northern rocks £14 billion

Thrugelmir

Graham_Devon wrote: »

Easy. Look at all the other banks. Not lending. If that doesn't tell you that something is wrong, then what does?

A government owned bank lending because all other business's are not does not make it a good thing. It makes it a massive risk to the taxpayer.....the very reason banks got in this situation, and something Northern Rock has already been through once, and is about to do it again.

However, they won't go down this time. They will just keep creaming from the taxpayer.

The "other" banks are lending. The problem is that over 50% of the pre credit crunch lenders have left the market.

If anything this is one of the most sensible actions the government has taken. As the NR has the infrastructure in place to operate as a new business. Providing LTV's are sensible, no reason why the business can't be profitable in the future.

cogito

Rochdale_Pioneers wrote: »

Just to put things in context, Northern Rock's default rate on mortgages was last reported as being 0.4%.

That means that of this £14bn almost all of it goes as proper investments. Which means we as taxpayers make a profit.

I don't know what reports you read but that's absolute rubbish.

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article5788542.ece

The proportion of borrowers more than three months in arrears on their mortgage payments had soared from 1.87 per cent in September 2008 to 2.92 per cent by December 2008.

chewmylegoff

cogito wrote: »

I don't know what reports you read but that's absolute rubbish.

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article5788542.ece

arrears is not the same thing as default.

the northern rock mortgage book was about £80bn when it was nationalised. it says in the article they have written off £600m relating to defaults this year.

that's a default rate of 0.75% on the opening balance.

that said, i expect the default rate to increase, as their loan book is decreasing in quality as time goes on -- it's the 125% mortgage people who cannot transfer away from northern rock, and their default rate is going to be much higher than people who took out sensible loans, who are remortgaging elsewhere because they can do so at preferential rates.

cogito

arrears is not the same thing as default.

It is in my book. At what point do arrears become default?

chewmylegoff

cogito wrote: »

It is in my book. At what point do arrears become default?

well, default is usually a legal term, defined in the loan agreement. i think it is common for mortgages for default to be consider as the point at which the repossession trigger is reached. this may be when you're more than 3 months in arrears, although i'm not sure and it may differ bank to bank, and product to product.

of course the actual bad debt due to default is the difference between the loan and the amount likely to be realised upon sale of the repossessed property.

hence the arrears rate or default rate is not equivalent to what the bank will actually lose in bad debts.

mewbie_2

chewmylegoff wrote: »

well, default is usually a legal term, defined in the loan agreement. i think it is common for mortgages to treat them as in default when the repossession trigger is reached. this may be when you're more than 3 months in arrears, although i'm not sure and it may differ bank to bank.

of course the actual bad debt due to default is the difference between the loan and the amount likely to be realised upon sale of the repossessed property.

I'm sure that is all correct, but I really miss NDG coming up with the legal definition and whether it was 1702 or 1703 when it first came into law.

ad9898_3

mewbie wrote: »

I'm sure that is all correct, but I really miss NDG coming up with the legal definition and whether it was 1702 or 1703 when it first came into law.

Ahhhh, don't we just, and she was cute too.:cool:

Rochdale_Pioneers

cogito wrote: »

It is in my book. At what point do arrears become default?

It may be in your book - happily it isn't in the bank's books or indeed in reality.

Cat695

Northern Rock will not try to help first-time buyers as part of a £14 billion package of new mortgage lending, the state-owned bank has said.

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/4787844/07am-tues-14billion-Northern-Rock-mortgage-deal-will-not-help-first-time-buyers.html

I guess the high prices aren't going to suddenly rise then

Cat695

Hoffman said: “Affordability is the key issue. We might do some business at 90 per cent, but we will test this market very carefully. It is likely that we will end up with more low LTVs as we go forward in the weeks and months.”

http://www.moneymarketing.co.uk/cgi-bin/item.cgi?id=181420&d=340&h=341&f=342