The Observer ran an article at the weekend about the mis-selling of mortgages. Turns out, in the words of the Citizen's Advice Bureau (CAB), that, pre-2008, "we were seeing lots of evidence of irresponsible lending people being lent mortgages they could never properly afford and unsuitable lending with people being given products that weren't necessarily right for them and a lot of the problems were driven by intermediaries".
That means regardless of whether you think moral responsibility for this kind of thing rests with the lender or the borrower that "it was only a matter of time before the claims management industry started moving in".
And move in they have. Claims management firm Brunel Franklin has just launched a "consumer mis-selling scheme" for example: brief it to make a case against the man who sold you your mortgage, and it'll take a 30% cut of your compensation if they do so successfully.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Clearly, most of those who think they have been mis-sold a debt are better off making their own claims via the Financial Omsbudsman Service (0800 0 234 567), but the fact that claims management firms are getting into this business (BF is far from alone in giving it a go) should act as a warning to any outfits planning to mis-sell mortgages this year. Outfits such as the coalition government.
George Osborne's budget made much of a £250m scheme to help first time buyers to get their own homes. If they can stump up 5% of a deposit, the government, along with a housebuilder, will come up with the rest at very favourable interest rates. This is supposed to be good for first-time buyers.
But will it really be any good at all for those who take the bait? I can't see that it will be. All the signs are that house prices are going to keep falling from here you can see that in our house price indicators and there was further evidence in the Land Registry numbers out yesterday. Note that transaction levels are particularly pathetic.
So the most likely outcome of the FirstBuy scheme will be that just as with Labour's similar effort a few years ago the miserable few who take the bait will end up in negative equity (remember that while the interest rate might look good, they've still taken out a 95% loan) and hence stuck for years in houses they thought they bought as stepping stones. Fast forward five years and if I was one of the 10,000 who are supposed to be buying via the scheme, I'd be looking for BF's phone number and then for a way to bring a mis-selling case against Osborne.
-
RICS: Housing market continues to strengthen but 2025 could be challengingThe latest survey by the Royal Institution of Chartered Surveyors reports a resilient UK housing market, but warns of headwinds next year
-
Bitcoin price one of the most-asked questions on Alexa - here's how to buy the cryptocurrencyAccording to figures from Amazon, which cover September 2023 to November 2024, pop star Taylor Swift and Bitcoin were named among the most popular Alexa queries of 2024
-
Beating inflation takes more luck than skill – but are we about to get lucky?Opinion The US Federal Reserve managed to beat inflation in the 1980s. But much of that was down to pure luck. Thankfully, says Merryn Somerset Webb, the Bank of England may be about to get lucky.
-
Rishi Sunak can’t fix all our problems – so why try?Opinion Rishi Sunak’s Spring Statement is an attempt to plaster over problems the chancellor can’t fix. So should he even bother trying, asks Merryn Somerset Webb?
-
Young people are becoming a scarce resource – we should value them more highlyOpinion In the last two years adults have been bizarrely unkind to children and young people. That doesn’t bode well for the future, says Merryn Somerset Webb.
-
Ask for a pay rise – everyone else isOpinion As inflation bites and the labour market remains tight, many of the nation's employees are asking for a pay rise. Merryn Somerset Webb explains why you should do that too.
-
Why central banks should stick to controlling inflationOpinion The world’s central bankers are stepping out of their traditional roles and becoming much more political. That’s a mistake, says Merryn Somerset Webb.
-
How St Ives became St Tropez as the recovery drives prices sky highOpinion Merryn Somerset Webb finds herself at the epicentre of Britain’s V-shaped recovery as pent-up demand flows straight into Cornwall’s restaurants and beaches.
-
The real problem of Universal Basic Income (UBI)Merryn's Blog April employment numbers showed 75 per cent fewer people in the US returned to employment compared to expectations. Merryn Somerset-Webb explains how excessive government support is causing a shortage of labour.
-
Why an ageing population is not necessarily the disaster many people think it isOpinion We’ve got used to the idea that an ageing population is a bad thing. But that’s not necessarily true, says Merryn Somerset Webb.
