Another one bites the dust - more mortgages being pulled

Griptool

Treadmill wrote: »

One thing I don't understand about the Credit Crunch ... Where did all the money go ? Surely somebody must have it or does money just evaporate ?

!!!!!! is right, the amount of money bank can lend is related to their capital base (fractional reserve).
Also check out Basel ll

Lost money on bad debt comes off a banks capital base reducing their capacity to lend. A reduction in the amount lent in a certain asset class (in this case housing) puts downward pressure on prices causing defaults causing more impairment to banks ability to lend causing more defaults .... you get the idea, a negative feed back loop.

The net effect of this will be a massive transfer of wealth, as always to the lending class - a select few will become even richer through this process and rest assured it won't be you - it will be the bankers (those that have prepared to buy assets at fire sale prices)

If you are really interested in how it will effect you READ THIS.
It was written before the credit crunch, its quite long but it give you a clear understanding of how we got into this mess,(its written buy gold bugs who have a certain POV so make your own mind up).

The collapse of the credit bubble is in its early stages - if your holding property as an investment get out now (remember equitable life, if you cash in early and took a small hit you got most of your money back , those that waited in the hope of a rescue got skewered).

If your fixed rate is coming up to renewal and you have less than 20% equity sell NOW and rent until it settles down (years i'm afraid) or risk losing everything.

And always remember summers coming and life goes on:T

InMyDreams

Treadmill wrote: »

One thing I don't understand about the Credit Crunch ... Where did all the money go ? Surely somebody must have it or does money just evaporate ?

See here. I started a new thread but maybe should have just added to this one. Sorry.

BenL

and bye bye to First Direct Mortgages (unless you are an exisiting FD customer)

Radio 5 Live announced this at 17:54 but the FD website has not been updated yet.

HSBC are apparently going to offer a 4.99% 2 year fixed rate but without the offset facilities.

FD are pulling out completely the analyst said as if they put up rates, other lenders will follow and then FD will find themselves at the top of the best buy tables again.

FD are not short of money, just overwhelmed by the demand for their products.

Ali660

I seem to have missed the boat!

Just called FD to chat about remortgage options and was told they are no longer considering new custom! Due to popularity they have now closed the doors unless you have a current account with them ... didn't see that one coming so soon!

paulb369uk

Ali660 wrote: »

I seem to have missed the boat!

Just called FD to chat about remortgage options and was told they are no longer considering new custom! Due to popularity they have now closed the doors unless you have a current account with them ... didn't see that one coming so soon!

Also spoke to FD today, if you set up an account 1st you can still apply for mortgage but am not sure how long the setting up of the bank account will take and the current offer may end anytime !!!:rolleyes:

mpsavuk

Treadmill wrote: »

One thing I don't understand about the Credit Crunch ... Where did all the money go ? Surely somebody must have it or does money just evaporate ?

This is how i understand the system after a recent unexpected crash course in basic economics:

Banks create money out of thin air using the 10/1 rule. For every $ deposited they can, by law, create 9 dollars of credit/loans.This is added to their balance sheet as an asset.

When we borrow money we are betting on our ability to pay it in the future. That loan money comes in (via salaries,business etc)and keeps the credit ball rolling. Another $ in, keep 10% in case of defaults, and use the rest to create more dollars for loans. Credit expansion. Necessary for economic growth.

When people stop paying back their loans in massive numbers (Yanks!) the banks have a lot less money coming in. So they have a lot less ability to loan out. Credit Crunch/contraction. Now the situation is that for every $ they lose on defaults thats 9 dollars they can't loan out. This is where deleveraging is a real !!!!!.It's great on the way up, but a real pain when it goes the other way.

So, no money in from loans= no money out for loans = no banks! After all, that's what they do.

Add to the mix all the worthless Mortgage Backed Securities writedowns etc and there goes even more money they can't lend on. If their shares fall there goes their market capitalisation so their potential to borrow on that takes a fall. Less money to loan/invest/pay bills with.

All this money doesn't actually exist in piles of notes in bank vaults. It's more like "Virtual money"!

That bank statement we get is really just an IOU as the Bank would have loaned/invested most of your cash deposits and savings. But they can pay you back 10% if there's a run on your bank.Kind of them isn't it!

(Phew....i need a coffee & ciggy after that lot!)

borntobefree

http://business.timesonline.co.uk/tol/business/economics/article3655950.ece

Quote from above:-

"Royal Bank of Scotland and NatWest said they will start turning away buy-to-let investors who lack a deposit of at least 25 per cent of a property's value. The banks previously required a deposit of only 15 per cent, but said the move was a defensive step to maintain customer service quality after a record number of applications.
Bank of Ireland withdrew most of its two-year, three-year and five-year fixed rates yesterday, adding that it would no longer sell two-year fixed or two-year discounted rates.
Woolwich, owned by Barclays, said it would increase rates today after increases by the rival C&G led to a surge in demand for Woolwich mortgages.
Melanie Bien, director of Savills Private Finance, the mortgage broker, said: “The rate at which lenders are pulling mortgage deals and increasing their pricing is unprecedented.”

borntobefree

The bit I don't get about the crunch is - when all the Americans started to default on their mortgages which led to the credit crunch and the housing mkt to fall...is this because they (the American defaulters) just drowned in a sea of debt. How much does the average American owe? Apparently debt is £10k per person in UK...and I don't owe anything:rolleyes:

natman

I have just soke to an advisor with britannia building society -
Just informed me that the rates on their two offset products are increasing o.25%...............
People where asking whether BOE would reduce their rates - looks like unless you have a tracker you wont feel the benefit if they did!

UK007BullDog

That is why I have been saying for the last 2 months to fix it and for 3 to 5 years as well. To wait this whole credit crunch malarkey out, without getting stressed. The BoE may lower their rates but with all the trackers being pulled and replaced with more expensive ones, I just would not be able to sleep without worry. People are not spending as they used to. There are sales racks in all the stores, offers everywhere, sale, sale, sale...... I think we may head into a recession. Not sure what is going on except I am more out of pocket this year than last, so would fix the mortgagge payments to be able to budget.

Mortgages for poor credit people are more or less gone now.....