Coop bank

Toptom1

About to exchange contracts on a house but I'm with coop bank. Should I change my morgage provider and stand a chance to loose the house or just go for it? How would it effect me if coop bank goes bankrupt?

happylucky

Am I right in assuming you're thinking about this based on Coop failing the BofE's stress test on house price crash of 35% (ish)?

I am kind of amazed that the coop is still offering mortgages, to be honest. At a guess, I would say potential impact would depend on your LTV - put very simply, if the house market goes down "significantly" then coop effectively goes bust (as I understand it, please anyone correct me)...and also your LTV shoots up. It's the fact that these 2 things are interlinked which is important.

If your LTV moves high(er) through house value decline, then of course it could be very difficult to remortgage away from whoever acquires their mortgage book (think UKAR/NRAM or private equivalent) to an alternative bank should the situation turn nasty (due to potential neg equity). There are plenty of threads about what life as an NRAM customer looks like and it's not pretty.

But if your LTV is low, and would still be reasonable if you were stress test it to a "significant" decline in asset value then you would just look to remortgage unless you had a good reason to actively want to stay with them.


Just my opinion. A really interesting question for the mortgage brokers who I'm sure know infinitely more about this than I do.

Southend1

Toptom1 wrote: »

About to exchange contracts on a house but I'm with coop bank. Should I change my morgage provider and stand a chance to loose the house or just go for it? How would it effect me if coop bank goes bankrupt?

It won't affect you in any way at all. I would proceed as planned.

princeofpounds

About the only thing that would happen is that the co-op would not offer to refinance you once/if the mortgage term expires.

In practice, your mortgage would eventually get sold on to a new entity(possibly still called the co-op), and you'd probably find it will move to an uncompetitive steep standard variable rate if they get a chance.

So just make sure that you aren't buying with a wafer-thin deposit, so you have a chance to refinance if necessary (and I would give that advice to anyone buying)

It's a very unlikely scenario now, to be honest.

What you need to remember is that it's a bigger issue if the bank owes you money and goes bankrupt, than if you owe the bank money!

davidmcn

princeofpounds wrote: »

In practice, your mortgage would eventually get sold on to a new entity(possibly still called the co-op), and you'd probably find it will move to an uncompetitive steep standard variable rate if they get a chance.

And of course, even banks which are in a perfectly healthy financial state are entitled to (and do) sell on their mortgages to other banks.

stator

As above, if your LTV is very small, 10% or 5% I would avoid them.

If you were in negative equity and they went bust you could find yourself stuck on a high SVR with no options to remortgage.
If you mortgage is only 50% LTV then it doesn't matter, if they went bust and hiked your rate you would just move elsewhere

mrginge

Co-op bank is not going bust.
Stop worrying.

Glover1862

I've just had an offer from Platform ( Coop Buy to Let Arm) and fixed for 5 years and after that the internet rate is linked to BoE base rate, hopefully I'll be long gone by then, a lot can happen in 5 years and as the other two main banks Lloyds & RBS just about managed to pass, a lot more than just Coop customers will be in trouble if house prices drop by 35%!

Toptom1

I'm puting down a 15% deposit and a 5 year fixed so hopefully by that point the crisis will be less volatile. Can see houses in London crashing maybe 30% and in manchester maybe 20% of course all speculation. Also I'm a ftb I'm in no rush but I'm 26 so can't live with my parents forever.

stator

A 5 year fix is a good idea. I don't know the term of mortgage but after 5 years of repayments your LTV should be less than 75%. So house prices would have to fall quite a bit to cause you a problem.

DRP

Toptom1 wrote: »

I'm puting down a 15% deposit and a 5 year fixed so hopefully by that point the crisis will be less volatile. Can see houses in London crashing maybe 30% and in manchester maybe 20% of course all speculation. Also I'm a ftb I'm in no rush but I'm 26 so can't live with my parents forever.

How did you come to those numbers!?!