MSE News: Risky lending targeted in tougher mortgage rules

jamesd

Say you started out and waited ten years. After ten years of 3% pay rises to keep the usual 1% over 2% inflation target that wages make your income would be 34% higher than at the start of the mortgage. At twenty years it'd be 81% higher. Not in real after inflation terms but in terms of the mortgage amount. So why force people to have a repayment vehicle at full funding rate in place on day one when that's the most expensive time to do it and it gets easier over time?

Doesn't even need to be interest only. Can be a deal where you start out at low interest rate and have the repayment level increase by a percentage of pay increases until you're on target to finish at the set term. Easy enough to have periodic reviews of pay slips once a year until you're at the target level so the mortgage lender can check on this.

So I view it as bad because it reduces flexibility at the time when flexibility is most important for a borrower who isn't defaulting.

joocathy

Banks have been doing this since 2009, yet people/media complaint that banks are no longer lending and making it difficult for borrowers. FSA you are late again, time to wakeup and lead the way.

I have always commented, self employed (SE) mortgages with no prove of income was wrong. It encouraged fraud, SE were about to declared less profit and pay less tax.

Negative is not about Loan to value or amount lent by a lender - its about where the market is at any given time - you have dips and rises in every market, unfortunately we are at the stage where prices are either staying put are reducing.

brit1234

We needed this years ago. Due to the irresponsible lending of the last decade we have seen the biggest UK housing bubble ever, even bigger than the US. Now are public services are being drastically cut to pay for the economic damage this has caused.

Personally I think the reforms go far enough. At the moment people are getting round the self cert/liar loan mortgages stop with these fast track mortgage scam.

If anyone doesn't think we have had a problem, watch this clip and see how bad it really was.

http://www.youtube.com/watch?v=vT1UnGS91BY

And here is a real bank advert how an Hungarian bank copied our dodgy bank lending and bragged about it.

http://www.youtube.com/watch?feature=player_embedded&v=OjXl61uKq8c

Thrugelmir

joocathy wrote: »

Banks have been doing this since 2009, yet people/media complaint that banks are no longer lending and making it difficult for borrowers. FSA you are late again, time to wakeup and lead the way.

FSA has to tread carefully. As NRAM still holds £85 billion of mortgage debt. So the UK taxpayer is still on the hook for some time yet.

antrobus

Thrugelmir wrote: »

FSA has to tread carefully. As NRAM still holds £85 billion of mortgage debt. So the UK taxpayer is still on the hook for some time yet.

NRAM 'only' has around £45 billion of lending balances, presumably you're including B&B as well which has about £35 billion. But never mind, together they made a combined profit of £431 million in the 6 months to June - the people who owe the £80 billion are on a sharper hook I feel.

joocathy

antrobus wrote: »

NRAM 'only' has around £45 billion of lending balances, presumably you're including B&B as well which has about £35 billion. But never mind, together they made a combined profit of £431 million in the 6 months to June - the people who owe the £80 billion are on a sharper hook I feel.

Yes NRAM has made profit, I wonder why it was not covered by the popular press. Good news doesn't sell I think. As long as the Standard Variable Rate remains low, NRAM will continue to make profit.

KTM_Gordo

As an alternative view-point, what happens if the change the headline from irresponsible lending to irresponsible borrowing?

I find it hard to belive that people were forced in to taking mortgages for more than they could afford - mortgage fraud was rife with people making false claims as to their income and financial situation to obtain their mortgage, supported by forged documents. That is not the fault of the lenders.

Someone I was talking to recently was very bitter that their house was about to be repossessed because he'd lost his job. He was saying that his self-cert. mortgage was too expensive. When I asked why he had a self-cert. he said it was because the bank wouldn't lend to him on a normal mortgage as it didn't think he could afford it... :shocked: So how, exactly, is it the bank's fault? He took the safety guard off, and got burnt.

We are adults. We know that a mortgage is potentially a long-term commitment. Why are people putting themselves in to a vulnerable position? Is it greed? Peer-pressure? Wrecklessness?