Wells Fargo actually targeted the emerging black middle class, folks making much higher than the median income - even as they called them “ghetto loans”. Putting morality aside for a second, what’s telling about this is that racism is …
Lloyds Banking Group has announced major changes to its operations this week, which will see further job losses within the organisation, the closure of branches and the loss of two well known brands for mortgages and homeowner loans.
The bank, which has been part nationalised with a bail out from a Government loan, announced this week that all branches of the Cheltenham and Gloucester would close by the end of November this year, with the prospect of an additional 1,500 job losses on top of the 3,000 redundancies which have been made since January this year.
Although the branches will be closing, Cheltenham & Gloucester loan products will still be available through other branches of the bank as well as through intermediaries and loan brokers. However, Intelligent Finance and the Bank of Scotland will no longer be offering loans through brokers, although Bank of Scotland will still retain branches on the high street.
Existing loan customers will be unaffected by these changes. Lloyds brands which will be available through loan brokers and advisers will now include; Scottish widows, Birmingham Midshires, the Halifax and Cheltenham & Gloucester.
The Lloyds Banking Group also intends to make changes to its personal loan business, by streamlining the operation and relocating it to London, with the loss of a further 265 jobs. Meanwhile, the Black Horse Personal Finance business will increase its personal loan operation, with the possibility of new jobs being created during the course of next year.
In total, the group expects to lose around 1,660 jobs from its operation and is working closely with staff and Unions. Helen Weir of the Lloyds Banking Group said “It is always difficult to make decisions about our business that affects our colleagues. We will work through these changes carefully and sensitively and continue to consult closely with our Unions throughout the process.”
We reported some time ago about banks and building societies offering “phantom” mortgages and homeowner loans, where a loan product was advertised to customers, but was then mysteriously withdrawn at the last minute, or the borrower didn’t quite meet the lending criteria and so was rejected.
It would appear that this practice is still continuing, although now lenders seem to be withdrawing mortgage offers once the written loan agreement has been issued, in many cases just before the case is due to complete, thereby causing chaos and disruption for everyone throughout the chain of potential home buyers.
Of course it is written into the loan agreement that a lender is able to withdraw a homeowner loan offer at any time and without reason, but prior to the current economic climate this was seldom enforced, unless there were significant changes in the borrower’s financial circumstances which could have an adverse effect on the ability to repay the loan.
The news comes from Property Portfolio Rescue, who have become involved in a number of property sales to save chains from collapsing after a buyer has had their loan offer withdrawn.
Nick Hopkinson of Property Portfolio Rescue said “Frequently lenders are raising people’s hopes with mortgage offers, which as far as I can see, they never have any intention of honouring. In fact, I’ve heard of several instances recently of mortgage offers being withdrawn at the eleventh hour after repeated credit checks by lenders have adversely affected a buyer’s credit rating, causing them to fail the loan criteria.
Banks are simply not open for business apart from to the very best customers with the lowest loan to values, but they are disguising this unwillingness to lend by launching products to the market which have so many clauses and caveats that most ordinary people would have little hope of qualifying.”
A large number of people with homeowner loans have been enjoying the benefits of low monthly repayments on their loan over the past few months, due to the Bank of England reducing the base rate of interest to just 0.5 per cent, in order to combat the effects of the credit crunch and following economic down turn.
In some cases, borrowers with a tracker rate, or standard variable rate loan have seen their monthly repayment fall by hundreds of pounds each month and in this situation it makes it hard for them to think about changing their loan deal, particularly if that change is likely to cost them more money than they are currently spending on their existing loan.
But with the likelihood of interest rates rising again at some point in the not too distant future, an increasing percentage of those borrowers who are opting to switch their existing homeowner loan, are now choosing to go for a fixed rate in order to cover themselves against their variable rate increasing sharply in the coming months. A recent survey conducted by Abbey has found that 85 per cent of people with a homeowner loan would choose a fixed rate loan if they were to re-mortgage at the present time.
The problem for many borrowers though, is when to switch deals. A new fixed rate deal is likely to be more expensive than their current loan at the moment and, human nature being what it is, individuals are likely to cling on to their low variable rate until the base rate starts to increase again, by which time it will probably be too late to find a competitive cheap loan on a fixed rate. Figures from the Bank of England show that there were just 31,800 remortgage cases in April, lower than the figure for March, which shows that, although people know where rates are heading, they appear to be waiting until the last possible moment to take action.
With the way that many individuals feel about their bank, and financial institutions in general, at the moment, it would be no surprise to learn that the answer to this question is a resounding “yes” from the majority of consumers.
This general feeling has been backed up by new research from the financial website Moneyextra.com, who have accused the main high street banks of “profiteering” from their loan customers, by charging them high interest rates on their homeowner loans, whilst the bank base rate of interest remains at an all time record low level of 0.5 per cent.
The accusation regards those borrowers who are ending the initial deal on their loan with their current lender and being placed on the standard variable rate of interest. The average homeowner loan rate is now around 4.66 per cent above the bank base rate, which has increased from just 1.9 per cent in mid 2008, equating to an increase of 145 per cent in the space of one year.
Moneyextra.com have estimated that banks are making a profit of £20.1 million every month from their loan customers, by not passing on realistic savings from the reduction in interest rates.
Richard Mason of Moneyextra.com said “This is blatant profiteering by our banks, they are shoring up their balance sheets by charging huge rates for existing borrowers, but offering tiny rates to savers. While a lot of deluded customers have recently taken advantage of a reduction in their monthly mortgage payments, what they fail to understand is that the full benefits of the rate cuts are not being passed on to them, savers are also facing a poor return as banks waste no time cutting their rates. Consumers are being treated like profit-fodder as banks prey on their lack of financial understanding.”
The effects of the credit crunch and the recent economic down turn has had a huge impact on not only the UK economy as a whole, but also on the majority of people living and working in this country.
A large number of people have been affected by the current recession, whether it has been simply seeing a slight slow down in their work, all the way through to more dramatic events such as losing their job, of even having their home repossessed due to not being able to maintain their monthly homeowner loan repayments.
It would appear that the recent economic slow down has shown many individuals just how vulnerable they really are and according to one expert, people are now becoming far more cautious about their financial situation, particularly when it comes to thinking about applying for a new personal loan.
Adrian Coles from the Building Societies Association (BSA) commented that a large number of individuals are now reluctant to commit themselves to the prospect of additional regular monthly loan repayments, particularly for luxury items which they do not actually need. He likened the situation to waking up with a hangover after a big night out and saying “never again”.
The latest figures from the Bank of England also show that the number of new loans is continuing to fall, with the annual growth rate of consumer credit falling to 3.2 per cent in March this year, with equally low expectations for April. Meanwhile, consumer group Credit Action has warned that we are by no means out of the woods yet and has predicted that personal insolvencies and bankruptcies could continue to rise throughout the year, possibly even reaching a level of 435 every day.
It is commendable that people are taking a more cautious approach towards personal loans, but to use the hangover analogy again, once the headache has cleared most of us are likely to go back to the pub!