Thursday, Sep 20, 2007
Trouble? What troule?
Evening Standard: Abbey branded 'unwise' as it launches a 125% mortgage
Abbey is offering 125% mortgages! "Abbey defended the deal, insisting it would be useful to those buyers who need extra cash to furnish a property. A spokesman said the bank carries out personal finance checks on customers to ensure they can afford the repayments." If someone can't even save a couple of grand to buy a bed, table and a few chairs, how can they possibly be considered credit-worthy? This is madness!
Posted by papabear @ 10:46 AM (680 views) Add Comment
10 Comments
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1. inbreda said...
This is indeed madness. I used to have a lot of money in Abbey - most of which has now been moved since they started doing nonsense like this. I will have to remove the remainder now - anyone know of any good stores for money at the moment. I am already in ICESAVE, Yorkshire bank and ICICI.
2. Darrude said...
average house price approx, 200K, most people daft enough to do this has Credit / Store Card, overdraft, personal loan, Car Hire purchase at 50K, Mortgage 250K.
It balances. Everyone is a winner. Roll on the 200% mortgage which throws in a free Holiday and Landrover Discovery.
3. mrmickey said...
I think savers are going to start voting with their feet if this sort of brain dead behaviour continues.
4. harold said...
Seems like Abbey want to start a run on themselves with hair-brained schemes like this! Don't suppose the chief exec of Abbey has just placed a load of put options on his own company, by any chance.
5. Drewster said...
Abbey don't care, they're now owned by Spanish banking giants Santander. Santander claims to be the seventh largest bank in the world by profits which makes them too big to fail: the government will always step in to rescue them. Spain's smaller banks are in trouble (see http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/09/19/cnspain119.xml) but Santander Group are safe. This all means Abbey is a lot safer than Northern Rock. I have an account there which I won't bother moving.
Alliance and Leicester on the other hand, they look a bit more shaky....
6. alan said...
Adverts for B&B's 110% mortgage were in the Metro this morning attempting to entice London's FTB commuters.
7. tyrellcorporation said...
Perhaps we are already starting to see the first seeds of the Moral Hazard issue. Will we start to see more ludicrous offers as the lenders realise they are effectively immune from risk?
Northern Rock had a pretty dodgy business model and they have been bailed out and protected from their decisions - where's the incentive to behave?
8. Bluestone2 said...
this surprised me. paid in a cheque (3 figure amount) from one bank to ATM of above mentioned bank after hours last friday.
it had been debited to the paying bank by tuesday am!! (of course it still remains to be credited to receiving bank). but how is that possible? that`s one banking day only to clear. are they all now so desperate they are gaining an extra day here and there on a few hundred because of high interbank rates?
9. alan said...
Tyrellcorp,
NR may have been bailed out, but their brand is totally trashed.
NR cannot survive in its old form, so it must be split up or taken over.
10. Rdb said...
This is off course absolute garbage - no mortgage provider offers a 125% mortgage. You will find that the mortgage is actually 90 / 95% which is secured on the value of the property and the remaining part of the loan is 'unsecured'. Given that FTBs would be able to get an unsecured loan of similar value (but perhaps not the preferrential rate) from another bank there is nothing 'mad' about this. The key thing is that the bank lends the money ethically and adequately considers the risks - it does seem questionable timing considering what just happened to Northern Rock (the previous company to offer such mortgages) - perhaps they are trying to compete in the niche, it would be interesting to find out what happens to their share price. FTBs may be on a reasonable wage but be unable to save as they are throwing money down the rental market toilet. Remember that there are also many charges associated with moving house which also accumulate to 3+k.