A REAL Mortgage Crisis Coming?

ixwood

At the very least, people should be aware that remortaging could be costly/tricky unless they have decent/some equity, not excessive salary incomes and a half decent credit rating,

sarkin

Crisis is only just starting lenders are pulling out of the market A& L clsoed to new business, NR closed.

Redundancys at lenders everyday.

When they pull fast track deals there is going to be a lot of pain.

(Fast track = good credit score 85%ltv or under, lender does not ask to see proof of income.)

morg_monster

But the 25% that rent still live in houses owned by somebody (except council tenants - or is that what you meant). That somebody is most likely a BTL landlord with a) plenty of equity in the house - so may sell to crystallise their gains or b) hardly any equity - may sell to minimise future losses.
This storm will affect a proportion of renters too.

I think good mortgages will be still available - but from the building societies who lend only what they have in deposits from savers and aren't exposed to the markets in the same way as some of the big banks are. I read an article online today (in mortgage insider? not sure) saying that the big banks will be "fighting to be at the bottom of the best buy tables" - as finally they are starting to get rid of their high risk customers due to the crunch and can price their mortgages in such a way as to make a profit, rather than to compete with other banks. They are hoping to see their margins increase.

I think people do need some kind of education about what is happening - its all very well saying "they should know better" but with all due respect, people around my age (27) or younger DON'T remember firsthand what happened in the early 1990s, and rather most of our lives (that we can remember anyway) have been based in a time where "stuff" was king, you bought whatever you wanted and weren't particularly encouraged to worry about the future or save for a rainy day. Yes we MSEers know better, and yes there is lots of information available if you go looking for it - but I should think for many young people all this credit crunch is the first they will have heard of "another way" to think and live your financial life. Personally I think we should have some sympathy; how were they supposed to know any better when no-one was telling them?

ixwood

Competing to be bottom of best buy tables, is quite witty, but a scary insight of things to come?

wolvoman

sarkin wrote: »

Crisis is only just starting lenders are pulling out of the market A& L clsoed to new business, NR closed.

Redundancys at lenders everyday.

When they pull fast track deals there is going to be a lot of pain.

(Fast track = good credit score 85%ltv or under, lender does not ask to see proof of income.)

What nonsense.

Alliance & Leicester is still doing new business. Even Northern Rock is to some extent.

Have you missed the fact that Barclays, Lloyds and Standard Chartered have all released good profit figures in the last few days and RBS are expected to show record profits tomorrow?

Yes some have suffered such as UBS and Citigroup.

ixwood

And assuming it's the credit contraction that is the root problem, will it not eventually affect credit cards, loans, investments, pensions eventually as well?

I suppose the fact that credit cards are already such a rip off they have the margin to carry on business as normal.

Generali

kingkano wrote: »

Just wanted to pick on this 1 point. Id doubt its half the country. Only 75% of houses are owned (I guess 25% rent?). And of those what portion are actually mortgage free or very low (under 50% ltv). With recent historical rises I'd say a good portion.

What portion are really bad credit or over 90% ltv. I would guess at tops 5% of the country? Maybe even as low as 2% 'of the country' will be in trouble at the moment.

If values fall by 10% then I see a larger portion obviously having trouble sourcing a new mortgage deal. But thats not yet.

75% of residential properties are bought with a mortgage (NSO)

Of people of working age:
70% own their home, 17% rent social housing, 12% rent privately, 1% are in tied accomodation (NSO)
Of the 70% that own their home, approx 70% have a mortgage.(NSO)

The average advance on a home purchase is 80% (CML)
As at Dec 2007 129,600 of 11,822,000 outstanding mortgages was in arrears. A little over 1% (CML)

IIRC fewer than 50% of residential properties have a mortgage.

Unfortunately, I can't find a source that will tell me the spread of LTVs. IIRC, the average LTV for HBOS's mortgage book is about 43%.

kingkano

ixwood wrote: »

Good point KK. I still think a lot of current mortgages would not fit into 3.5 times salary, or 2.5 joint, 75% LTV, no affordabilty problems (especially if IRs go up a percent or 3) and excellent credit score/history.

Ahhh now thats a different kettle of fish. I don't think we are anywhere near there yet - but who knows where the credit crunch is going I guess. Most definitely a large portion wouldn't fall into this category. But then a large portion outside your qualification above can easily afford what they have borrowed at the moment (key point there I guess).

But the 25% that rent still live in houses owned by somebody (except council tenants - or is that what you meant). That somebody is most likely a BTL landlord with a) plenty of equity in the house - so may sell to crystallise their gains or b) hardly any equity - may sell to minimise future losses.

Darn I can't find the excerpt. I think it was on bbc sometime ago and mentioned about houses owned some stat dropping. Im sure it was just 'privately owned houses' because it was low in the 70s, rose drastically in the 80s and 90s due to council houses sold off and has just started to dip again recently. But then the government cant be buying many houses so *shrug*.

sarkin

HERE YOU GO. NO MORE LENDING TO NEW CUSTOMERS WE ARE CLOSED FOR NEW BUSINESS

News: Company News
21 February 2008
Breaking News
A&L to scale back mortgage offering

Alliance & Leicester (A&L) is retreating from the mortgage market after revealing it had suffered £185m losses in the wake of the credit crunch, knocking 30% off last year’s profits.
Following the news of the losses, shares slumped to a record low of 428p yesterday and were 472p at the time of going to press. The problems have forced the bank to cut back its lending, with Chris Rhodes, finance director and acting chief executive, revealing A&L would concentrate on keeping its existing customers during the coming year rather than seek out new borrowers by offering market-leading mortgage rates.
In yesterday’s trading statement, Rhodes commented: “We expect net new mortgage lending to be negative this year. We expect to concentrate on customer retention."
Danny Clarke, equity analyst at Shore Capital, said A&L was effectively pulling out of the mortgage market as it shifted its focus towards its funding. He added: “It is another example of dislocation in the market. I think it is probably the correct strategy. As a consequence of protecting what they have, A&L’s mortgage books will contract as they change focus. They are dependant on the wholesale markets and will not be as active as they have been.”
Clarke said lender had to focus on pulling back lending unless the markets opened up again. He added: “If that happens I feel they will revert back to their lending strategy of last year but it is unlikely the market will be the same once things do get moving again.”

kingkano

Generali wrote: »

75% of residential properties are bought with a mortgage (NSO)

Of people of working age:
70% own their home, 17% rent social housing, 12% rent privately, 1% are in tied accomodation (NSO)
Of the 70% that own their home, approx 70% have a mortgage.(NSO)

The average advance on a home purchase is 80% (CML)
As at Dec 2007 129,600 of 11,822,000 outstanding mortgages was in arrears. A little over 1% (CML)

IIRC fewer than 50% of residential properties have a mortgage.

Unfortunately, I can't find a source that will tell me the spread of LTVs. IIRC, the average LTV for HBOS's mortgage book is about 43%.

A true gent thanks very much. :beer: (I was hoping I had remembered it right lol)

70% of 70% I make to be 49% so yah.