Day 3 Highlights one of the most contentious subjects of all:

Day 3 Highlights one of the most contentious subjects of all:

The industries approach to affordability testing

One of the most frustrating things a mortgage prisoner will hear is that they cannot afford, or are not entitled to, a new financial arrangement. This is a complex issue in itself. We will look at it in greater detail in a future article. For now, let’s divide the problem into two parts:

  1. Computer says no.
  2. Credit rating issues. 

Computer says no:

You have been paying £800 a month for your mortgage. This has been going on for 11 years.  With current interest rates, you should be paying a much lower monthly payment. Maybe as little as £340 per month. A saving of £500 a month would transform your life, and so you approach a few lenders. Surely paying £5k a year less for your mortgage makes total financial sense, and would help you become a more productive, profitable and valuable asset to the state. 

well, guess what. The computer says no…

Whether this is due to negative equity, complex attached loans like the “together” mortgage or company policies is not always clear. The truth is plain to see. Our society is run in such a way that the banks have the power. Their paradigm is such that a person paying £800 a month is deemed not to be able to afford £350 a month. This is true, even when that person has never missed a payment and maintains a level of credit rating. 

Many of the people that fall into this category are not trapped because of their own actions. The mismanagement of the bank they borrowed with is more often the culprit. Of course, those running the banks received bonuses for their efforts. The mortgage prisoners, on the other hand, were penalised. Even the intervention of the government did not help. The following manner in which the book was dealt with belies the intention. All the government was interested in was profit. Those that were involved should hang their heads in shame. Unfortunately, they were rewarded instead.

The system is broken. When the government held the books of the now-defunct bank Northern Rock, it failed to help. Surely this would have been the time to look at affordability and even put in place a rescue package for the struggling victims?  

 Credit rating issues:

The affordability problem is compounded by the credit rating system. Many Mortgage prisoners went into their loans with a solid credit rating. There were also a fair few who were struggling and saw the loans as a way out. For the former group,  the situation of affordability is an extra cruel blow. In a lot of cases, we are finding that it is the initial loan that has forced defaults and resulted in poor credit scores. Some have found themselves in financial difficulty through illness and redundancy. 

Current affordability metrics DO NOT WORK!

We want the government and the financial industries to look at the REAL situation of households and their budgets. Removing the human perspective and replacing it with the cold hard algorithm is literally destroying people. 

Uk Mortgage prisoners demand change.