How lenders will get around Browns 100% mortgage ban.

mrposhman

We could do worse than looking at those countries where the banks haven't gone bust and looking at their banking business models. I would look at Australias for a start, from what I know of their system it certainly seems better than ours.

Conrad

Wookster wrote: »

So does that mean that the uber pessimists were all wrong with the other (pessimistic) predictions they made?

No, but it might demonstrate the future always seems more fluid than the one the uber pessimists imagine.
The Humanity hive will throw out new lenders and innovations just as it walsy has.
I think it simplistic to consider the lending market will remain in aspic, it never does.

To those that do not view 95% + a cashback as 100% lending; These products were specifically demanded by those without a deposit and in the event of repossession 95% + 5% must be repaid, so this is plainly 100% lending by another name.

Dan:_4

LilacPixie wrote: »

Wasn't NR's 125% together deal a 95% mortgage and a 30% personal loan anyway????

Yes. On any 'Together' product only 95% is secured.

Generali

mrposhman wrote: »

We could do worse than looking at those countries where the banks haven't gone bust and looking at their banking business models. I would look at Australias for a start, from what I know of their system it certainly seems better than ours.

Biggest difference was requiring larger levels held in reserve. Secondary was more conservative ideas about what could be held in reserve.

Graham_Devon

Conrad wrote: »

No, but it might demonstrate the future always seems more fluid than the one the uber pessimists imagine.
The Humanity hive will throw out new lenders and innovations just as it walsy has.
I think it simplistic to consider the lending market will remain in aspic, it never does.

To those that do not view 95% + a cashback as 100% lending; These products were specifically demanded by those without a deposit and in the event of repossession 95% + 5% must be repaid, so this is plainly 100% lending by another name.

Sorry, it was the wording, the cashback element.

I regard cashback as getting cash back into my hand on the price I have paid.

So 5% cashback on a £1 I had spent I would get 5p given back. taking the price to 95p

I wouldnt regard cashback as buying something for £1, paying 95p, then getting cashback of 5p, which means I owe them 5p, taking the product to £1.

Doesnt make any sense, but sure it's either me or something to do with the wording. I saw many cashback mortgages when I was looking and they all referred to you getting a lumpsum in cash after the mortgage has gone through. Indeed, I did, £500. Arrived in my bank account as cash. Not a loan.

udydudy

Finally a bank makes money by LENDING!!. So irrespective of fewer lenders being around in a years time, they will always fight for market share. Pulic memory is short.

The only way the economy can be turned around will be to lend, lend and lend even more so that people consume and there will be jobs about.

Banks will obviously give out unsecured loans left right and centre and then come around and also give you a mortgage maybe 90% or 95% but they will surely not call it Together 125% or now 100% since that will be banned.

I guess it is election time so the best way is to fool the public is by making silly statements like banning 100% mortgages, responsible lending, blah blah. Once the elections are past these guys will turn a blind eye to reckless lending and the banks will be back to business. and we the tax payer will be poorer by a few hundred billions. or maybe not if all these bank shares do a come back!!!!

treliac

So we continue with an economy driven by greed! What becomes of all the casualties along the way, tempted into the kind of financial over-commitment and mismanagement we've all just learned has been happening?

Is there no prospect of some common sense prevailing, ever!

HelpWhereIcan

Graham_Devon wrote: »

Doesnt make any sense, but sure it's either me or something to do with the wording. I saw many cashback mortgages when I was looking and they all referred to you getting a lumpsum in cash after the mortgage has gone through. Indeed, I did, £500. Arrived in my bank account as cash. Not a loan.

I see your point, but Conrad is correct that 95% plus cashback used to be used a 100% mortgage by the back door - with the lender's knowledge in most cases.

I agree to buy a property from you for £100,000.

I apply for a 95% mortgage with a 5% cashback.

We exchange and complete on the same day.

The lender sends my £95,000 mortgage funds and £4,750 cashback to the solicitor on the day of completion. The solicitor uses the £4,750 cashback to pay over to yours instead of the deposit.

When lenders got a bit cautious about this and started sending the cashback on as a cheque/bank transfer after completion people started to borrow the 5% deposit from family/friends/the bank (for home improvements etc) and then use the cash back to repay the loan.

Peversely, Together etc grew out of a desire by lenders to stamp out the abuse of cashback deals and have it all in the open to help manage risk and combat fraud - just a shame things got out of hand. (baby & bathwater spring to mind)

For that reason it is virtually impossible to outlaw 100% mortgages and gifted deposits - human nature will always find a way around it.

More practical to have it all in the open and take more care with affordability calculations and preventing fraudulent valuations through audit valuations etc etc. A bit like the "legalised boxing is safer than underground bare knuckle prize fighting argument".

JayScottGreenspan

Lenders won't be falling over themselves to bend the rules until the housing market is going up again, as it is only then that they will become understandably more relaxed about LTVs.

It will happen, but it ain't gonna happen for years. When the recession is over, after repossessions have peaked and come down again, when the banks have written off all their past mortgage sins - only then will the momentum slowly start building again.