Negative equity – are the banks responsible?

Negative equity – are the banks responsible?

9:04 AM, 12th December 2018, About 6 years ago 55

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A few of my houses are coming to their end of term and the lenders want their money back.

They knew my exit strategy was refinance or sale, but now they don’t seem to recognise any responsibility for the negative equity.

When the banking crisis occurred it followed naturally that house prices dropped dramatically as lenders either folded (albeit bailed out by the government) or sold their book to others. (Not necessarily even lenders).

The banking crisis was caused by reckless lending and the banks ran out of money and were unable to continue their business. The bankers have apologised unreservedly for their error of judgement. Great! But now when some areas are still struggling with negative equity they should (in my opinion) extend the mortgage for a lifetime. Or if they want to recoup their capital reduce the amount owing to an amount that would enable refinancing.

The FCA do not regulate buy to let mortgages, however, the mortgage is a contract. In contract “every contract has an implied contract term that the lender will perform the contract with care and skill”. Surely lending recklessly and being unable to sustain your business, which then has the knock on effect of destroying the value of my investment, is lacking in the performance of care and skill?

There is so much more I can add to this argument but would like to hear a reasonable response that says I’m wrong. I just cannot see it any other way.

But would appreciate your comments.


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Ian Narbeth

15:00 PM, 12th December 2018, About 6 years ago

Reply to the comment left by Gwen Davies at 12/12/2018 - 14:36
You seem impervious to legal reason. At best your chances of success in bringing a legal claim with the best QC in the country and a sympathetic judge are, in my humble opinion, precisely zero.

Even arguing a moral case (a) your bank alone won't have caused the banking crisis, (b) they won't admit it and (c) even if they did it doesn't follow that they will offer any redress.

Gwen Davies

15:07 PM, 12th December 2018, About 6 years ago

Reply to the comment left by Ian Narbeth at 12/12/2018 - 14:19
Sorry Ian I’m back again. You say if you both contemplated it so what. It isn’t so what. It’s the contemplation at the start of the contract that is important. In the Heron it was their contemplation at the beginning of the contract that made them liable at the end. Sugar prices like property prices fluctuate but in the heron they delivered late. In this scenario the banks were not conducting their business with care and skill . They were complicit in the banking crisis. Yes prices fluctuate (with sugar and property). This is not the argument it’s the contemplation at the beginning and the lack of care and skill by the lender in performing the contract. Please just try and see what I am saying. The banking crisis caused the drop in property prices. Hence they are responsible for my loss.
If the Heron had delivered on time there could have still been a loss or a profit but they would not have been responsible even for a loss. They failed to complete the contract in the correct manner. The Banks have failed to complete this contract in the correct manner because they did not perform with care and skill by their own admission. Why should they be allowed to get away with behaving so badly and leave us to carry the cost?
You say can they call in the loan . Yes. Well why? If they breached the contract terms. They don’t owe me. Duty of care but they owe a duty of care to the contract terms. And when they do not conform to the terms (implied) of the contract they are liable for my loss.

Ian Narbeth

15:20 PM, 12th December 2018, About 6 years ago

Reply to the comment left by Gwen Davies at 12/12/2018 - 15:07Gwen
I have been practising law for over thirty years. Your reading of the Heron case is just wrong. In Heron the delivery was late and as a result the sugar was sold at a lower price because the market had gone down. That has nothing to do with your case. As Alexander Pope said: "A little learning is a dangerous thing."
What performance breach are you alleging the bank committed? Causing the banking crisis? Causing the value of your specific properties to fall? How? Even if it did those things - unprovable - there was no implied term that the bank wouldn't cause a market crash. There was no implied term that the bank would sustain house prices. The bank lent you the money. That is pretty much the end of their responsibility apart from maintaining accurate ledgers and providing statements of interest.

Rob Thomas

15:35 PM, 12th December 2018, About 6 years ago


There is no realistic chance that you could win this argument in court. But if you did, think about the implications. If banks were found responsible for your losses because 'they caused the financial crisis', banks would henceforth be much more careful what they lent and mortgage rates would have to rise to cover the risk of being held liable for future losses. So responsible borrowers would end up suffering at your hands. Lower mortgage availability would also push down house prices further, so any other property you own would be worth less.

By the way, UK banks didn't cause the banking crisis, it stated in the US sub-prime mortgage market, leading to severe illiquidity in the global wholesale funding markets that UK banks rely on, causing them to reduce lending which in turn caused UK house prices to fall.

Gwen Davies

15:39 PM, 12th December 2018, About 6 years ago

Reply to the comment left by Ian Narbeth at 12/12/2018 - 15:20
Oh gosh Ian I do apologise I have no legal knowledge, so compared to you I am a novice. But I am nearly 70 and I am using what I assume is common sense. I’m sure you will agree that the banking crisis is the cause of my negative equity. The Banks were reckless and the lenders I have my mortgages with have all had to stop lending or have disappeared altogether after being bailed out by the government. I cannot understand how they are not held accountable for this travesty. They were all complicit in the banking crisis. They did not perform with care and skill. I just feel they should take responsibility for this. But apparently that is not the case. It is a truly unfair relationship.

Rob Crawford

15:51 PM, 12th December 2018, About 6 years ago

Reply to the comment left by Gwen Davies at 12/12/2018 - 15:39Hi Gwen, unfortunately common sense tends not to prevail. I think their is sufficient reasoning given here that suggests legal action on the terms you have stated would be a waste of time and money. So stop diverting your attention on a lost cause. You say you have not spoken to other lenders who may well be able to help - age is against you but NLA have recently produced a list of lenders willing to lend with an end of term age of 89. You really need to get some professional independent finance and possibly legal advice. The best independent mortgage Provider I have come across by far is Khalid Javid.

Gwen Davies

16:16 PM, 12th December 2018, About 6 years ago

Thank you so much Rob. I will continue with my quest. Not in court but just can’t believe the injustice of all this. It seems for residential mortgages the ombudsman will help but why can’t there be a way that the banks doing buy to let mortgages (actually not doing buy to let because they’ve lost their businesses) be made to help borrowers?
Thank you for the contact

Gwen Davies

16:21 PM, 12th December 2018, About 6 years ago

Reply to the comment left by Michael Barnes at 12/12/2018 - 14:01
Hi Michael the evidence I have is that they failed and are either now non existent or are no longer in the lending business. I think victims of the global crisis (for want of a better word). But as a victim why don’t they help us out. We can all come out of this smiling with time. If we all help each other. Right?

Neil Patterson

16:30 PM, 12th December 2018, About 6 years ago

I think you should do an article search for West Brom >>

Gwen Davies

17:31 PM, 12th December 2018, About 6 years ago

Reply to the comment left by Seething Landlord at 12/12/2018 - 11:49
Seething landlord. It was always contemplated that the exit strategy was sale or refinance

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