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Guardian: 95% Mortgages "not a source of risk"
Comments
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is there any evidence that FTB are high risk per se?
certainly high LTV or poor affordability ratios will be higher risk
IIRC the default rate among FTBs is about double the market as a whole.
Does that make them high risk? It certainly makes them higher risk but they are a much better bet for a bank than a credit card customer, before adjusting for interest rate differences etc.0 -
IIRC the default rate among FTBs is about double the market as a whole. .
Which still makes them very low risk indeed.
As I recall, DCLG report the repossession rate for the market as a whole over the cycle is around 0.78%. And of course the majority of funds outstanding are recovered. Which is the point of secured lending, and why it's such low risk.
Credit cards and other forms of unsecured lending, as you point out, are higher risk. With higher rates accordingly.
However to describe any variation of UK mortgage lending as "high risk" is laughable.“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 -
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IIRC the default rate among FTBs is about double the market as a whole.
Does that make them high risk? It certainly makes them higher risk but they are a much better bet for a bank than a credit card customer, before adjusting for interest rate differences etc.
that seems remarkably low
however what is the default rate for FTB when corrected for LTV and mortgagee affordability?0 -
that seems remarkably low
however what is the default rate for FTB when corrected for LTV and mortgagee affordability?
It is low.
I'm not aware that anyone does that analysis for public consumption. I would imagine that the big mortgage lenders do that but they will keep it private.0 -
Thrugelmir wrote: »Only in that they are more than likely to have a smaller deposit (and also no equity) to inject that a second rung mover.
Many first rung buyers are now trapped with interest only mortgages that were granted with no thought by either lender or borrower as to how capital would be repaid.It is low.
I'm not aware that anyone does that analysis for public consumption. I would imagine that the big mortgage lenders do that but they will keep it private.
I wonder what the loss is on those that are forced sales?
Are you chaps aware of any data that shows how many good mortgages are required to to run their course for each one that loses money?"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: »how many good mortgages are required to to run their course for each one that loses money?
In order for mortgage lending to be unprofitable for banks, default rates would need to be over 1500% higher than they are.
The stats are fairly clear in this regard.
Just 0.78% of mortgages end up in repossession. Recovery is north of 80% on the few that do. So realised losses are around 0.20% of lending.
Current average bank margins above funding costs are around 3%.
Banks would need to lose 15 times more than they currently do in order to lose money.
Even Northern Rock's so called "bad bank", containing the worst of the worst of UK mortgages, made a £750,000,000 profit last year alone. The profit on "good" mortgages is eye watering by comparison.“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 -
HAMISH_MCTAVISH wrote: »Even Northern Rock's so called "bad bank", containing the worst of the worst of UK mortgages, made a £750,000,000 profit last year alone. The profit on "good" mortgages is eye watering by comparison.
Not a great example really Hamish.
Took a great deal to make the bad stuff profitable. Ignoring that it would have taken the bank and it's customers with it if measures weren't taken is ignorant at best.0 -
Graham_Devon wrote: »Not a great example really Hamish.
Took a great deal to make the bad stuff profitable. Ignoring that it would have taken the bank and it's customers with it if measures weren't taken is ignorant at best.
Don't confuse cash-fow with profitability Graham.
NR needed a huge injection of working capital to replace funding no longer available from the global markets when the entire credit system froze in 2007/8.
As did many other banks.
But don't for one second think any of that was as a result of the profitability of UK mortgage lending on their books.
As that had nothing whatsoever to do with why the UK banks needed funding, almost overnight, amounting to tens or even hundreds of billions of pounds.“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 -
HAMISH_MCTAVISH wrote: »In order for mortgage lending to be unprofitable for banks, default rates would need to be over 1500% higher than they are.
The stats are fairly clear in this regard.
Just 0.78% of mortgages end up in repossession. Recovery is north of 80% on the few that do. So realised losses are around 0.20% of lending.
Current average bank margins above funding costs are around 3%.
Banks would need to lose 15 times more than they currently do in order to lose money.
Even Northern Rock's so called "bad bank", containing the worst of the worst of UK mortgages, made a £750,000,000 profit last year alone. The profit on "good" mortgages is eye watering by comparison.
I don't dispute you facts but it doesn't answer my question.
I don't dispute that mortgage business is overall profitable and that defaults on the whole book are small."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
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