Banks MUST hold more capital, and lending won't get "back to normal" until then

Emy1501

wotsthat wrote: »

It's also a consequence of being required to hold more capital than in the past which would normally have been lent out. I don't know whether this is sensible or over cautious but lending isn't lower just because the banks have spent all the money.

Maybe the banks are also finding more profitable things to do with the money rather than lend against UK houses.

Lenders are interested in lending as long as you fit the right criteria.

My application for a remortgage went in last Monday valuation done and agreed by Friday and offers on its way.

wotsthat

Emy1501 wrote: »

Lenders are interested in lending as long as you fit the right criteria.

My application for a remortgage went in last Monday valuation done and agreed by Friday and offers on its way.

A year or so ago I wanted Nationwide to lend me money against the equity in my house to fund a holiday home purchase. I went in one lunchtime and the mortgage adviser just about tripped over trying to write the cheque. Went for a cheaper lender in the end and likewise no problems - less than 10 days from application to offer.

As soon as a decent 5 year fixed offset comes out I'll be moving to it and expect zero problems.

I've said this a lot - lenders 'need' to lend for political reasons - they are scrambling to haul in the best risks to appear to be lending hence the amazing deals for well off people.

Our happy experiences are nice pieces of anecdotal evidence but I expect neither of us are 'typical'.

grizzly1911

wotsthat wrote: »

Most estimates of forbearance are based on the 2011 FSA study commissioned by the BoE precisely because they didn't have the data. FSA estimated that arrears rates would be 1.7% compared to 1.2% if there was no forbearance.

Maybe the data is being routinely collected from lenders now?

The data is held by the Banks, certainly used to be as they were classed as Non Performing Debt.

What is the definition of forebearance?

1.7% is that volume, £amount?

wotsthat

grizzly1911 wrote: »

The data is held by the Banks, certainly used to be as they were classed as Non Performing Debt.

What is the definition of forebearance?

1.7% is that volume, £amount?

Forbearance doesn't have a set definition - I think the FSA struggled because it has different meanings at different banks i.e. converting to IO, payment holidays extended payment periods are all examples of forbearance so it makes the data more difficult to collate and understand. It also means that they are not all non-performing.

1.7% is the arrears rate that FSA said that they'd expect in the absence of forbearance vs. the real 1.2% arrears rate typical at the time. EDIT: I think it's 1.7% of mortgages in arrears rather than £/ pence.

In terms of forbearance they estimated 5% - 8% of all mortgages were subject to forbearance to some degree.

Emy1501

wotsthat wrote: »

A year or so ago I wanted Nationwide to lend me money against the equity in my house to fund a holiday home purchase. I went in one lunchtime and the mortgage adviser just about tripped over trying to write the cheque. Went for a cheaper lender in the end and likewise no problems - less than 10 days from application to offer.

As soon as a decent 5 year fixed offset comes out I'll be moving to it and expect zero problems.

I've said this a lot - lenders 'need' to lend for political reasons - they are scrambling to haul in the best risks to appear to be lending hence the amazing deals for well off people.

Our happy experiences are nice pieces of anecdotal evidence but I expect neither of us are 'typical'.

My mortgage is from a new lender to the market so I doubt any government pressure.

I have a reasonable deposit but 3 kids and reasonably high multiple.

looking at the mortgage forum it does not seem full of people struggling to get 90% mortgages and I suspect the problem is that there are simply not enough suitable people for mortgages at the moment.

Gracchus_Babeuf

My problem is not availability of mortgages but the poor rates currently on offer, given the record low BoE rate. The lowest no-arrangement-fee tracker I could find is one from HSBC which is 2.49% above base rate, and that's for no more than 60% LTV. This seems poor value - I would have thought that with such a large deposit a tracker of 2% above base rate would be obtainable.

Graham_Devon

This is from 2011, but I'm just trying to help with the estimated figures.

The Bank of England estimates that up to 12% of UK residential mortgages could be receiving some kind of forbearance or special help from banks at present.

FSA say 5-8%, but that only looks at the main 6 banks. This estimates that £50bn is under forbearance.

The FSA also state that forbearance now accounts for 63% of all "troubled" mortgages.

Moving on to the original point of this thread, I've now found out the reason Mervyn King could have stated forbearance can't continue is the parralels and research drawn from Greece and Spain.

In 2010, the lowest levels of insolvencies in the EU were found in Greece, Spain, Italy and Portugal....It's said to have masked the issues for some time, but led to exacerbating some of the problems they face today.

Basically it can work in the short term, but if nothing gets better, it can become a dangerous game, as has happened, as the banks don't have enough capital currently to even face the bad debts disgused as forbearance.

Whether all the above is purely coincidental, I guess we'd have to take a view on individually.

http://www.cnbc.com/id/49531208

Bank analysis shows that UK lenders have eased lending terms for struggling businesses and households on £175bn of debt. Sir Mervyn hinted that it is a problem, saying: “Perhaps forbearance by banks has allowed inefficient firms that might otherwise have had to contract to continue.” Eurozone exposures also pose a risk.

Mervyn really does seem to have taken a different viewpoint on all of this, as he's also stated that this could lead to the next generation paying for todays generations excesses.

He also appeared to realign his inflation expectations, stating that inflation is likely to be "a little" over target still at the end of the year.

grizzly1911

Graham_Devon wrote: »

This is from 2011, but I'm just trying to help with the estimated figures.

FSA say 5-8%, but that only looks at the main 6 banks. This estimates that £50bn is under forbearance.

The FSA also state that forbearance now accounts for 63% of all "troubled" mortgages.

Moving on to the original point of this thread, I've now found out the reason Mervyn King could have stated forbearance can't continue is the parralels and research drawn from Greece and Spain.

In 2010, the lowest levels of insolvencies in the EU were found in Greece, Spain, Italy and Portugal....It's said to have masked the issues for some time, but led to exacerbating some of the problems they face today.

Basically it can work in the short term, but if nothing gets better, it can become a dangerous game, as has happened, as the banks don't have enough capital currently to even face the bad debts disgused as forbearance.

Whether all the above is purely coincidental, I guess we'd have to take a view on individually.

http://www.cnbc.com/id/49531208

Mervyn really does seem to have taken a different viewpoint on all of this, as he's also stated that this could lead to the next generation paying for todays generations excesses.

He also appeared to realign his inflation expectations, stating that inflation is likely to be "a little" over target still at the end of the year.

Mervyn is going so I guess he can start telling the truth a bit more.

As long as the Banks are profitable (on paper anyway) then they can continue to take the write offs in a managed progressive fashion over a long period. Non/poorly PerformingDebt does occasionally get better too.

If that period takes 10/15 years then things ain't going to bounce back anytime soon.

I guess one worry would be if EURO regulators suddenly said you have to spill the beans all at once.

IveSeenTheLight

chewmylegoff wrote: »

i see, the whole hamish vs. graham epic was about the meaning of the word rationing. it was all semantics!

personally i don't think there is anything in the meaning of rationing which implies or requires equality. WW2 food rationing is a good example of that, as civilians and the military both received a fixed ration, but those rations were not equal.

the NHS is another good example, the NHS rations its resources (by making you wait) based on need rather than apportioning resources on an equal basis to all users.

banks have a certain amount to lend, and they are lending it to the people who have the largest deposits. it's certainly not grammatically incorrect to call this credit rationing as far as i'm concerned. you can call it something else if you want though.

I wonder that instead of using the word rationing, if restricted / restricting would be more acceptable term.

Lenders are restricting mortgages to those with higher deposits.

Potential demand are restricted from attaining credit until they have been able to secure the required deposits

Is it agreeable that Mortgages are being restricted and until the restriction is eased, the opportunity to become a homeowner will continue to be restricted

grizzly1911

Gracchus_Babeuf wrote: »

My problem is not availability of mortgages but the poor rates currently on offer, given the record low BoE rate. The lowest no-arrangement-fee tracker I could find is one from HSBC which is 2.49% above base rate, and that's for no more than 60% LTV. This seems poor value - I would have thought that with such a large deposit a tracker of 2% above base rate would be obtainable.

Were you on a tracker before, what margin were you paying then?

I thought Tesco were offering 2.99% and being hailed as cheap rate wise on another thread.

Just because rates are low does not mean he margin will drop proportionally.