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Debate House Prices
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Shapps hails collapse in house building
Comments
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It amazes me that anybody can get a mortgage at all. From a lender's point of view, it's a crazy deal.
Oh alright then, I'll bite....
Why is that?“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
Lending somebody money for 25 years when you can't borrow it for 25 years, you've got no idea whether they'll be able to make the payments for 25 years, you've got no idea whether the security will hold its value for 25 years, and you've got no idea how much inflation there's going to be over 25 years.HAMISH_MCTAVISH wrote: »Oh alright then, I'll bite....
Why is that?
And you take all the risk of things going wrong, but if they don't, the borrower takes all the profit.
Would you lend your money like that?"It will take, five, 10, 15 years to get back to where we need to be. But it's no longer the individual banks that are in the wrong, it's the banking industry as a whole." - Steven Cooper, head of personal and business banking at Barclays, talking to Martin Lewis0 -
Lending somebody money for 25 years when you can't borrow it for 25 years, you've got no idea whether they'll be able to make the payments for 25 years, you've got no idea whether the security will hold its value for 25 years, and you've got no idea how much inflation there's going to be over 25 years.
And you take all the risk of things going wrong, but if they don't, the borrower takes all the profit.
Would you lend your money like that?
well clearly they take a historical view to see that in the main, they do make money from lending in this way.
recent history of course shows the potential pitfalls caused by market corrections but historically the boom always lasts longer than the bust.
and if it all goes wrong, as a bank you can look forward to being bailed out with taxpayer's money, which you can then re-lend to the taxpayer at a healthy apr% rate
they wouldnt do it if there weren't vast sums of money to be made!'Be not deceived; God is not mocked: for whatsoever a man soweth, that shall he also reap.'
GALATIANS 6: 7 (KJV)0 -
Though in recent years much of it has come from churning the arrangement fees.RUN_RABBIT_RUN wrote: »they wouldnt do it if there weren't vast sums of money to be made!"It will take, five, 10, 15 years to get back to where we need to be. But it's no longer the individual banks that are in the wrong, it's the banking industry as a whole." - Steven Cooper, head of personal and business banking at Barclays, talking to Martin Lewis0 -
Lending somebody money for 25 years when you can't borrow it for 25 years, you've got no idea whether they'll be able to make the payments for 25 years, you've got no idea whether the security will hold its value for 25 years, and you've got no idea how much inflation there's going to be over 25 years.
And you take all the risk of things going wrong, but if they don't, the borrower takes all the profit.
Would you lend your money like that?
no they don't, because the lender charges the borrower interest.0 -
Though in recent years much of it has come from churning the arrangement fees.
Bank profit margins on mortgage lending are at near record highs, as there is almost no competition in the market.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
Not to mention all that forbearance keeping their mortgage books overvalued.HAMISH_MCTAVISH wrote: »Bank profit margins on mortgage lending are at near record highs, as there is almost no competition in the market."It will take, five, 10, 15 years to get back to where we need to be. But it's no longer the individual banks that are in the wrong, it's the banking industry as a whole." - Steven Cooper, head of personal and business banking at Barclays, talking to Martin Lewis0 -
Not to mention all that forbearance keeping their mortgage books overvalued.
That makes no sense at all.
If it's cheaper for a bank to offer forbearance, rather than repossessing and incurring further costs, then it's merely the smart thing to do from a business perspective.
It doesn't result in a mortgage book being overvalued, it protects the existing value of the book by minimising losses.
Why would you want banks to maximise their losses?“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
You don't have to repossess, you can make an arrangement. But then there's paperwork, so the loan has to be flagged up as underperforming and valued on the balance sheet accordingly.HAMISH_MCTAVISH wrote: »If it's cheaper for a bank to offer forbearance, rather than repossessing and incurring further costs, then it's merely the smart thing to do from a business perspective.
It doesn't result in a mortgage book being overvalued
The point about forbearance is that looking the other way doesn't generate paperwork, so the loan stays on the books at full value notwithstanding that it's actually underperforming. So the balance sheet is a lie.
The banks know they're sitting on this ticking time bomb and are itching to start writing down these underperforming loans when the opportunity arises to do that without hurting their credit much. When they haven't got PPI, eurozone bonds etc eating holes in their profits."It will take, five, 10, 15 years to get back to where we need to be. But it's no longer the individual banks that are in the wrong, it's the banking industry as a whole." - Steven Cooper, head of personal and business banking at Barclays, talking to Martin Lewis0
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