Sunday, Sep 16, 2007
Prime only mortgage lender? Errrr think not.
Northern Rock (Crock): Northern Rock (Crock)
Look at this PDF and the last paragraph put out by Northern Rock (Crock), they claim to be a prime only mortgage lender.
My foot.
Posted by david20040_0 @ 04:11 PM (527 views) Add Comment
16 Comments
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1. Jackdaw said...
Although providing 125% mortgages sounds like irresponsible behaviour - it appears that there have been no mortgage debt defaults so far - indicating perhaps that borrowers were well vetted in regard to their ability to repay their loans. But it is still early days - the full effect of the IR increases may not be seen for a while.
2. Observer said...
Interesting statement! Talk about shooting yourself in the foot...
It would be even more interesting to know what percentage of NR's loan portfolio is 'Prime' or 'Sub-Prime' etc..given their rentless persuit of increasing market share, my guess is sub-prime fillsup the majority of the books.
3. Orwell said...
Ha ha David,
Well spotted now I am going to max out my Northern Rock Loan and credit cards and run off to ask them to give me some more of the BOE's money. I thnik I will raise my morgage to salary ratio to 225%!!
4. p. doff said...
David, I think you are right to question the last paragraph. I seem to do a considerable proportion of NR mortgage valuations with over 100% loan to value ratio (and associated unsecured debt).
In these cases I have noticed that house buyers have no hesitation in paying what I consider to be over the odds - I guess the attitude is it's not their money so why should they care.
If the housing market does go ti-- up, sorry, pear shaped, resulting in the C word, then the NR unsecured debt could dramatically increase. These debts will no doubt have been sold on to raise more finance for lending, but I wonder who will be unwittingly sitting on these little toxic time bombs.
5. p. doff said...
Incidentally,NR deposits are stated by the media to be £26.7 billion, whereas their loans are stated to amount to £86.7 billion.
Mind you, HBOS has lent £376.8 billion against deposits of £211.9 billion.
Time to split up some of my savings I think.
6. paolo88888 said...
To be fair, they are selective over borrowers, even if they do lend high multiples. I was rejected as being too old, even though I had a previous mortgage with them which I paid off years early.
7. david20040_0 said...
NR aren't selective.
If they had been they wouldn't be in this mess.
8. planning4acrash said...
My Dad has £2500 worth of Northern Rock shares, (5k at their peak), I'm trying to get him to sell them first thing tomorrow morning, but he refuses and says that they will only go up and that they will benefit from a takeover. I say they will only go down and that he will get nothing from a takeover. Anybody got any views on that? Any kernels of wisdom to maybe change his mind?!
9. planning4acrash said...
I meant, that he thinks they will go up in the long term.
10. paolo88888 said...
David,
This "mess" has been caused because of lack of liquidity in the market for securitised mortgages. The problem is not bad debts - I have just heard the executive director of NR on BBC Money Box say that the bad debt ratio is half the industry average. The lack of liquidity should just affect the ability of NR to write new business. I used to have several NR savings products, but for several years it has not offered the best savings rates, presumably because it was raising funds through securitisation.
11. Ash4781 said...
http://uk.finance.yahoo.com/q/bc?s=NRK.L&t=my&l=on&z=m&q=l&c=
http://uk.finance.yahoo.com/q/bc?s=NRK.L&t=1y&l=on&z=m&q=l&c=v
12. Ash4781 said...
http://www.ft.com/cms/s/0/39199b78-6489-11dc-90ea-0000779fd2ac,dwp_uuid=e8477cc4-c820-11db-b0dc-000b5df10621.html
180p share estimate here
13. Orwell said...
David,
All I can speak is from real experience (even though Mr. Smith of exemplary Analytical Economics fame doesn't seem to favour this).
Whenever one looks at the Mortgage Repossession Court list, NR are one of the most frequent applicants for orders. I think I said this months ago....
14. su said...
p4ac. I'm no financial guru, as you know, but I would tend to side with you on this one. It's probably a bit late now, but I hope your dad doesn't regret his decision later on. From his point of view his shares are so devalued that he may feel he doesn't have much to lose anyway. Trying to look on the bright side: at least he still has his business and his NR shares don't represent his entire fortune. We're living in uncertain times and unfortunately I think a lot of people are going to be hurt by this. I just wish it could be otherwise.
15. Alvarez said...
planning4acrash... You could tell your dad that there are no shares that will always 'only go up', fact. And Northern Rock shares this morning are worth about a quarter of what they were in February this year. They could be worth nothing very soon, or they may stabilise if there is a takeover. Who knows? As long as your dad believes this it's ok, he just has to be realistic and understand that any share could go up or down at any time. Having said that, what's the point of holding on to a share in freefall?
16. Alvarez said...
planning4acrash... This from thisismoney this morning
'Recognising that the position is now irretrievable, Northern Rock is expected to appoint the U.S. bank Merrill Lynch to find a buyer. The main losers will be Northern Rock's 176,000 shareholders, who will be lucky to receive £3 per share from the eventual sale. At the beginning of this year, their shares were worth £12 each.'