Sunday, September 18, 2011

Heavy Handed Lenders


This week we heard about someone who had received their 3rd letter from the Cheltenham & Gloucester (subsidiary of that public/tax payer bailed out phenomenon known as Lloyds TSB) asking them how they proposed to pay off the balance of their mortgage in 5 years time when it reached the end of it's term. They had dismissed the first letter as an error and replied to the second letter giving as much detail as possible. I add here that the outstanding loan is interest-only so there is no capital being repaid. They have never missed a repayment – even though their business has been through and is possibly still going through the worst period in it's 25 year existence. They recently virtually paid off one mortgage account with a £25,000 cash payment and continue to overpay the balance of their loan. Not good enough for the C&G – they want details of exactly how the balance will be cleared in 5 years time! With documentary proof of the value of endowment policies that they have already been told will only cover 5% of the outstanding balance.

Could it be that the loan is on a very low rate that would not be available today? Would it be better for them if the borrower remortgaged elsewhere giving them cash to lend again at a rate that's better for them? Would it be better for them if the borrower decided to opt for a capital/repayment loan that was more expensive?

Perhaps it would be fair if the borrower wrote back to C&G and asked them for a detailed plan with proof of how the payments will be made on the £40 Billion of direct so-called 'Government Aid', otherwise know as Joe Public's money, that kept their business afloat?

Anyone else heard similar stories of bullying by state owned banks, who are probably hiding behind a facade of proposing responsible lending, hassling customers who are making their payments and doing their best to survive the recession? The person in our example has a 48% loan to property value, is in their early 50's. Is the C & G at risk of not getting their money? I think not.