We’d like to remind Forumites to please avoid political debate on the Forum.
This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
Debate House Prices
In order to help keep the Forum a useful, safe and friendly place for our users, discussions around non MoneySaving matters are no longer permitted. This includes wider debates about general house prices, the economy and politics. As a result, we have taken the decision to keep this board permanently closed, but it remains viewable for users who may find some useful information in it. Thank you for your understanding.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
The Forum now has a brand new text editor, adding a bunch of handy features to use when creating posts. Read more in our how-to guide
Guardian: 95% Mortgages "not a source of risk"
Comments
-
[QUOTE=HAMISH_MCTAVISH;59919589
The current margin is 3%, on a third of previous lending. The previous margin was 1%, but volumes were 3 times higher.
[/QUOTE]
Can you link to where you get this info?0 -
Graham_Devon wrote: »If they lend at 5% and base rates fall (as happened pre 2007) at 3% profit and it's costing then 2% to borrow the money....
If base rates fall and the interest rate on the mortgage is now 3.5% (instead of 5%) and the cost to the bank is still 2%, the profit level has fallen. While base rates have fallen and the interest the customer pays has fallen it doesn't neccesarily mean your costs of purchasing the money have fallen. (indeed, they can't fall to 0).
This is what has happened to the likes of Bank of Ireland. Also what happened to Halifax.
So the profit levels fall and they have to make that up via other products. Hamish seems to be stating they should just take the loss forever more.
That would be a policy decision by the bank. If they want to maintain their profitability they would hold the margin on SVR and fixed rate deals..
If they have tracker products, following something like BOE, then yes they will lose money compared to expectation."If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....
"big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham0 -
0 -
What exactly is that .83% figure and where do you get £50k from. Default rate less than .8% recovery rate above 80% so loss .2% or £200 per £100k.
The £50k was an example given as a loss some posts previous. Prices in NI are a good example of where lenders such as Ulster Bank (RBS) and LLoyds have taken sizable hits.
0.83% was the figure given by LLoyds as its overall net margin from mortgage lending. From this figure provisions will be made and deducted for non performing loans, arrears and asset write downs (i.e. for Irish property loans).0 -
Shows the point well.
At the start of 09 savings rate (fixed term) of 5.50% were on offer pre FFL 4% was available. Prior to FFL the cost of funds was much higher than BOE."If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....
"big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham0 -
grizzly1911 wrote: »That would be a policy decision by the bank. If they want to maintain their profitability they would hold the margin on SVR and fixed rate deals..
If they have tracker products, following something like BOE, then yes they will lose money compared to expectation.
The profit is the margin above the rate the banks borrows at. If they borrow at 5% and lend at 7% or borrow at 1% and lend at 3% the profit remains the same.0 -
-
The profit is the margin above the rate the banks borrows at. If they borrow at 5% and lend at 7% or borrow at 1% and lend at 3% the profit remains the same.
Correct. It is the cost of funds to them not BOE that is why they can't afford to fully match the falls in BOE.
When BOE was 0.5% last year why were they still paying me 4% and even 2.5% on offer today?
Investopedia explains 'Cost Of Funds'
For lenders such as banks and credit unions, cost of funds is determined by the interest rate paid to depositors on financial products including savings accounts
and time deposits. Although the term cost of funds usually refers to financial institutions, most corporations that rely on borrowing are impacted by the costs they must incur to gain access to capital.
http://www.investopedia.com/terms/c/costoffunds.asp#axzz2NJs45jvs"If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....
"big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham0 -
grizzly1911 wrote: »So when BOE was 0.5% last year why were they still paying me 4%?
Because they get away with paying most people .2%0 -
Because they get away with paying most people .2%
Move savings to better places don't let them get away with it. If you have 2DDRs, £500 of monthly credits Santander will give you up to 3% on current account at present.
No different to insurance companies and car break down ripping us off at renewal or blades for my dogs clipper being £17 when I can buy a whole new unit for £22. And then thereis printer ink...."If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....
"big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham0
This discussion has been closed.
Confirm your email address to Create Threads and Reply
Categories
- All Categories
- 354.5K Banking & Borrowing
- 254.4K Reduce Debt & Boost Income
- 455.4K Spending & Discounts
- 247.4K Work, Benefits & Business
- 604.2K Mortgages, Homes & Bills
- 178.5K Life & Family
- 261.7K Travel & Transport
- 1.5M Hobbies & Leisure
- 16.1K Discuss & Feedback
- 37.7K Read-Only Boards