2 ms·

A mortgage has an interest rate set (in part) by an idependant body. This is generally below 10%. You will find that this deal we're discussing is the other way

A mortgage has an interest rate set (in part) by an idependant body. This is generally below 10%. You will find that this deal we're discussing is the other way round the label slicing off 90% off the actual sales. That is their "interest charge" for the loan they provided. If we're going to stick to this mortgage comparison: do you think it would be fair if all the banks colluded to charge interest rates starting at 90%? Right/wrong, morally/legally that doesn't bother me. Is it fair? That's the question. The answer IMO is "No". This is what riles me, especially when as a consumer it is very difficult to find this kind of information so it is difficult to make "fair" purchases to stop this kind of thing.

tezza 17y ago
The base interest rate is set by the government and the banks can whack on whatever margin they want (including negative for a period) Do you think it's "fair" that banks offer Interest Only[1] mortgages, where you the householder can pay off 100% of the price of the house... and then owe the bank the same amount again? I understand why you are riled... but see my other post about my friend who offered better terms to bands and got no business[2] ----- [1] http://www.thisismoney.co.uk/mortgages-and-homes/tips-and-guides/article.html?in_article_id=415637&in_page_id=53957&in_advicepage_id=97 http://www.thisismoney.co.uk/mortgages-and-homes/tips-and-gu... [2] http://news.ycombinator.com/item?id=971950 http://news.ycombinator.com/item?id=971950
- Quarrelsome 17y ago
  Yea, I used to work in the mortgage industry. Interest only mortgages are there for people who have investments to cover the cost but just to want to ensure the liability doesn't increase. What is unfair is selling these mortgages with endowment plans as a "dead cert" to consumers like banks did in the 80s in the UK. They were all successfully sued and settled in the late 90's / 2000s. In the UK the council that sets interest rates is an independant entity.
sethg 17y ago
The difference between a home mortgage and a record label's advance is that the value of the home being mortgaged is relatively stable. If I borrow $450K to purchase a $500K house, and then I can't make my payments, I am likely to still have a house with a market value close to $450K. (OK, in many parts of the US today this is not true, but at least that was the bank's expectation when they authorized the mortgage.) If a new band approaches a record label for a contract, the label knows how much it will cost to produce and promote their album, but given the fickleness of the public taste, they don't know whether that album will sell ten thousand copies or ten million. And after the band has sold ten million albums, it will have a lot more negotiating leverage in the next round of contract negotiations. So the record label has every incentive to lock the band into a contract that grabs as much as possible for the label. Bands that only sell a modest number of copies get screwed by this arrangement, but if the band members only expected to sell a modest number of copies of their album, they wouldn't be seeking a deal with a major record label to begin with, right?
anamax 17y ago
> A mortgage has an interest rate set (in part) by an idependant body. That's typically not true in the US.... > This is what riles me, especially when as a consumer it is very difficult to find this kind of information so it is difficult to make "fair" purchases to stop this kind of thing. Actually, it's pretty easy. If you're buying in a store, it's almost certainly from a "rip-off record company".

tezza 17y ago

The base interest rate is set by the government and the banks can whack on whatever margin they want (including negative for a period) Do you think it's "fair" that banks offer Interest Only[1] mortgages, where you the householder can pay off 100% of the price of the house... and then owe the bank the same amount again? I understand why you are riled... but see my other post about my friend who offered better terms to bands and got no business[2] ----- [1] http://www.thisismoney.co.uk/mortgages-and-homes/tips-and-guides/article.html?in_article_id=415637&in_page_id=53957&in_advicepage_id=97 http://www.thisismoney.co.uk/mortgages-and-homes/tips-and-gu... [2] http://news.ycombinator.com/item?id=971950 http://news.ycombinator.com/item?id=971950

Quarrelsome 17y ago
Yea, I used to work in the mortgage industry. Interest only mortgages are there for people who have investments to cover the cost but just to want to ensure the liability doesn't increase. What is unfair is selling these mortgages with endowment plans as a "dead cert" to consumers like banks did in the 80s in the UK. They were all successfully sued and settled in the late 90's / 2000s. In the UK the council that sets interest rates is an independant entity.

sethg 17y ago

The difference between a home mortgage and a record label's advance is that the value of the home being mortgaged is relatively stable. If I borrow $450K to purchase a $500K house, and then I can't make my payments, I am likely to still have a house with a market value close to $450K. (OK, in many parts of the US today this is not true, but at least that was the bank's expectation when they authorized the mortgage.) If a new band approaches a record label for a contract, the label knows how much it will cost to produce and promote their album, but given the fickleness of the public taste, they don't know whether that album will sell ten thousand copies or ten million. And after the band has sold ten million albums, it will have a lot more negotiating leverage in the next round of contract negotiations. So the record label has every incentive to lock the band into a contract that grabs as much as possible for the label. Bands that only sell a modest number of copies get screwed by this arrangement, but if the band members only expected to sell a modest number of copies of their album, they wouldn't be seeking a deal with a major record label to begin with, right?

anamax 17y ago

> A mortgage has an interest rate set (in part) by an idependant body. That's typically not true in the US.... > This is what riles me, especially when as a consumer it is very difficult to find this kind of information so it is difficult to make "fair" purchases to stop this kind of thing. Actually, it's pretty easy. If you're buying in a store, it's almost certainly from a "rip-off record company".