Saturday, Oct 06, 2007
The return of financial prudence?
Independent: Nervous banks turn down millions of loan requests
Every day, more than 20,000 people are being turned down for personal loans as banks adjust to the crisis in world financial markets. Experts are warning consumers to take extra care to keep their credit rating up to scratch in a new atmosphere in which even an unpaid £5 mobile phone bill can become grounds for turning down a loan application. A survey by the financial comparison site MoneyExpert.com revealed that 1.91 million people had had applications for loans turned down in the three months to September, a sharp rise on the previous quarterly figure of 1.39 million.
Posted by uncle chris @ 10:05 AM (494 views) Add Comment
2 Comments
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1. deepak said...
Like banks not trusting banks not knowing who is riddled with sub prime (BAD) debt and maybe internally be bust. aka Northern Rock.
Same would apply with the banks and people relationship. They will test the following
1) Are you sub prime: Not in the UK sense ( which says 6% is sub prime) but in US sense ( Where you could have a high income but you can't service your debts)
2) When the house price crashes: Could they sell your assets ( if you have any apart from house) to pay for it.
And the answer is simply NO.
If on an average 60% wealth in UK is in housing. So if the value of that falls you can't have more money against it.
Also you could see banks calling up and asking for other things are collateral in case your house does not have enough equity to service debts.This is especially important for Home Equity Withdrawls.
For most people Houses are 100% (I think it only comes to 60% because of very rich people for common man its 100%).
2. alan said...
I think the reason for banks declining loans is because they are trying to limit their exposure to UK debt.
Credit Action released some useful data earlier this month which shows collossal amounts of indebtedness per UK household. If I were HSBC (etc.etc) seeking to loan out money, I'd look elsewhere in the world and spread the geographical risk.
Note many mortgage lenders are adjusting downward the LTV percentage - expect this to continue. 95% loans will still be around, but at very unfavourable rates, due to their vulnerability to a slide.