How much new money is available for mortgages today.

Percy1983

julieq wrote: »

Well you can't get 125% mortgages now either.

So what's your point?

You said a 125% mortgage is better than a 90% mortgage + 35% unsecured.

My point is the type of people who took the 125% mortgages would probably have more debt on top of said mortgage, now you can get a 90% mortgage and its not as easy to run up said credit cards (not impossible I will admit, but you need a very strong credit file).

I still don't see how lending more than the properties value is anything less than reckless, it seems the lesson has been learned as such reckless behaviour has stopped.

Graham_Devon

Percy1983 wrote: »

You said a 125% mortgage is better than a 90% mortgage + 35% unsecured.

25% was an unsecured personal loan with northern rock anyway.

julieq

Kennyboy66 wrote: »

Northern Rock.

So prudent they had to fiddle the figures when reporting them to the CML & FSA.

In May 2009 - 3.2% of their customers were in arrears and 30% (yes thirty percent) in negative equity


I would think they just about hit the mark as reckless and border line fraudulent (in that they could only borrow short as the rates they did because they had previously mis-reported arrears figures as being less than the CML average).

What a laughable assertion.

3.2% of arrears is only fractionally above the CML figures for arrears for the entire industry, and negative equity is not an indicator of arrears (obviously - it's 10x the amount of arrears in your own numbers). The strongest indicator of arrears and repossessions is life changes - unemployment or relationship breakdown.

As usual, the bears are trapped in a "debt is bad" mindset and are extrapolating from that all sorts of simply wrong conclusions about what sort of lending is reckless and what isn't. It is reckless to lend to people who cannot possibly repay - single parents on low incomes in the US for example, or Greeks. It isn't reckless to lend to people who can and do repay, which by and large is the case with Northern Rock borrowers.

What killed Northern Rock wasn't lending in itself, it was that it had a low ratio of funding to deposits and relied on securitisation of its own mortgage assets to provide liquidity. That dried up when US securitised debt came under scrutiny and they weren't able to borrow what they needed to cover ongoing business at rates below the yield on its mortgage business. As people started to worry that the bank wasn't solvent, they removed deposits and created a run on the bank. There is an excellent summary of the process here:

http://prmia.org/pdf/Case_Studies/Northern_Rock_Case_Study_v_1_1.pdf

You will not see one comment in that piece on UK sub prime or high LTV lending as a trigger to the problems at Northern Rock. In fact it specifically notes that NR wasn't even exposed to US Sub prime lending, it just was unable to securitise and sell on its own mortgage assets.

Graham_Devon

Oh PURLEASE julie.

Interest rates were cut to 0.5%. SMI kicked in earlier. Northern Rock themselves had even lower repo's than any other bank due to public ownership and the creation of the "bad bank". It was even featured on the BBC news that Northern Rock would do all it could to stop any reposession due to public ownership.

Of COURSE repo's and arrears are going to be lower than they might have been. The key fact is that they are still as high as "normal" times according to the CML, even AFTER all of that.

For pities sake....surely you have got to be on a wind up.

julieq

Graham, one day you'll come to realise that nothing you believe currently was ever true. Prepare yourself. It'll be a bad day.

Do you fancy reading the analysis I linked to? That spells it out very clearly. Nothing to do with risky lending. All about liquidity.

Anyway arrears rates are a matter of fact, even if repossessions can be a matter of judgement. We were presented with two numbers in this thread for NR, arrears rates and negative equity, and neither give evidence of reckless lending. Reckless business strategy possibly because it relied on securitising mortgage assets to provide liquidity. But reckless lending? No.

As I've said repeatedly, SMI and low rates have marginal effects only on repossession rates. You keep on waving these at me as if they're the only thing preventing mass repossessions and it's nonsense: even in your own case as someone paying very high rates before the crisis you've admitted that the reductions are a windfall rather than a lifeline, and even if there has been no increase in salaries since 2007 people were paying mortgages then at higher rates. Frankly that's the evidence generally.

The key factor in repossessions is life changes - unemployment and relationship breakdowns - and your so called "props" are marginal factors if anything. But what caused NR's liquidity crisis was being charged penalty rates on liquidity loans which took their costs on tight margins below the yield from mortgage lending and when they were unable to raise cash by offloading securitised assets. That's inarguable fact, and it happened before rate decreases anyway.

wotsthat

Graham_Devon wrote: »

Of COURSE repo's and arrears are going to be lower than they might have been. The key fact is that they are still as high as "normal" times according to the CML, even AFTER all of that.

I'm starting to wish rates would rise just so this argument can be proven wrong.

Mortgage affordability is the best it's been for 8 years. Lenders are picking and choosing - higher risk applicants can't get a mortgage and so won't have a mortgage to default on. The average risk of loan books is therefore decreasing.

Arrears and repo's will for sure rise if interest rates go up (especially if they go up too soon) but it won't be anywhere near what the doom mongers wish for.

Conrad

Thrugelmir wrote: »

Not sure that disorderly is a word that I would use. Reckless may be more appropriate.

Perhaps, yet the repossession proportion has remained very low indeed, so I'm not sure forcing millions of hitherto perfectly sensible adults into renting is good for the nation, do you?

Conrad

julieq wrote: »

Graham, one day you'll come to realise that nothing you believe currently was ever true. Prepare yourself. It'll be a bad day.

Do you fancy reading the analysis I linked to? That spells it out very clearly. Nothing to do with risky lending. All about liquidity.

Anyway arrears rates are a matter of fact, even if repossessions can be a matter of judgement. We were presented with two numbers in this thread for NR, arrears rates and negative equity, and neither give evidence of reckless lending. Reckless business strategy possibly because it relied on securitising mortgage assets to provide liquidity. But reckless lending? No.

As I've said repeatedly, SMI and low rates have marginal effects only on repossession rates. You keep on waving these at me as if they're the only thing preventing mass repossessions and it's nonsense: even in your own case as someone paying very high rates before the crisis you've admitted that the reductions are a windfall rather than a lifeline, and even if there has been no increase in salaries since 2007 people were paying mortgages then at higher rates. Frankly that's the evidence generally.

The key factor in repossessions is life changes - unemployment and relationship breakdowns - and your so called "props" are marginal factors if anything. But what caused NR's liquidity crisis was being charged penalty rates on liquidity loans which took their costs on tight margins below the yield from mortgage lending and when they were unable to raise cash by offloading securitised assets. That's inarguable fact, and it happened before rate decreases anyway.

Great post.

In the end Graham and co welcome stricter lending but at what cost and to what benefit? I'd say the Human cost is far greater than the benefit as millions are now frozen out of home ownership even though the stats indicate only a tiny minority of them had they been able to buy, would have ended up repossessed.

The societal detriment resulting from increased regulation far outweighs and supposed benefit.

AGAIN, self cert mortgages according to lender reps I meet, have had very low repo rates, as it is felt the such mortgagees are less likely to give up without a fight as they dont want to loose the considerable cash stake they originally had to input to get the mortgage. It really is an urban myth that self cert was toxic in our nation.

Thrugelmir

julieq wrote: »

What killed Northern Rock wasn't lending in itself, it was that it had a low ratio of funding to deposits and relied on securitisation of its own mortgage assets to provide liquidity. That dried up when US securitised debt came under scrutiny and they weren't able to borrow what they needed to cover ongoing business at rates below the yield on its mortgage business. As people started to worry that the bank wasn't solvent, they removed deposits and created a run on the bank.

Such a well run business? Why does NRAM still have an £85 billion mortgage book under management?

Northern Rock's former finance director, David Jones, has been fined and banned by the Financial Services Authority (FSA) for his part in the misreporting of mortgage arrears.

The FSA found that Mr Jones' misconduct started in mid-January 2007 when he agreed, along with David Baker, to allow false mortgage arrears figures to appear in footnotes accompanying the 2006 annual accounts.

As a result of these actions, Northern Rock left out almost 2,000 repossessions that were pending, but had not yet taken place.


The FSA said that, from 2005, Northern Rock staff were under pressure to report arrears at half the rate of rivals.

If they had reported correct figures, said the FSA, Northern Rock's arrears would have increased by more than 50%, or repossessions figures by about 300%.

But, crucially, it would also have given investors and depositors a truer picture of the health of the bank.

And then there was Granite.........

Northern Rock is facing a Charity Commission investigation after it emerged that the bank exploited the name of a charity for disabled children while creating an elaborate financial arrangement for maximising profits from home loans.

The inquiries will centre on the bank's unusual structure. For while Northern Rock appeared to be a uncomplicated mortgage lender employing thousands of people in the north of England, three-quarters of its key assets are owned by a Jersey-based offshore trust called Granite.

And at the heart of Granite's operations is a rather peculiar fact: on paper, at least, it had been set up to benefit charities, and in particular a small organisation for children with Down's Syndrome, and their families, which was being run from a semi-detached house on the outskirts of Newcastle.

The network's labyrinthine structure allowed Northern Rock to take advantage of the British public's growing hunger for cheap home loans - although it was a structure that was eventually to splinter and almost collapse under the weight of the worldwide credit squeeze.

Before that happened, however, Granite raised £71bn of funds for the bank through 24 separate bond issues, all backed by the bank's £58bn worth of residential mortgages.

The Granite trusts were not owned by Northern Rock, but were nevertheless controlled by the bank. This meant the bank could include the billions of mortgage assets on its balance sheet - making it appear that much bigger and more profitable - while having no direct responsibilities to the bond holders who bought the securities backed by those mortgages.

http://www.guardian.co.uk/business/2007/nov/28/northernrock.subprimecrisis

Emy1501

in 2008 defaults on those with credit problems taking out 90% plus mortgages was between 8-9%. BTL 6-8% Self Cert up to 9% Standard mortgaes was about 2.5%. this was for the 10 biggest lenders

I suspect the above is the real reason why mortgages are hard to come by for those who do not fit into the normal criteria. Also I thought there were just FSA guidelines at the moment. Banks can still lend to who they want can't they? They just choose not to