Pensions to be used for mortgage guarantees?

A._Badger

Thrugelmir wrote: »

Absolutely they did. In the UK, Lehmans spliced and diced the Northern Rock mortgages into packages that no one could understand the contents of. By securitising the debt and selling it on. NR shifted the risk off the balance sheet onto the investors.

As I understand it, that is not why NR failed though. It failed because it borrowed the money it loaned at rates which it ceased to be able to pay after the US system rolled onto its back, twitched and stopped breathing.

For all the hysteria about 'liar loans' it has not been the UK's mortgage buyers who have defaulted, but hopeless case buyers in the USA who were force-fed loans to buy votes.

Linton

A._Badger wrote: »

As I understand it, that is not why NR failed though. It failed because it borrowed the money it loaned at rates which it ceased to be able to pay after the US system rolled onto its back, twitched and stopped breathing.

For all the hysteria about 'liar loans' it has not been the UK's mortgage buyers who have defaulted, but hopeless case buyers in the USA who were force-fed loans to buy votes.

Nearly agree with you but not quite...

1) My understanding is that NR failed because it expanded rapidly, didnt have sufficient money from depositors to pay for increased mortgage loans and therefore borrowed short term money on the international money markets. These borrowings of course needed to be repeatedly renewed. However when credit crunched the international money markets froze and no-one would lend any bank any money in case they were compromised with toxic US mortgage debts and would not be able to repay. So NR couldnt get the replacement loans it needed and didnt have the cash to repay the ones it had taken out.

2) The US mortgages were toxic, not because of political wheeling & dealing but rather because there were many commission-only mortgage salesman who were paid purely on the basis of mortgages sold, and did not suffer any come-back when the borrowers could never have repaid.

A._Badger

Linton wrote: »

Nearly agree with you but not quite...

`

2) The US mortgages were toxic, not because of political wheeling & dealing but rather because there were many commission-only mortgage salesman who were paid purely on the basis of mortgages sold, and did not suffer any come-back when the borrowers could never have repaid.

That isn't my understanding of the situation in the USA. Starting with 1977's Community Reinvestment Act, AIUI, US institutions became more or less obliged to make loans to people to whom they should never have been made.*

Which certainly doesn't let Lehmans et al off the hook, but it should be a cautionary lesson for those who think politicians can be trusted to order the mortgage business any more honestly than bankers.

* Added - I should say that I don't believe this was the only reason for the sub-prime crisis.

shortchanged_2

nearlyrich wrote: »

Where are FTB's buying £400k homes?

Your random prices seem a little extreme to me!

Sorry but I don't understand where you got the £400K FTB figure from?

I never mentioned £400K.

I was stating that back in 2001, 2002ish that a FTB could have got the same house for £40K back then that they would have had to pay over £100K for in 2007 and only a little less now.

Now those figures are way out of line with general and wage inflation.

Loughton_Monkey

shortchanged wrote: »

Sorry but I don't understand where you got the £400K FTB figure from?

I never mentioned £400K.

I was stating that back in 2001, 2002ish that a FTB could have got the same house for £40K back then that they would have had to pay over £100K for in 2007 and only a little less now.

Now those figures are way out of line with general and wage inflation.

Indeed they are. But so are yours. You mention 2001 2002, so let's take end 2001. Nationwide UK Average Price = £92,533. End June 2012 - same UK figure - Average Price = £164,955.

That's an increase of 78.2%, and not the 150% you claim.

If I've said it once, I've said it a million times: Don't exaggerate!

ukcarper

Land Reg figures

Average house price Jan 2002 about £100k July 2012 about £162k

Median wage 2002 about £17k 2012 about £21.5k .

5.9x 2002 7.5x 2012.

Property was below long term average in Jan 2002.

nearlyrich

shortchanged wrote: »

Sorry but I don't understand where you got the £400K FTB figure from?

I never mentioned £400K.

I was stating that back in 2001, 2002ish that a FTB could have got the same house for £40K back then that they would have had to pay over £100K for in 2007 and only a little less now.

Now those figures are way out of line with general and wage inflation.

People were talking 25% deposits being unaffordable, I was going off £100k being 25% of the cost of the house, seems you meant the total cost of the house is £100k.

PasturesNew

HAMISH_MCTAVISH wrote: »

A 10% fall in house prices turns a 5% deposit into a 5.5% deposit.

The problem isn't prices. It's deposits.

Requiring a 25% deposit to get a decent rate is absurd.

A 50% fall in house prices turns a 10% deposit into a 20% deposit. See.... problem is prices.

quantic

People I know moaned that it was impossible to save up because they were renting (on higher wages than me might I add), they said that I was only able to because I lived at home... There seems to be a "if I can't save it quickly, I won't save anything, attitude..."

Trouble is, in the 2 years I've had a mortgage I have saved up more than my house deposit was, for my wedding and emergency fund, so I'm just not sure I believe that anymore.

Its taken some pretty heavy discipline and sacrifice (given that I've not had even a cost of living increase in 2 1/2 years and my wage is actually below national average) but I have found that where there is a will there is often a way.

I'm not claiming that its possible for everyone, as I understand some people do not have the income - no matter what they do, but often for others they are just not prepared to put in the work. Shame the government can't print patience and will power...

coastline

Taken from a live debate...I'd guessed myself most people don't have decent pension pots anyway...we have a government encouraging saving for retirement.. now we have an idea to use exsisting funds for other purposes..


It seems that 13.6m people have the sort of private pension pot needed to take part in this scheme to guarantee loans for a home deposit. Technically they can take part as long as the guarantee doesn't exceed the total cash payment they can take on retirement.
Realistically the Lib Dems suggest only a quarter of a million people with £40,000 or more pension savings will take part. However as some posters have pointed out, many might have their savings divided between several schemes. Others have pointed out that a £40,000 pension pot will provide a pathetically low pension in any case. In response, the Lib Dems point out that people will usually continue to pay into and build up their schemes. In any case, if you face penury on £2,000 a year, maybe you will be glad you at least helped your children - you could even demand to move in!
Realistically though the Lib Dems are working on an assumption that only 12,500 people would take up the offer. Privately they say the industry suggests a range of 10,000 to 20,000. It's a tiny figure, and doesn't warrant the rather dramatic introduction from Nick Clegg on the Marr show, but better than nothing, they say.
And who will be helped: the wealthy or the more needy? The most likely scenario is surely that the scheme will extend down the income/wealth scale the number of people who can help the next generation buy a home, but not by a lot.
The key to helping the vast majority who will not benefit from the scheme will be in other departments and announcements, especially decisions on planning and the economy.