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Newbuy Statistics
Comments
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With default rate at 0.8% that £15m comes down to £120k assuming they recover nothing. Shouldn't your £2.7billion be £270million
That default rate is for the whole mortgage book, AIUI,with risk spread across the portfolio, not concentrated as these are."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 -
So maybe they should apply a mansion tax after all- to anyone born before 1960!
Phew:cool:"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 default rate is for the whole mortgage book, AIUI,with risk spread across the portfolio, not concentrated as these are.
True but then the default rate is low and just because someone defaults it doesn't mean nothing will be recovered.0 -
True but then the default rate is low and just because someone defaults it doesn't mean nothing will be recovered.
True but if you have effectively guaranteed an overpriced property in the first place that is highly likely to drop once on the open market you are really providing 100%+ mortgages through the back door."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 -
Graham_Devon wrote: »- Incurred liabilities stand at £0.
A reminder to all those wanting banks to go on a credit lending spree again......
Why?
Sensible lending policy is better for everyone. Slow and sure is the way forward.0 -
Not many people understand New buy.
It is NOT limited to first time buyers
Buyers put in a 5% deposit
Developer puts in 3.5% of the sales price into an insurance scheme.
If a lender suffers a loss they can claim 95% of it from the insurance scheme.
If the scheme runs out of cash the government will pay up to 5.5% of the purchase price.
This means that in order for the government to pay out anything the banks will have to suffer a loss of 3.7% of their loan amount across their new buy portfolio in the 7 years from the date of first sale.
that equates to not recovering a penny on one in 27 loans, before the government steps in.
edit to add this.
if a newbuy house is repossessed and sold for 25% less than it was bought for (a pretty prudent estimate) the buyer suffers 5% and the bank loses 20% of the sales price.
now in order for the fund to run out. 1 in 6 houses sold under New Buy would need to be repossessed and sold for 75% of original sales value.
Calculated - of the 20% loss, 19% is covered by the insurance scheme, and 6 X 3.5 (the builders contribution) = 21%. so for every 6 loans we can cover 1 repossession.
Now even among first time buyers at the top end of the risk spectrum, a 17% repossession rate in 7 years is very unlikely, making government intervention unlikely.0 -
martinsurrey wrote: »edit to add this.
if a newbuy house is repossessed and sold for 25% less than it was bought for (a pretty prudent estimate) the buyer suffers 5% and the bank loses 20% of the sales price.
now in order for the fund to run out. 1 in 6 houses sold under New Buy would need to be repossessed and sold for 75% of original sales value.
Calculated - of the 20% loss, 19% is covered by the insurance scheme, and 6 X 3.5 (the builders contribution) = 21%. so for every 6 loans we can cover 1 repossession.
Now even among first time buyers at the top end of the risk spectrum, a 17% repossession rate in 7 years is very unlikely, making government intervention unlikely.
The buyer is effectively paying above the value for the house.
If 3.5% is being put into an insurance scheme then 100# housereally worth 96.5# at best. Lenders are advancing 95/96.5 or 98.5%.+LTV.
Why aren't insurance companies falling over themselves to do it? Because the punters can't afford to pay it up front without adding it to the mortgage? 95#+ 3.5#+ 98.5%LTV.
If it is such a safe bet why does the government need to be involved at all?"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: »The buyer is effectively paying above the value for the house.
If 3.5% is being put into an insurance scheme then 100# housereally worth 96.5# at best. Lenders are advancing 95/96.5 or 98.5%.+LTV.
Why aren't insurance companies falling over themselves to do it? Because the punters can't afford to pay it up front without adding it to the mortgage? 95#+ 3.5#+ 98.5%LTV.
If it is such a safe bet why does the government need to be involved at all?
Insurance companies aren’t involved at all...
I didn’t say it was a safe bet; it’s just not that risky a bet from the exchequers point of view, but if the property market fell off a cliff and the government did have to step in, the government cost on other things would dwarf the new buy bill, a property crash of that size would more than likely see us needing an EU bail out, rampant inflation and huge unemployment...
The reason the scheme hasn’t really lived up to promise is due to the mortgage market.
To get a mortgage at these levels you need to be income rich (to cover affordability) but asset poor (so can only provide a 5% deposit).
What is happening is that once it gets to nuts and bolts, people with a good income are just saving up in order to access the MUCH better rates and house prices (due to room to negotiate) at 15% and 20% deposits.
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martinsurrey wrote: »Insurance companies aren’t involved at all...
The reason the scheme hasn’t really lived up to promise is due to the mortgage market.
To get a mortgage at these levels you need to be income rich (to cover affordability) but asset poor (so can only provide a 5% deposit).
What is happening is that once it gets to nuts and bolts, people with a good income are just saving up in order to access the MUCH better rates and house prices (due to room to negotiate) at 15% and 20% deposits.
Can't blame them seems the right thing to do.
Desperate buyers always get done over, not just property."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 -
martinsurrey wrote: »Not many people understand New buy.
It is NOT limited to first time buyers
Buyers put in a 5% deposit
Developer puts in 3.5% of the sales price into an insurance scheme.
If a lender suffers a loss they can claim 95% of it from the insurance scheme.
If the scheme runs out of cash the government will pay up to 5.5% of the purchase price.
This means that in order for the government to pay out anything the banks will have to suffer a loss of 3.7% of their loan amount across their new buy portfolio in the 7 years from the date of first sale.
that equates to not recovering a penny on one in 27 loans, before the government steps in.
edit to add this.
if a newbuy house is repossessed and sold for 25% less than it was bought for (a pretty prudent estimate) the buyer suffers 5% and the bank loses 20% of the sales price.
now in order for the fund to run out. 1 in 6 houses sold under New Buy would need to be repossessed and sold for 75% of original sales value.
Calculated - of the 20% loss, 19% is covered by the insurance scheme, and 6 X 3.5 (the builders contribution) = 21%. so for every 6 loans we can cover 1 repossession.
Now even among first time buyers at the top end of the risk spectrum, a 17% repossession rate in 7 years is very unlikely, making government intervention unlikely.
excellent explanation, many thanks ....... one has to wonder though why? why have all this complication .... ultimately if this is a free economy then none of this would be allowed or necessary?0
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