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It wasn't all america's fault, it was the banks.
Comments
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grizzly1911 wrote: »1% of what?
1% of their residential mortgage book.
As per the findings of the Parliamentary committee.:)“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 -
Are we all reading the same reports?Banking commission says HBOS' focus on specialist mortgages drove losses
http://www.mortgagestrategy.co.uk/latest-news/banking-commission-says-hbos-focus-on-specialist-mortgages-drove-losses/1068952.articleThe report states: “The [retail] division incurred substantially higher mortgage-related losses than its major competitors, reflecting the bank’s strategy of pursuing growth in higher risk non-standard mortgages.
“We also note that the division’s customer funding gap was a major factor in the group’s overall funding gap, which was a principal immediate cause in the short term of the failure of the bank. Prudent customer funding should have been a secure source of stability during market storms.”Boulger says many of HBOS’ problems stem from selling loss leading tracker products and sub-prime deals that were too cheap.0 -
HAMISH_MCTAVISH wrote: »1% of their residential mortgage book.
As per the findings of the Parliamentary committee.:)
In HBOS's retail division - the mortgage-based business at which Halifax had long been market leader - the damage wasn't nearly as bad. The Commission reckons impairments in the three years after collapse came to £7bn, out of £255bn.
(Note: that's with a more benign residential housing market than in, for instance, commercial property, but the housing market correction probably hasn't ended yet).
7/255 closer to 3% and yet to bottom.
There was the wrong culture: it was brash in pursuit of a "wildly ambitious growth strategy". There was a lack of controls for risk: "The risk function was a cardinal area of weakness," and this was "a matter of design, not accident". No-one stayed long atop the risk management division: instead, ambition took them up the career ladder and off to the moola-making divisions.
There was a lack of controls of different divisions from the centre, and of the necessary banking skills at the top. Andy Hornby came in from retail, having been at Asda; other key figures were from insurance. The top team were "incapable of even understanding the risks that some elements of the business were running, let alone managing them".
http://www.bbc.co.uk/news/uk-scotland-scotland-business-22037950"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 -
Thrugelmir wrote: »Are we all reading the same reports?
http://www.mortgagestrategy.co.uk/latest-news/banking-commission-says-hbos-focus-on-specialist-mortgages-drove-losses/1068952.article
Can you refresh my memory as to the profit on the profit margin on mortgage debt isn't it around 0.7-0.8%?"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: »7/255 closer to 3% and yet to bottom.
Not what the Parliamentary report says.
we estimate that HBOS mortgage impairments for the 2008-11 period would have been some £2 billion (which represents 1 per cent of the 2008 book of secured loans).“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 -
grizzly1911 wrote: »Can you refresh my memory as to the profit on the profit margin on mortgage debt isn't it around 0.7-0.8%?
Average bank margins were 1% before the credit crunch.
More like 3% today.“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: »Average bank margins were 1% before the credit crunch.
More like 3% today.
Net Profit margins.
So on a book of £255bn (no doubt shrunk since) the bank would make perhaps £1.8bn so about 4 years to recover £7bn+.
The true extent of the bad debts has been masked by 0.5% BOE rates and massive forbearance and kid gloves."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 -
HAMISH_MCTAVISH wrote: »Not what the Parliamentary report says.
we estimate that HBOS mortgage impairments for the 2008-11 period would have been some £2 billion (which represents 1 per cent of the 2008 book of secured loans).
Or
45. LBG does not publish divisional results for the HBOS Group and so it is not possible to know precisely the impairments the Retail Division has incurred since the financial crisis. We do, however, know that at the end of 2008, HBOS had retail impairments of £2.2 billion, of which £1.1 billion was against secured lending,URL="http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/144/14405.htm#note66"]66[/URL up from just £28m in 2007. We estimate that total Retail impairments would have been some £7 billion between 2008 and 2011.
44. The Retail business was the largest division in HBOS in terms of customer loans. A key element of the Division's mortgage strategy was to grow 'non-standard' mortgage lending, particularly buy-to-let and self-certified mortgages, where margins had remained higher than for standard mortgages and the overall profitability was thought to be more attractive, despite higher credit risks. By the end of 2008, £66.5 billion (28 per cent) of the banks' retail mortgage lending was classified as non-standard and 62 per cent of the Division's book had a loan-to-value ratio of over 70 per cent.URL="http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/144/14405.htm#note63"]63[/URL These proportions are significantly higher than for any other mainstream mortgage lender. Furthermore, at the end of 2008, the Retail Division had customer deposits of £144 billion and customer loans of £255 billion, a gap of £111 billionURL="http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/144/14405.htm#note64"]64[/URL which accounted for over half the Group's total funding gap of £213 billion.URL="http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/144/14405.htm#note65"]65[/URL
http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/144/14405.htm#a5"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: »Can you refresh my memory as to the profit on the profit margin on mortgage debt isn't it around 0.7-0.8%?
Not to make a point but to add clarity:
I have a mortgage book which makes a profit (before credit impairment) of .7%.
1% of those mortgages go bad so I make a loss of 0.3% right?
Wrong!
When the mortgages to bad I repossess the house and if there's a loss after that I take the car etc to make up the difference.
That's why mortgages are available at base rate + 3% when credit card debt attracts 30% interest.0 -
Not to make a point but to add clarity:
I have a mortgage book which makes a profit (before credit impairment) of .7%.
1% of those mortgages go bad so I make a loss of 0.3% right?
Wrong!
When the mortgages to bad I repossess the house and if there's a loss after that I take the car etc to make up the difference.
That's why mortgages are available at base rate + 3% when credit card debt attracts 30% interest.
Depends if we are talking impaired or written off."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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