They Go Up-diddly-up-up

Generali

As is traditional as the increase in house prices/unsustainable bubble/immoral boomer-pocket-filling-fest continues, lenders cut their lending standards:

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/11855490/Another-major-lender-offers-5-deposit-mortgages.html

Nationwide is offering mortgages to borrowers with a 5pc deposit for the first time since 2008.




The lender has made an additional £1bn available to first-time buyers and home movers with a small deposit.




The building society is offering a two-year fixed rate deal priced from 3.99pc with the a £999 fee. It also has a three-year fix from 4.59pc and a five-year fix from 4.79pc. Both come with the same £999 fee.

I wonder who will offer the first 100% mortgage of the current boom (or perhaps a 95% secured plus 5% unsecured which would look a bit better on the books)..?

As an aside, for which I have no link, I read a research piece recently showing that Government/Sovereign debt arrears at at an all time high: debts taken from people that couldn't pay and laid onto the Government are now proving hard to service. Whodda thunkit?

wymondham

I presume this means that Nationwide are quite happy house prices will not significantly go down?

Generali

wymondham wrote: »

I presume this means that Nationwide are quite happy house prices will not significantly go down?

It sounds like it. The typical loss from an FTB repo is about 10% IIRC.

Conrad

I was flogging 100% mortgages back in the early 90's and as always I want to point out that the vast majority of people sustained them in spite of market ups n downs. My first mortgage was 95% and this was the norm for my contemporaries. The doomsayers would have us all believe such things lead to mass financial ruin, it really doesn't

Conrad

Hope it's ok for me to mention the unbalanced economy argument here. Sure we'd all love a German industrial economy but take me as a real live example of why this is so hard. I've sold my business premises and am investing proceeds in further B2l. I would love nothing more than to invest this in a 'proper' business, how proud would I be to be doing my bit towards rebalancing the economy, but in the end it's too big a risk and no one is going to bail me out if I loose my hard earned investment money, furthermore it would detriment my children.

So whilst it's highly fashionable to bemoan the likes of me for not investing in a real business, put yourself in my shoes, would you encash your own funds and risk them on a manufacturing business?

michaels

Generali wrote: »

It sounds like it. The typical loss from an FTB repo is about 10% IIRC.

What exactly does that mean - that the lender typically loses 10% of the amount lent - does it relate to a specific ltv?

antrobus

Generali wrote: »

....As an aside, for which I have no link, I read a research piece recently showing that Government/Sovereign debt arrears at at an all time high: debts taken from people that couldn't pay and laid onto the Government are now proving hard to service. Whodda thunkit?

For the first time, economists at the Bank of Canada have compiled a comprehensive database of missed government debt payments that include sovereign bonds, bank loans and credit provided by official sector lenders such as the IMF and World Bank. ....In 2013, global arrears and restructuring spiked to a new high of $442bn as Greece, Ireland and Portugal restructured large sums of debt agreed by their EU partners.

Financial Times, 6th September
Sovereign borrowers fall behind on record sums of debt

Generali

Conrad wrote: »

I was flogging 100% mortgages back in the early 90's and as always I want to point out that the vast majority of people sustained them in spite of market ups n downs. My first mortgage was 95% and this was the norm for my contemporaries. The doomsayers would have us all believe such things lead to mass financial ruin, it really doesn't

I'm not being a doomsayer, I am merely pointing out that lending standards are falling.

I have no problem at all with 95% repayment mortgages for FTBs.

95% IO mortgages with no repayment vehicle..a little less. 100% mortgages? Pretty risky as a lender. 125% mortgages?

This is the road that you're going down.

antrobus

michaels wrote: »

What exactly does that mean - that the lender typically loses 10% of the amount lent - does it relate to a specific ltv?

I believe that lenders are interested in the loss as a percentage of the amount lent. 10% would actually be rather 'optimistic'; in recent years it has been more like 23%.

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/9902335/Almost-90pc-of-repossessed-homes-sold-on-at-loss.html

gadgetmind

Conrad wrote: »

The doomsayers would have us all believe such things lead to mass financial ruin, it really doesn't

It doesn't always but it certainly can sometimes as it's a high risk strategy for both lender and borrower. I prefer it if financial institutions don't take these risks to boost profits/bonuses, and then require tax payer bails outs when it all goes wrong, but perhaps that's just me.

michaels

Generali wrote: »

As is traditional as the increase in house prices/unsustainable bubble/immoral boomer-pocket-filling-fest continues, lenders cut their lending standards:

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/11855490/Another-major-lender-offers-5-deposit-mortgages.html



I wonder who will offer the first 100% mortgage of the current boom (or perhaps a 95% secured plus 5% unsecured which would look a bit better on the books)..?

As an aside, for which I have no link, I read a research piece recently showing that Government/Sovereign debt arrears at at an all time high: debts taken from people that couldn't pay and laid onto the Government are now proving hard to service. Whodda thunkit?

3.99% on a 2 year fix is at least 2% above the rate for pretty much risk free lending with a 40% deposit. Supposing a repossession will cost 10% of capital loaned, that means that even if 30% default in the 2 year fix period Nationwide are still better off with this business than the zero risk 'prime' borrowers. (Have I got the maths right?)