The Return Of Sub-Prime Lending.

Graham_Devon

So, if there was nothing wrong with NR lending, and the lending went from 100, to 110, to 125%, and this was all running tickety boo, and there would have been no crash in the UK if the Americans hadn't had been so silly...

...Where would we be now? 150% mortgages? Afterall, house prices would still be booming, and the need for even bigger mortgages to keep it going would also be needed.

As there was nothing wrong with this lending, and there would have been no crash, I can only assume we would have hit 150% mortgages by now. Afterall, 3 years of 15% HPI each year would have average house prices at 288k, and we'd obviously need 150% mortgages to sustain that.

What then? 175% mortages? Still no problems?

Loughton_Monkey

I was once a director of a mortgage company. When 'retail finance' is insufficient or not available, it is extremely common to use "Syndicated Loans" which are always for a relatively short period (2 years or shorter). The idea is simply to renew them before they run out. Probably NR was just a bit 'unlucky' in that it had a large amount of these things due at once, and at the wrong time.

People may recall the South Korean crisis needing a huge IMF Loan in 1997. This, again, was much less to do with any major problem with South Korea's economy. It was more naivety of a 'newly rich' country who accidentally had a huge amount of loans all becoming due at the same time.

The other issue that keeps cropping up here is the US Sub Prime market. There is often a 'flavour' of people thinking that it is a case simply of their defaults being higher than here. In a sense yes, but the key difference is that negative equity in USA is the bank's problem. You are legally allowed simply to hand the keys back and keep a clean record. If you imagine that were to be the case here, then it's very easy to understand how deep the problem would have become. In fact the queues to hand back keys would have been longer than the NR queues to withdraw their money!

andykn

Graham_Devon wrote: »

So, if there was nothing wrong with NR lending, and the lending went from 100, to 110, to 125%, and this was all running tickety boo, and there would have been no crash in the UK if the Americans hadn't had been so silly...

...Where would we be now? 150% mortgages? Afterall, house prices would still be booming, and the need for even bigger mortgages to keep it going would also be needed.

As there was nothing wrong with this lending, and there would have been no crash, I can only assume we would have hit 150% mortgages by now. Afterall, 3 years of 15% HPI each year would have average house prices at 288k, and we'd obviously need 150% mortgages to sustain that.

What then? 175% mortages? Still no problems?

No.

Apart from anything else, who could get an unsecured loan for more than 30% of their house value?

andykn

Loughton_Monkey wrote: »

I was once a director of a mortgage company. When 'retail finance' is insufficient or not available, it is extremely common to use "Syndicated Loans" which are always for a relatively short period (2 years or shorter). The idea is simply to renew them before they run out. Probably NR was just a bit 'unlucky' in that it had a large amount of these things due at once, and at the wrong time.

People may recall the South Korean crisis needing a huge IMF Loan in 1997. This, again, was much less to do with any major problem with South Korea's economy. It was more naivety of a 'newly rich' country who accidentally had a huge amount of loans all becoming due at the same time.

The other issue that keeps cropping up here is the US Sub Prime market. There is often a 'flavour' of people thinking that it is a case simply of their defaults being higher than here. In a sense yes, but the key difference is that negative equity in USA is the bank's problem. You are legally allowed simply to hand the keys back and keep a clean record. If you imagine that were to be the case here, then it's very easy to understand how deep the problem would have become. In fact the queues to hand back keys would have been longer than the NR queues to withdraw their money!

I think that's only certain states, the US property market dropped much more than ours and many more people (esp NINJAs) were given loans that, once the discount ran out, they could never have afforded.

Sibley

I've been saying this will happen for ages.

There is a gap in the market now. If banks won't lend to higher risk people then somebody will.

I'm happy to see this. Once the main name banks see they are losing money easy credit will be available again. This will have a knock on effect and house prices will rise.

This is a problem with being a bear. Everyone is working against you.

Graham_Devon

andykn wrote: »

No.

Apart from anything else, who could get an unsecured loan for more than 30% of their house value?

Who could get a 125% mortgage....before it was created?

AD9898_2

Sub Prime returns ?? What with a few hundred million pound ?? Won't even scratch the surface of the 'near £1 trillion' mortgage market. Story pretty much irrelevant unless your a person who just likes the look of a good headline.

That kind of money is just a p!ss in the wind.

HAMISH_MCTAVISH

Sibley wrote: »

This is a problem with being a bear. Everyone is working against you.

Very true.....:rotfl:

Generali

AD9898 wrote: »

Sub Prime returns ?? What with a few hundred million pound ?? Won't even scratch the surface of the 'near £1 trillion' mortgage market. Story pretty much irrelevant unless your a person who just likes the look of a good headline.

That kind of money is just a p!ss in the wind.

Prices are set at the margin, not at the average. The total size of the mortgage market matters less than net borrowing or loans to FTBs.

Still it isn't a huge amount of money I agree but all of it is likely to find its way into new net lending as it is aimed at people that can't borrow right now.

doire_2

Sibley wrote: »

I've been saying this will happen for ages.

There is a gap in the market now. If banks won't lend to higher risk people then somebody will.

I'm happy to see this. Once the main name banks see they are losing money easy credit will be available again. This will have a knock on effect and house prices will rise.

This is a problem with being a bear. Everyone is working against you.

Sibley and hamish hoping someone lends to people with bad credit so prices will rise again. :rotfl::rotfl::rotfl:

Desperate muppets!