now 4 years later they're certainly no better, and they're definitely "rental carpets") and we pay a fair bit more than friends in owned homes.

But, that's reality for us, at least for the next 7 or so years minimum. We'll see, I guess!
Yeah - my brain never quite understood previously when I couldn't afford to buy, but I was paying more in rent than if I had bought and had a mortgage. It's a bit nuts.

I saved hard for 11 years to buy the house I am in now. 3 years in and I just want rid of this mortgage and am already frustrated by the system which I feel is a bit stacked against me. I know I am lucky.. I am doing ok and have a nice house and have managed to overpay a bit and bring my monthly payments down. I just really hate debt and the growing feeling that a company is trying to screw money out of me and there is little I can do about it is making me want to pay it off even more!

I guess I can't overpay anything close to the maximum I am allowed on my present fixed deal, but I don't think that's the point! I wonder what will happen when I am much closer to paying it off in the future and potentially have to choose between overpaying very little to get a good interest rate versus getting a rubbish interest rate so I can pay it down. I guess I'll worry about that in 10 years...
 

homie

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#4
'fees' used in this way annoy me too. What does the fee actually go towards? Nothing. They are not a fee, they are a penalty for taking the cheapest product.
 
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katykicker

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#5
I feel like it's all designed to squeeze every penny out of you too. Still, I can't wait to get a mortgage (50% LTV for me should make for a nice fee for 5 years I hope), as renting is dead money isn't it x
 

The Reverend

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#6
I'm relatively new to the world of mortgages and not really had any debt before, but it seems to me that the world of mortgages is one that is unfair and rigged substantially in the favour of the financial institutions.

I understand that lending people money is risky (different risks for different people, amount lent, circumstances etc, etc) and so the borrower does have to pay a premium for that. This makes sense to me. Maybe I was naive, but when I was growing up I always thought that you get a mortgage for 20-25 years and yes you may have to pay a fee to get it initially (i.e. an admin type fee), but then you were "set".

If I look at HSBC (who I have a mortgage with), their SVR is totally ridiculous (4.19%) and therefore they basically force you to get some sort of deal. They then make sure there is one (so no choice...) which has no booking fee and the rest have a booking fee which feel extremely high (generally £1,000+) just for a 2 year period (yes, you can do 3, 5 and 10 too). I tried to calculate the different deals earlier and concluded that the one without the booking fee is about the same as the cheapest one with the booking fee, so some light at the end of the tunnel there.

I do feel like they are trying to trick you into paying massive fees each time and basically screw you out of every penny that they can. Plus they force you into these fixed deals (NB - even the tracker is only for 2 years and also has a massive fee) to stop you overpaying too much so they can guarantee to maximise their investment out of you for as long as physically possible.

Maybe I am just a very cynical person, but it does not seem like a fair system to me. Some time ago the government tried to make it easier to change current account and there was the whole discussion around unreasonable fees... why aren't they doing something for mortgages?
I don't think Mortgages are a con, but I do know that they feel expensive. @Queen Jess During my lifetime the bank of England base rate was 17% https://www.mortgagestrategy.co.uk/historical-interest-rates-uk/ and anyone gettting a mortgage wouldn't not have worried about a bank admin fee, but more correctly, it was probably tiny in comparison to the Interest Rate of the mortgage.

There is more competition that ever in the mortgage market and thats why banks make their products so hard to compare. Some people just hear 'low % Rate' and want it, regardless of whether its cheaper over the total life span. A £3k fee might be excessive but if it saves you £500 a month over 2 years then it is probably worth while. However, if you don't have £3k spare but can afford an extra £400 a month there might be a 'better' mortgage deal for you.

When I was looking for my first mortgage, what was really interesting was Abbey National (or just Abbey). They wouldn't actually lend to me (long story) but they spent 25 minutes explaining mortgages in a way that no-one else had done. They also explained that as money making exercises, mortgages are pretty shit for banks. When you take the cost of borrowing (for them) with what they could make in other markets (shares/currency/etc), its rediculous they even lend out for homes!

:D

Thanks,

The Reverend
 

The Reverend

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#7
I feel like it's all designed to squeeze every penny out of you too. Still, I can't wait to get a mortgage (50% LTV for me should make for a nice fee for 5 years I hope), as renting is dead money isn't it x
Arrrrg!

My most hated phrase ever! (well not really!)

I've both rented as a tennant and rented as a landlord.

When I rented as a tennant I wanted my own home with no responsiblity for maintaining the place. I once had a wasp nest in the attic and the landlord had to sort it out, as well as the water ingress in the kitchen.

I paid the landlord a sum every month and in exchange for that I got a property I wanted to live in. I was also able, with 30 day's notice, to leave that property to move somewhere else. I didn't have to worry about selling, worry about solicitors fees, estate agent fees, buyers, etc.

As a landlord (only RARS) I offer tennants a room which is warm, dry, has its own bathroom, can use the kitchen and the living room. They pay me for this, but, and has happened last month, they can choose to give me 30 days notice leave. I'm offering them x and they are paying for not having to worry about costs for fixing the heating, or repairing my neighbours roof when they flooded the kitchen, or fixing the leaking shower. They don't have to worry about service charge. All of this is tied up into 1 monthly payment.

Do people think renting a hotel room is dead money? Or renting a taxi when they have a car at home? Or going to macdonalds when they can make a dreadful burger at home themselves?

The UK has a weird relationship with Renting - that isn't seen in the rest of Europe or even the world.

And Breathe!

Thanks,

The Reverend
 

Queen Jess

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#8
I don't think Mortgages are a con, but I do know that they feel expensive. @Queen Jess During my lifetime the bank of England base rate was 17% https://www.mortgagestrategy.co.uk/historical-interest-rates-uk/ and anyone gettting a mortgage wouldn't not have worried about a bank admin fee, but more correctly, it was probably tiny in comparison to the Interest Rate of the mortgage.

There is more competition that ever in the mortgage market and thats why banks make their products so hard to compare. Some people just hear 'low % Rate' and want it, regardless of whether its cheaper over the total life span. A £3k fee might be excessive but if it saves you £500 a month over 2 years then it is probably worth while. However, if you don't have £3k spare but can afford an extra £400 a month there might be a 'better' mortgage deal for you.

When I was looking for my first mortgage, what was really interesting was Abbey National (or just Abbey). They wouldn't actually lend to me (long story) but they spent 25 minutes explaining mortgages in a way that no-one else had done. They also explained that as money making exercises, mortgages are pretty shit for banks. When you take the cost of borrowing (for them) with what they could make in other markets (shares/currency/etc), its rediculous they even lend out for homes!

:D

Thanks,

The Reverend
But I presume that they do need mortgages as part of a balanced portfolio as they wouldn't put all their money into high yield, high risk investments? When I was looking for a mortgage, people seemed to want to lend me more than I thought was ever sensible and I couldn't understand that at all. Maybe they wanted to buy the property rather than have my debt?!

To be honest I would rather have no fee and a higher interest rate to stop the faffing around every 2 years.
 

Queen Jess

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#9
Arrrrg!

My most hated phrase ever! (well not really!)

I've both rented as a tennant and rented as a landlord.

When I rented as a tennant I wanted my own home with no responsiblity for maintaining the place. I once had a wasp nest in the attic and the landlord had to sort it out, as well as the water ingress in the kitchen.

I paid the landlord a sum every month and in exchange for that I got a property I wanted to live in. I was also able, with 30 day's notice, to leave that property to move somewhere else. I didn't have to worry about selling, worry about solicitors fees, estate agent fees, buyers, etc.

As a landlord (only RARS) I offer tennants a room which is warm, dry, has its own bathroom, can use the kitchen and the living room. They pay me for this, but, and has happened last month, they can choose to give me 30 days notice leave. I'm offering them x and they are paying for not having to worry about costs for fixing the heating, or repairing my neighbours roof when they flooded the kitchen, or fixing the leaking shower. They don't have to worry about service charge. All of this is tied up into 1 monthly payment.

Do people think renting a hotel room is dead money? Or renting a taxi when they have a car at home? Or going to macdonalds when they can make a dreadful burger at home themselves?

The UK has a weird relationship with Renting - that isn't seen in the rest of Europe or even the world.

And Breathe!

Thanks,

The Reverend
I agree we do have a different attitude in this country to renting/owning. For me, I wanted the stability to know I could stay in one place forever. I hated when I was renting that the landlord could give me notice and I could be out in a couple of months. It has happened quite often when circumstances changed and they needed to sell etc. I like to plan and I felt like it forced me into a situation where I couldn't plan as I had no control over what might happen.
 

Jon

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#10
I first looked into buying a house in the pre-recession days with northern Rock offering us stupid 120% mortgages with I think just maybe 2 or 3 payslips needed and that was it. Here is all ya money!!

We didn't bite and actually moved to another rented place and THEN bought after that at which point the housing market had bottomed out and we were able to get a 3 bedroom, front and back garden + garage + full loft conversion of next to nothing! (Northern Prices yo) and the value of the property has obviously steamrolled north since we moved in 10 years ago.

So many things influence the rates that mortgages are being offered at so it's not just the providers as such that are responsible.

We get the letter every 3-5 years saying we need to change product and if we do to x,y,z then there is a £1000 fee but like @The Reverend says if that offered a decent rate the £1000 is irrelevant as long-term if saves you money.
 

Petlamb

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#11
But I presume that they do need mortgages as part of a balanced portfolio as they wouldn't put all their money into high yield, high risk investments? When I was looking for a mortgage, people seemed to want to lend me more than I thought was ever sensible and I couldn't understand that at all. Maybe they wanted to buy the property rather than have my debt?!

To be honest I would rather have no fee and a higher interest rate to stop the faffing around every 2 years.
One of the hopes for a lot of institutions with regard to mortgages can be the same as student accounts. They might not make a huge amount out of them, but they're hoping for loyalty. Then on top of that there is what you said, it's a reasonably low risk investment for them too.
 

Petlamb

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#12
Arrrrg!

My most hated phrase ever! (well not really!)

I've both rented as a tennant and rented as a landlord.

When I rented as a tennant I wanted my own home with no responsiblity for maintaining the place. I once had a wasp nest in the attic and the landlord had to sort it out, as well as the water ingress in the kitchen.

I paid the landlord a sum every month and in exchange for that I got a property I wanted to live in. I was also able, with 30 day's notice, to leave that property to move somewhere else. I didn't have to worry about selling, worry about solicitors fees, estate agent fees, buyers, etc.

As a landlord (only RARS) I offer tennants a room which is warm, dry, has its own bathroom, can use the kitchen and the living room. They pay me for this, but, and has happened last month, they can choose to give me 30 days notice leave. I'm offering them x and they are paying for not having to worry about costs for fixing the heating, or repairing my neighbours roof when they flooded the kitchen, or fixing the leaking shower. They don't have to worry about service charge. All of this is tied up into 1 monthly payment.

Do people think renting a hotel room is dead money? Or renting a taxi when they have a car at home? Or going to macdonalds when they can make a dreadful burger at home themselves?

The UK has a weird relationship with Renting - that isn't seen in the rest of Europe or even the world.

And Breathe!

Thanks,

The Reverend
I agree that when we pay our rent, we're paying for something - I'm also not a fan of the whole "dead money" thing, though i understand where it comes from and share some of the frustration. There are definitely the benefits you mentioned, if anything goes wrong with the house, it's down to our landlord to fix it. Thankfully, she's wonderful and a brilliant LL to have so she's really good at getting things done swiftly. (I've certainly had my share of rotten LLs!)
 

katykicker

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#13
Hey, just to clarify I was joking about the dead money thing ;) I've been renting for ages and when I move I'll be renting again before making the leap to buying :D I could buy now but I like the freedom of not paying for shit when it breaks.

So everyone can get back off their soap box now - it was meant to be a millenial joke and I missed the ;) off
 

katykicker

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#14
I first looked into buying a house in the pre-recession days with northern Rock offering us stupid 120% mortgages with I think just maybe 2 or 3 payslips needed and that was it. Here is all ya money!!

We didn't bite and actually moved to another rented place and THEN bought after that at which point the housing market had bottomed out and we were able to get a 3 bedroom, front and back garden + garage + full loft conversion of next to nothing! (Northern Prices yo) and the value of the property has obviously steamrolled north since we moved in 10 years ago.

So many things influence the rates that mortgages are being offered at so it's not just the providers as such that are responsible.

We get the letter every 3-5 years saying we need to change product and if we do to x,y,z then there is a £1000 fee but like @The Reverend says if that offered a decent rate the £1000 is irrelevant as long-term if saves you money.
Does it save you money though? Have you checked?
 

JesseEverAfter

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#15
I agree we do have a different attitude in this country to renting/owning. For me, I wanted the stability to know I could stay in one place forever. I hated when I was renting that the landlord could give me notice and I could be out in a couple of months. It has happened quite often when circumstances changed and they needed to sell etc. I like to plan and I felt like it forced me into a situation where I couldn't plan as I had no control over what might happen.
This is the problem I had and makes me uneasy about renting again. Land lord decided they no longer wanted to be a land lord and sold off their entire portfolio. I like things to be stable and knowing something like this is out of my control has kind off renting even though I know it has its advantages...
 

Jon

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#16
This is the problem I had and makes me uneasy about renting again. Land lord decided they no longer wanted to be a land lord and sold off their entire portfolio. I like things to be stable and knowing something like this is out of my control has kind off renting even though I know it has its advantages...
Tell you what I don't miss about renting.

BLOODY INSPECTIONS

God we used to have to put all our guinea pigs in the car and take them for a drive around Leeds for the afternoon while the house was inspected as we weren't meant to have pets of any kind.

That and NEVER getting your full deposit back used to do my head in!
 

kaiserpups

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#17
I guess we've been quite lucky. Usually take a fixed term for a pretty decent rate that allows us to overpay - we never have had the money spare to do that! - and no fees to set up. Even got a £500 cash back on one a few years ago that got us a new shed :)

Our fixed rate comes to an end soon and we're looking to lock in again for probably 5 years and have found a good few without fees and cashback so will probably end up with that again.
 

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