Stock Markets Bombing!

vellum

Alan_M wrote: »

I was thinking more the Wall Street crash in the 20's where it was well documented a few people took a dive.

I didn't realise that happened when the dot.com boom collapsed.

unfortunately it happened in the far east.

Generali

Alan_M wrote: »

What I don't fully comprehend is why other industries are falling in sympathy.

Ok, I get it that banks prices are dropping, there's the direct obvious connection. But Mining and Oil stocks? Why's that, is it because they are financed by the banks that are dropping therefore they won't be leant as much money etc etc...?

Because the fear is that the real US economy is going to go chests up and take the rest of the world with it.

If the world's economy heads into recession, less stuff will be bought. If less stuff is bought, less oil and so on is needed.

Buy fags'n'booze'n'utilities stocks is my advice.

Gorgeous_George

Why is this thread on the housing forum? Surely it should on the Savings and Investments or Gambling forums.



GG

WTF?_2

Gorgeous_George wrote: »

Why is this thread on the housing forum? Surely it should on the Savings and Investments or Gambling forums.



GG

Because
(1) It's a disastrous failure in sub-prime housing lending in the US that's triggered the problems

and

(2) The credit crunch brought about by the above mentioned crisis will throttle the UK housing market.


It's also worth noting that the degree of dodgy lending in the UK (which has propped up the crazy house price levels in the UK) is almost as bad as the US and that mess has yet to hit the global markets. When it does, look out for even more turbulence.

green1970

!!!!!!? wrote: »

It's also worth noting that the degree of dodgy lending in the UK (which has propped up the crazy house price levels in the UK) is almost as bad as the US and that mess has yet to hit the global markets.

Dodgy lending in the UK is nowhere near as bad as the US, mortgages have been heavily regulated by the FSA for nearly 3 years and prior to that, the voluntary regulation by the MCCB was as tough.

The sorts of loans talked about in the US are sub-prime lending at 100% or more at 'low start' rates. i.e. you pay 2% even though the variable rate is 8% and the 6% is rolled up and added year on year. We haven't had those types of mortgages in the UK for probably 15 years or so and even then, the roll-up type mortgages needed a 15% or more deposit and they certainly weren't given to anyone with a bad credit history.

Mortgage lending in this country is very, very responsible. I don't know if the same could be said for secured loans, unsecured loans and credit cards but mortgage lending in the main is excellent in this country. It's when people take out the other stuff that they get into trouble, hence the increase in repos. That is what will do the damage in my opinion, not dodgy mortgages.

Alan_M_2

green1970 wrote: »

Mortgage lending in this country is very, very responsible. I don't know if the same could be said for secured loans, unsecured loans and credit cards but mortgage lending in the main is excellent in this country. It's when people take out the other stuff that they get into trouble, hence the increase in repos. That is what will do the damage in my opinion, not dodgy mortgages.

I think you'll find Self Certification circumvented all the safe checks you assume are in place.

ManAtHome

green1970 wrote: »

Mortgage lending in this country is very, very responsible.

I suppose we'll find out soon enough now the banks are having problems getting their wheelbarrows over to the far east to get a few more shovels of cheap dosh.

pickles110564

Alan_M wrote: »

I think you'll find Self Certification circumvented all the safe checks you assume are in place.

Also if you have a few BLT's they will lend you large amounts at a drop of a hat as long as you earn £20K and they dont check how much you have outstanding either

green1970

Again, with self-certification, there's usually a 15% deposit as security, coupled with the fact that prices have gone up in the past few years to give even more of a cushion there.

Lenders could have helped with the self-cert thing as they could be more flexible in today's job market about which incomes they can use when assessing how much someone can afford.

As a for instance, lenders traditionally a basic salary and apply a multiple to that to come up with a maximum loan. So going back to late 80s, if I had a salary of £14000 (net of £900 per month), I could borrow 3 times that so £42000 which, at 15.4% variable, came to about £450 a month, nearly 50% of my salary.

Nowadays, let's say I have a child and have a £20k basic salary and on top of that I get an attendance allowance, unsociable hours and very regular overtime of £6k, plus Working Family/Child Tax Credit, Child Allowance (£1600 per month). Say I have a good 15% deposit and want to borrow £130,000 on a nice 10 year fixed rate of 5.7% with monthly repayments of around £650) - lenders don't tend to touch that with a bargepole despite it being much more affordable (and stable due to the security of the fixed rate). Yet if I self-certify my income at £30k (which is my salary plus the rest of the stuff grossed up accordingly) which is no lie, I can get the mortgage I can afford.

I don't doubt that self-cert has been abused so that people can get the house they want, yet who takes out a mortgage they knowingly cannot afford, that would be madness. The key to mortgage lending nowadays is affordability, the mortgage intermediary as part of the FSA regulation has to check that the net income you declare is reasonable and sustainable so that there's less room for abuse.

Now if we had self-cert 100% mortgages for people who are bad payers, then that would be irresponsible which is why it doesn't exist. I truly do believe mortgages aren't the problem in this country, it's the other easy lending on top that does the damage.

A mortgage at 5 times my salary at a nice fixed rate is more affordable than a mortgage at 3 times my salary at a high variable rate when houses were a third of the price they are now.

Gorgeous_George

pickles110564 wrote: »

Also if you have a few BLT's they will lend you large amounts at a drop of a hat as long as you earn £20K and they dont check how much you have outstanding either

Sounds nice, but I've already eaten. Might treat myself to a BLT tomorrow.



GG