Lloyds Intimidate Mortgage Borrowers-Again

Hot on the heels of our last blog about repossessions, today in the news I read an article about Lloyds Bank who now are aiming to try and force their interest only mortgage borrowers to move on to a repayment mortgage. Lloyds is owned over 40% by the taxpayer.

Firstly, lets just say, that a contract is a contract. If you have a contract with a bank regarding a mortgage (or a loan) it is a legal entity, and therefore they are as bound by it as you are.

This means the cannot force you to change to a different product, you have a legal right to stay on an interest only mortgage if that’s what you want to do. ( However, they can intimidate you instead!)

Last year an investigation by The Sunday Times found LLOYDS Banking Group staff were intimidating victims of the recession who had fallen behind on loan payments.

In The News

City Wire reported yesterday;

If the borrower hasn’t got an approved answer such as some sort of regular savings plan in place, Lloyds will try to persuade them to move onto a repayment loan. This includes borrowers with Halifax and Cheltenham & Gloucester.

If your particular case does not fit their stringent criteria, then they feel they can pester you to try and change your loan status from interest only to repayment. Remember, while we are talking about legals, harassment is also illegal.

On average, if you get moved on to a repayment mortgage it would usually add at least 25% your payments each month. Make no mistake, this is about them paying down their huge debt, not about helping you as their customer.

Banking Profits

Lloyds were in debt to the tune of £13.4 Billion back in 2008 when they were rescued by the taxpayer. 80% of this debt was caused by irresponsible lending at the HBOS group. Latest news reports state that they have loaned out £23 billion to business and £14.5 billion to new mortgages. However, that second figure “to new mortgages” should not be taken literally- as it includes remortgages. Interestingly enough, they are not paying out any dividends on the profits made to their shareholders, but that’s another story.

This graph from the British Banking Authority shows how the top 7 banks are really performing.

A quote from the BBA says: The main high street banking groups (MBBG) account for some two-thirds of all UK mortgage lending outstanding, provide around half of all consumer credit and, within that, some 60% of all  new card credit based on the Bank of England’s ‘lending to individuals’ data.

They include the  seven largest UK retail lending groups: Santander UK (including Alliance & Leicester and Bradford & Bingley deposits), Barclays, Bradford & Bingley lending, HSBC Bank, Lloyds Banking Group, Northern Rock and Royal Bank of Scotland Group.

Values Always Rise- Don’t they?

The Council of Mortgage Lenders say that in 2009, 14% of all homeowners took an interest-only mortgage with no repayment plan. Largely these borrowers were probably led to believe that house prices would continue to rise and therefore the equity would eventually pay off the loan when they came to sell. The thing is, if you hang tight then this will probably still be the case, and a mortgage is after all a long term contract. Worst case scenario is that interest rates rise, but you can prepare for that with some savings.

If you get an intimidating letter from Lloyds asking you to prove how you will pay down the mortgage, the best course of action is to just ignore it. Experts say Interest rates will remain low for at least another 6 months to a year, so there really is no urgency to make a decision now.

**UPDATE**You may want to read our other two blogs here:Why You Cant Negotiate Your Mortgage Debt With NRAM // What Will Mortgage Interest Rate Rises Really Cost You?

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