"Affordability" - the new endowment?

dolce_vita

No mr broderick. Given the choice in this so called "monty hall" problem you are statistically always better off going for number 3.

Hope this helps

:cool:

mr.broderick

But behind one is the jackpot...read the riddle...

mr.broderick

dolce_vita wrote: »

No mr broderick. Given the choice in this so called "monty hall" problem you are statistically always better off going for number 3.

Hope this helps

:cool:

I guess this is assuming the host knows where the jackpot is?
Otherwise there is equal probability of the jackpot being in 1 or 3.

dolce_vita

mr.broderick wrote: »

I guess this is assuming the host knows where the jackpot is? yes

Otherwise there is equal probability of the jackpot being in 1 or 3. No

Whichever one you initially choose, there is a greater probability that the prize will be behind one of the others.

In this case, there is a 2/3 chance that number 3 holds the prize.

It's always best to swap.

I've been divorced 3 times you know.

BrandNewDay

mr.broderick wrote: »

I guess this is assuming the host knows where the jackpot is?
Otherwise there is equal probability of the jackpot being in 1 or 3.

yes... the assumption is that the host knows and that s/he always does this trick to contestants.
Although it boggles the mind, it has been proven to be true: switching doors statistically increases your odds of winning the jackpot. I do not understand why this is, but it is.

http://en.wikipedia.org/wiki/Monty_hall_problem

MarkyMarkD

If you can't bother reading my post, don't bother responding emf.

MarkyMarkD wrote:

Eatmyfish suggests that lenders may not care about bad debt because they package up the loans and sell them on. This is cobblers. For one thing, A&L has only securitised a small proportion of their lending unlike (for example) Northern Rock who have securitised loads.

But more to the point, if a lender securitises rubbish loans, it will have to pay a far higher rate to fund future securitisations when the previous ones turn out to be rubbish. It isn't a "money for old rope" scenario as eatmyfish seems to think.

It's in every lender's interest to underwrite the best possible quality loans, because then the cost of securitisation is the lowest possible in the medium to long term.

UK007BullDog

It has never been so easy to get ones debts written off. After a year one can start anew.

No one forces people to get a mortgage more than they should be able to afford. Its the people who want to live over their means and have the flashy house and the flashy car.

People get upset when I tell them they cannot have what they want. I then get the a broker was able to get us more (but it will cost them a fee) by going self cert. So I tell them to be careful and think about affordability now and in the future and they throw back "interest only" in my face and snicker when leaving the office. I used to worry for them and call them up to find out how things are. Now I don't waste my time anymore. If they have not grasped by now what is happening then so be it. I get pretty fed up with the greed but the banks are fueling it somewhat by offering higher income multiples.

The affordability is based on the cost of living. But the amount given as a basis by the government is much too low. So the banks lend too much. But if the government wants to stop repossessions etc then it needs to stop:

Self cert for employed people.
100%, 125% & 130% mortgages
Interest only mortgages
Income multiples

Rework the actual cost of living in the UK before adding a mortgage. The current amounts are a joke.

ManAtHome

MarkyMarkD wrote: »

It's in every lender's interest to underwrite the best possible quality loans, because then the cost of securitisation is the lowest possible in the medium to long term.

May be true now, but was this the case 1 year ago? There is always a balance between quality and how much you can hedge - obviously "the rules" have changed quite a bit recently.

May also explain why MM was offered more this year - lower than average risk?

I did ask a few questions on an "affordability" thread a couple of months back - the answers pretty much confirmed MMs view that this method of "calculation" was handy for justifying just about anything - eg based entirely on the institutions "view" of future rates which tended to forecast a peak at whatever IRs were yesterday, even from last August when they'd just increased to 4.75%.

MarkyMarkD

I'm not sure I understand your point, MAH.

If lenders underwrote rubbish a few years ago, they would be getting defaults in their securitisation vehicles and they wouldn't be able to borrow money on new securitisations at the same rates, because everyone would be suspicious of the asset quality.

The fact is that, for prime lending, there are next to no defaults for most lenders right now. Northern Rock's share price has fallen dramatically recently precisely because the defaults in their mortgage book are starting to look worrying. But the other main lenders really haven't been lending in a very risky way.

Obviously, if prices fall the situation changes dramatically. But as things are today, I don't think many lenders have really over-lent in a dramatic way on prime mortgages.

ManAtHome

Yes, but rates and "arrangement fees" seem to have increased more than a bit, as have provisions for bad debt. I get the impression that the ability to "lay off" debt was easier up to few months ago than it is now,

Can't be just NR who have been slinging money about like a man with several arms..?