UK’s ‘bad bank’ warns 1% rate rise could sink 15,000 customers

zzzt

How much would a 1% rise affect monthly repayments by?

antrobus

debtisnotme wrote: »

How do they know?

It is "based on research that we have done" according to CEO Ian Hares.

ilovehouses wrote: »

This is a cash cow. That's why Prudential have just bought £12bn of the loan book.

That's what UKAR is supposed to do. It started off with a variety of asset portfolios acquired from the Northern Rock and Bradford and Bingley. The most recent was the £11.8 bn sales of B&B BTL mortgages to the Prudential and Blackstone. Previous to that it was the £13 bn sale of NR Granite mortgages to Cerebrus.

According to the BBC UKAR "started with £116bn worth of loans on its books and the latest sale cuts those holdings to £22bn - of that £12.7bn originated from Bradford & Bingley and £9.7bn originally came from Northern Rock."

It's latest accounts to March 2017 show £19.5 bn of customer loans outstanding.
http://www.ukar.co.uk/~/media/Files/U/Ukar-V2/Attachments/press-releases/2017/ukar-annual-report-and-accounts-report-2017.pdf

This is how we get our money back.:)

antrobus

michaels wrote: »

...2) The loans are generally on legacy interest rates (ie very expensive) compared to what is available on the market today so anyone with average or better credit risk will have remortgaged elsewhere to save money...

Acording to UKAR, the sale of the B&B BTL mortgages generated a loss before tax of £384.7m - "This loss reflects the low interest rates payable on the loans".

The problem with both NR and B&B was that they charged too little not too much, that's why they went pop.

Malthusian

kabayiri wrote: »

In future, anyone with savings will get less and less government support, but how do you view someone with no money but wardrobes full of posh clothes?

If they want to live on baked beans while wearing posh clothes then let them. What am I supposed to envy them for? The fact that if I gave up contributing to society I'd have to eat baked beans while wearing clothes from Primark? Living on state benefits is a miserable existence, whether or not you splurged all your money beforehand or never had it in the first place.

You can't move for advice from the Government, the regulator, the newspapers, the priesthood etc telling you not to get in debt. Nobody is encouraged to get in debt, and the few adverts which cross the line into telling you to get into debt to fund an unsustainable lifestyle are slapped down by the regulator (albeit not very hard).

People are no more encouraged to get into debt than they are encouraged to jump into canals; the mere fact canals exist and you can jump into one does not mean you can start using the passive voice if you choose to.

always_sunny

kabayiri wrote: »

In future, anyone with savings will get less and less government support, but how do you view someone with no money but wardrobes full of posh clothes?

Future? It should be now already!
The government doesn't have money to support, tax payers contribute to this charity at the expense of other projects.

I doubt that it'd ever happen here in the UK, handholding is the preferred method.

michaels

antrobus wrote: »

Acording to UKAR, the sale of the B&B BTL mortgages generated a loss before tax of £384.7m - "This loss reflects the low interest rates payable on the loans".

The problem with both NR and B&B was that they charged too little not too much, that's why they went pop.

I thought they went pop because they were iliquid because their borrowers had too little equity and that spooked the markets into refusing to fund the loans.

I am not sure that direct conclusions on the actual rate payable can be deduced from the fact that the sale of some of the mortgages resulted in a book loss. For example suppose the average rate payable is 5% but the risk profile would indicate the rate should be 6% then any purchaser would expect a discount. Borrowers with a better risk profile would have left long ago of course because they would have been able to remortgage way cheaper than 5% so 'reverse cherry-picking' would have happened.

michaels

As we are talking about those left with UKAR I found this on the BBC:

What's left in the portfolio which remains with the taxpayer? Some more buy-to-letters and, crucially, 56,000 residential borrowers.
They include many stuck on an interest rate of nearly 5%, thousands in financial difficulty and over a thousand who have been referred for help in dealing with debt.
Offloading these loans is likely to be much more difficult.

In other words these are not 'typical borrowers' but are those who are already in difficulties or who do not have the income or equity to remortgage elsewhere and are thus trapped on punitive rates of 5%. Hardly surprising that for this group an increase in rates would be problematical - it is almost by definition.

antrobus

michaels wrote: »

I thought they went pop because they were iliquid because their borrowers had too little equity and that spooked the markets into refusing to fund the loans. ...

It was their lenders (or potential lenders) that got spooked because they underlying security provided was a bit carp. And they were right. The scale of 'impairment losses' recognised by UKAR in the next few years were sufficient to have wiped out the capital of both banks.

michaels wrote: »

..I am not sure that direct conclusions on the actual rate payable can be deduced from the fact that the sale of some of the mortgages resulted in a book loss. For example suppose the average rate payable is 5% but the risk profile would indicate the rate should be 6% then any purchaser would expect a discount. Borrowers with a better risk profile would have left long ago of course because they would have been able to remortgage way cheaper than 5% so 'reverse cherry-picking' would have happened.

You are contradicting yourself. You state that these "loans originally came from Bradford and Bingley and Northern Rock who were some of the loosest in their underwriting criteria", i.e. the loans were to cheap. Now you are claiming they were to expensive.:)

Sapphire

Malthusian wrote: »

People are no more encouraged to get into debt than they are encouraged to jump into canals; the mere fact canals exist and you can jump into one does not mean you can start using the passive voice if you choose to.

So why d'you reckon there is such a different attitude to spending than there used to be? My grandparents and parents, for instance, never got into debt and were never overdrawn – this despite originating in families that did have wealth initially (lost during the war).

I do think that advertising has a lot to do with encouraging individuals to think they 'must have' things like pouting lips/mask-like faces, nails like spades that make one feel frankly ill, hundreds of pounds worth of shoes and handbags, new 'luxury' kitchens that all look the same, etc. Yet many of them still appear to feel 'poor' and that they must have more. It's as though material wealth – rather than interesting personal qualities like knowledge, courage or creative ability – is supposed to somehow make them feel better than anyone else.

I expect it's all to the benefit of global corporations, which are fully aware how gullible many people are, and how to con them into thinking what they are buying is essential/life enhancing, or whatever...:cool:

Sapphire

zzzt wrote: »

How much would a 1% rise affect monthly repayments by?

Depends how large the debt is, surely?:D