Fixed rate mortgages - have juicy deals gone for good?

andykn

Thrugelmir wrote: »

Since 2000 £300 billion has been withdrawn from the value of equity in housing and spent on consumption. In the year to April 2009 a net £23 billion was repaid. So still a long way just to repay recent debt borrowed let alone start saving. For many its going to be a lifetime.

I appreciate that. But, whilst some of that 23 billion will stay in the institutions as added capital reserves, the rest of it will be crying out "lend me, lend me".

Thrugelmir

andykn wrote: »

I appreciate that. But, whilst some of that 23 billion will stay in the institutions as added capital reserves, the rest of it will be crying out "lend me, lend me".

The money repaid isn't capital reserves. Its depositors money whether it be wholesale or consumer.

The net effect of repayments is to reduce the banks lending exposure and therefore the amount of funding it is required to borrow or raise.


The capital reserves of a bank primarily consist of retained profits and shareholders equity.

lemonjelly

Thrugelmir wrote: »

The money repaid isn't capital reserves. Its depositors money whether it be wholesale or consumer.

The net effect of repayments is to reduce the banks lending exposure and therefore the amount of funding it is required to borrow or raise.


The capital reserves of a bank primarily consist of retained profits and shareholders equity.

I doubt most will be aware of the implications of the equity release black hole until we see a wave of bereavements. Families will suddenly find out that mum/dad/nan/grandad in their lovely big house actually still owe 90% of it's value to a bank.

I saw an application for council housing recently, from a 68 year old. He lived alone in a 3 bed former council house, which he bought, late 80's from the council for just over £11k. Decent house, not a bad area.

He's just remortgaged again, & owes £190k on it.

So many questions arise out of this. How is he ever expected to repay? He's a pensioner. His income is hardly likely to massively increase.

When will he repay it? He is 68. Health isn't too bad, but not great. Does the lender realistically anticipate he'll live to 93, with no problems, making regular payments?

Lastly, though I don't gamble, I'll bet his family are looking at that house thinking one day, it'll be the start of their BTL empire, or their home, or, when he pops, they'll sell it, pay off their debts, have a couple of holidays & upgrade. They're in for a shock!

The over 55's are actually one of the most exposed at the moment, due to equity release. Some of their descendents who have been banking on a nice inheritence are in for a real suprise!!!:rotfl:

Personally, I think if they've earned it, why not spend it?

Thrugelmir

lemonjelly wrote: »

I doubt most will be aware of the implications of the equity release black hole until we see a wave of bereavements. Families will suddenly find out that mum/dad/nan/grandad in their lovely big house actually still owe 90% of it's value to a bank.

I saw an application for council housing recently, from a 68 year old. He lived alone in a 3 bed former council house, which he bought, late 80's from the council for just over £11k. Decent house, not a bad area.

He's just remortgaged again, & owes £190k on it.

So many questions arise out of this. How is he ever expected to repay? He's a pensioner. His income is hardly likely to massively increase.

When will he repay it? He is 68. Health isn't too bad, but not great. Does the lender realistically anticipate he'll live to 93, with no problems, making regular payments?

Lastly, though I don't gamble, I'll bet his family are looking at that house thinking one day, it'll be the start of their BTL empire, or their home, or, when he pops, they'll sell it, pay off their debts, have a couple of holidays & upgrade. They're in for a shock!

The over 55's are actually one of the most exposed at the moment, due to equity release. Some of their descendents who have been banking on a nice inheritence are in for a real suprise!!!:rotfl:

Personally, I think if they've earned it, why not spend it?

Is spending paper profit by borrowing the same as earning it?

I would call it taking a punt.

lemonjelly

Thrugelmir wrote: »

Is spending paper profit by borrowing the same as earning it?

I would call it taking a punt.

I'd agree 100%.

I think initially the borrowing was done against the expectation of ever rising house prices, and at the encouragement of Vorderman et al.

Now we are in a downturn, it has led to some minor concerns amongst elderly homeowners. That said, many are of the mind that as long as there's enough to bury them, then all is ok. They're aware it'll be paid out of the estate.

That is why some mourning relatives are gonna have real tears!

Conrad

Thrugelmir wrote: »

Is spending paper profit by borrowing the same as earning it?

I would call it taking a punt.

The equity store in an OAP's home represents a lifetimes toil, so why not unlock it and spend it.
Guarantees apply to these schemes whereby the owner cannot ever be made homeless.

Putting money into a pension scheme - now that's a punt, and of course the pot dies with you - pensions are not for smart people.

Thrugelmir

Conrad wrote: »

The equity store in an OAP's home represents a lifetimes toil, so why not unlock it and spend it.
Guarantees apply to these schemes whereby the owner cannot ever be made homeless.

Putting money into a pension scheme - now that's a punt, and of course the pot dies with you - pensions are not for smart people.

I agree in principle. But the past 15 years of property values have been based on a fabricated boom with no foundations.

At least a pension gives you a guaranteed income for life. Whether you die 1 year or 40 years after retiring is irrelevant.

Those no guarantee that your heirs won't waste their inheritance.