Renters: Angry and Insecure

chucky

angrypirate wrote: »

Question is, how do you define best. The best mortgage borrowers (ie the best places for a bank to invest) in a time when house prices are going up are surely the 100% mortgage holders, whom you can slap on an extra % or 2 on their interest payments coz of the LTV ratio at the time the mortgage is taken out. House prices are going up so no risk of NE in case of a repo. But thats not who they are lending to now because they dont see house prices going up. So they best people to lend to are those with big deposits reducing the risk of a NE repo situation.

You could argue that lending to businesses is even riskier as their is no physical asset to sell if the business goes bust.

As to how much money the banks have - i personally believe its a bit of a red herring. The banks see a bust and a HPC, so are protecting themselves against it.

it's not a red herring at all, it's a reality - the banks are dumping huge amounts with the BOE on overnight repos because it's 'safer' and they get a better margin than going down the route of offering it on the market to both businesses and for investing or buying property.

angrypirate

chucky wrote: »

it's not a red herring at all, it's a reality - the banks are dumping huge amounts with the BOE on overnight repos because it's 'safer' and they get a better margin than going down the route of offering it on the market to both businesses and for investing or buying property.

So the banks have the cash but are choosing to dump it with the BOE? I see this as their choice, hence it is a red herring that they dont have the cash

chucky

angrypirate wrote: »

So the banks have the cash but are choosing to dump it with the BOE? I see this as their choice, hence it is a red herring that they dont have the cash

a bank is a business who's priority is to increase profits.

the bank decides that it is better to use it's funds and dump it with the BOE instead of lending it to business and/or for people with mortgages.

there is enough profit margin for the banks to lend to people with 75% LTVs - haven't you seen the banks profits recently?

once the markets improves and margins reduce it can lend at 90% or 95% LTV's it will probably stop putting it's funds with the BOE.

that's a massive difference from your more dramatic scenario

angrypirate wrote: »

The banks see a bust and a HPC, so are protecting themselves against it.

angrypirate

chucky wrote: »

a bank is a business who's priority is to increase profits.
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Agreed

chucky wrote: »

the bank decides that it is better to use it's funds and dump it with the BOE instead of lending it to business and/or for people with mortgages.
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Agreed - hence it is the banks call. It is still the banks money and so they still have healthy balance sheets. Its just that they are choosing not to lend it out to 100% LTV mortgages

chucky wrote: »

there is enough profit margin for the banks to lend to epople with 75% LTVs - haven't you seen the banks profits recently?
once the markets improves and margins reduce it can lend at 90% or 95% LTV's it will probably stop putting it's funds with the BOE.
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There is a bigger profit margin lending to people with 90% or 100% LTVs as they charge higher interest rates. However the RISK IS HIGHER. The risk is, on repo, the property being worth less than the mortgage hence the bank loses money. Having a 25% deposit reduces this risk to an acceptable amount.

chucky wrote: »

that's a massive difference from your more dramatic scenario
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Generali

chucky wrote: »

a bank is a business who's priority is to increase profits.

the bank decides that it is better to use it's funds and dump it with the BOE instead of lending it to business and/or for people with mortgages.

there is enough profit margin for the banks to lend to people with 75% LTVs - haven't you seen the banks profits recently?

once the markets improves and margins reduce it can lend at 90% or 95% LTV's it will probably stop putting it's funds with the BOE.

that's a massive difference from your more dramatic scenario

Also, cash held at the BoE counts towards Tier 1 reserves which banks have been told to increase.

angrypirate

Generali wrote: »

Also, cash held at the BoE counts towards Tier 1 reserves which banks have been told to increase.

And the banks have no say in this. None whatsoever. If they wanted to invest in other things but didnt have the money, they wouldnt be allowed to remove this money from the BoE.

chucky

angrypirate wrote: »

And the banks have no say in this. None whatsoever. If they wanted to invest in other things but didnt have the money, they wouldnt be allowed to remove this money from the BoE.

as i understand it they have but they're happy doing it - it's cheaper and more sensible this way otherwise they would have go and raise capital or even lower the size of their loan books.

they don't want to do that because 1) they are making decent profits on their current loans and 2) it's probably not cheap

Barnetbear

Neighbour noise like I've had, really pleased I never bought it, 2nd time in a row I've had screaming kids next door, drives me nuts. I left one rented to escape a screaming baby and found another here, thank heavens I'm just renting and can wave them bye bye shortly.

LL is having kittens, having set the asking rent at 10% less than 2009 and still only one viewer in 3 weeks and he wasn't interested. My old LL had a void of 9 months after I left, I left because I told him I want a rent reduction if I have to put up with that noise. He said no. He lost £6k of rent he'd otherwise have had from me. He's no amateur, he has a portfolio, but they never learn, greed gets the better of them.

oz0707

Barnetbear wrote: »

LL is having kittens, having set the asking rent at 10% less than 2009 and still only one viewer in 3 weeks and he wasn't interested. My old LL had a void of 9 months after I left, I left because I told him I want a rent reduction if I have to put up with that noise. He said no. He lost £6k of rent he'd otherwise have had from me. He's no amateur, he has a portfolio, but they never learn, greed gets the better of them.

I have played that card before but there is a limit. A landlord isn't greedy for not taking up your offer after previously agreeing to a higher amount. Some might say your greedy for making the request.

StevieJ

angrypirate wrote: »

The introduction of 100% mortgages has only been relatively recently. Prior to the housing boom of the naughties it was the norm for banks to ask for 10% (if not more) deposit depending on your credit rating. The purpose of this was that banks would only lend to people who had proven to be good customers with good credit rating who were responsible with their money. A policy which, had they kept to, would have seen a much smaller house price boom and also would have made this whole economic bust a lot smaller.

I was offered an 100% mortgage in 1988, problem was their surveyor valued the house at 5% less so I was only given a 95% mortgage, the balance above 80% was insured using a MIG which was paid by the mortgage recipient and added to the mortgage.