How Financially Secure Are Mortgage Lenders?

[Deleted User]

Hello,

I'm in the process of buying a flat but there's a lot of talk in the media about the world entering a worse financial crisis than 2008.

My question is this: I am about to choose a mortgage/mortgage lender. Does anyone know if there is a way to find out about and compare the financial stability of mortgage lenders? If we end up having a prolonged global financial crisis, I'm wondering if some mortgage lenders will go under - like Nothern Rock did during the last crash?

I would like to get a mortgage from one of the more financially secure mortgage lenders, but I don't know how to get that info'.

AdrianC

NR collapsed because they were lending to sub-prime borrowers. The reason that people couldn't remortgage away from the legacy NR run-down was because they were sub-prime borrowers who nobody would lend to with the tighter post-crash restrictions. The reason people had their properties repossessed was because the affordability tests were inadequate and they couldn't afford repayments.

None of those apply this time.

Will financial institutions go under? <shrug>
Will you lose your house if your lender does? No.

princeofpounds

It's not like picking a bank for a deposit. You owe the bank (or other type of lender) with a mortgage, not the other way around. If they go under, nothing changes in terms of your liability - eventually some other institution will buy the debt (either directly or by buying out the failed lender) and you carry on paying them. 

The real risk you need to bear in mind is refinancing risk. What happens when you need to remortgage, if your current lender cannot offer you a new deal aside from their SVR? You will then be in the open market, which is normally a perfectly good place to be, but in the middle of a crisis maybe not so much, especially if you are in negative equity. 

So don't concentrate on your lender. Concentrate on your equity, the term of your loan, the interest rate risk you bear etc. 

[Deleted User]

I understand that if your mortgage lender goes under your mortgage is bought by someone else, but if I'm on a fixed deal and the mortgage is bought by a different lender, does my fixed deal continue or do i get transferred to a SVR immediately?

davidmcn

Geepers1 said:

I understand that if your mortgage lender goes under your mortgage is bought by someone else, but if I'm on a fixed deal and the mortgage is bought by a different lender, does my fixed deal continue or do i get transferred to a SVR immediately?

As above, nothing changes with the terms of your mortgage.

Also bear in mind that mortgage books more often change hands without the lender going bust - you don't have any say in whether they sell on your mortgage.

Crashy_Time

AdrianC said:

NR collapsed because they were lending to sub-prime borrowers. The reason that people couldn't remortgage away from the legacy NR run-down was because they were sub-prime borrowers who nobody would lend to with the tighter post-crash restrictions. The reason people had their properties repossessed was because the affordability tests were inadequate and they couldn't afford repayments.

None of those apply this time.

Will financial institutions go under? <shrug>
Will you lose your house if your lender does? No.

Really? They allowed the debt bubble to continue, not only that they encouraged it to grow, and people are a lot more indebted now on all sorts of levels than they were in`08 and previous crashes. Saw a guy on telly yesterday, market trader or similar, wife and two kids, "Big mortgage" and "Six weeks savings, if that..." the guy was almost weeping. Interest rates should have been pushed back as far towards normal as possible by now, with some pain already taken, so they had a reasonable cushion for major events like this, as it stands watching the PTB thrashing around trying to backstop this is tragic comedy at it`s darkest. The idea that financial institutions are not going to be hit in this is fantasy IMO. Imagine the trader guy had had a decent return on his savings for ten years, and been able to pay off his house in ten years, he would be in a much stronger position to weather the storm now? Hopefully sensible people are going to forget all about buying and selling houses for silly prices and concentrate on the very real public health emergency that we are facing.

Crashy_Time

princeofpounds said:

It's not like picking a bank for a deposit. You owe the bank (or other type of lender) with a mortgage, not the other way around. If they go under, nothing changes in terms of your liability - eventually some other institution will buy the debt (either directly or by buying out the failed lender) and you carry on paying them. 

The real risk you need to bear in mind is refinancing risk. What happens when you need to remortgage, if your current lender cannot offer you a new deal aside from their SVR? You will then be in the open market, which is normally a perfectly good place to be, but in the middle of a crisis maybe not so much, especially if you are in negative equity. 

So don't concentrate on your lender. Concentrate on your equity, the term of your loan, the interest rate risk you bear etc. 

Exactly.