Monday, Jun 30, 2008
That's gotta hurt!
Times Online: Northern Rock borrowers face big jump in mortgage repayments
Hundreds of thousands of Northern Rock borrowers are facing huge rises in their monthly mortgage repayments because they are trapped in deals with the beleaguered lender.
Thousands of Together customers have little option but to move on to the bank's standard rate of 7.49 per cent at the end of their fixed-rate deals. A homeowner who took out a £150,000 fixed-rate loan with Northern Rock at 6 per cent will see their monthly repayments rise by £186 on the bank's standard rate. Melanie Bien, of Savills Private Finance, a broker, said: “Unfortunately, people with 100 and 125 per cent loans who are coming to the end of the fixed-rate don't have much choice.”
Posted by gardeniadotnet @ 07:41 AM (608 views) Add Comment
13 Comments
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1. uncle tom said...
There are a lot of secondary consequences from the crash that the media are only just beginning to appreciate.
The people who get bounced onto a high SVR (sometimes 50% more p.m. than the discounted deal they had before) won't go into obvious meltdown straight away; they will stop eating at restaurants, settle for a costa holiday instead of the Maldives, load their supermarket trolleys from the Tesco value range, and defer buying a new car. There's clear evidence of this trend already.
In some cases, such savings won't be enough, and they will start defaulting on their mortgages; but even then, it will be some time before they go to repo. The killer factor for many of these these people will be redundancy, which in many cases will be the consequence of others not eating out, buying cars etc.
Then there's the trapped home owners - able to make ends meet, but unable to move house, and in particular, upsize, because they are in low or negative equity. Even when the credit crunch eventually relaxes, and house prices have found their sustainable level, there will be around two million home owners who are trapped, and will suffer the humiliation of watching the next generation buy better houses with smaller loans.
That second factor, in particular, points to the likelihood of houses that are neither scarce nor cheap suffering the most dramatic falls in this crash - middle England homes that peaked between £300k & £600k may prove to be the worst casualties.
2. Ah-so said...
Ouch, that's gotta hurt.
Let's face it, if you needed 100% mortgage to buy a "cheap" flat for £150,000, you are going to find paying £936 intrest only each month very difficult indeed. Many more repossessions to follow.
3. gardeniadotnet said...
1. uncle tom said...
>Even when the credit crunch eventually relaxes
This is the only point in your post that I would take issue with...
I have it on good authority - the credit crunch ISN'T going to relax.
4. mark said...
wonder if we will ever get our money back for this bank or will we be hit twice when they increase tax rates to pay for it...
5. paul said...
Tom, I believe what gardeniadotnet reckons too - the credit crunch is simply a moniker given by the media to the process of adjustment to more realistic lending levels.
6. techieman said...
garden... do you mean isnt going to relax in the near future. I would think that UT acknowledges that there wont be a quick injection of funds - either public or private - that would cause the CC ro relax in the near future but after some excesses are purged from the system the banks will relax conditions. At some stage they have no alternative. Otherwise the cycle of decreasing asset values, decreasing valuations lower lending, lowing the ability of borrowers to borrow continues, creating decreasing assets etc. At the moment the issue is whos loan book is most exposed and no bank wishing to lend in a falling market, thereby increasing theior exposure above their competitors.
At some point this has to end (perhaps by purging of the weak banks (in terms of solvency rations) , by the same token as at some point the increasing LTVs and relaxing of credit had to land with a bump. The real question is what happens in the second wave that is that the non CC macro economic recession / depressionary effects are felt. At that stage the banks may well be willing to lend but people may have no confidence left for them to agree to borrow.
7. lierbag said...
Good points all. But the bigger mesaage is this: 99% of us are going to hell in a handcart.
OPEC's President, Chakib Khelil, is presently forecasting oil at $170+ a barrel by the end of the year - other experienced industry forecasters see that figure doubling and trebling within the next few years. The US and/or Israel is poised to attack Iran - which will retaliate by closing down the Straits of Hormuz - the intention, to choke Western oil supplies. The UK itself is now a net importer of oil and gas - having to compete ferociously with the rest of the world for increasingly costly available resources - and with no viable Plan B, facing a dependency which must eventually terminally undermine the country's economy.
Whichever way you look at it, the story isn't going to have a rosy ending for anyone outside of the plutocratic class.
So enjoy the 'credit crunch' - these are still relatively happy days.
8. techieman said...
lierbag - cheered me up no end! Thanks but although i agree with you re oil going around this $170 , the following doom scenario is exactly that. I dont buy into that - and think that after $170 (or a further spike) we start to see quite substantial falls. If you are right i will be the first to admit im wrong. But the point i am making is that we have had the HPC catalyst already and any other bad news just ensures the falls are greater than anticipated. The next wave after this CC induced fall will be - as you rightly say - the economy.
9. uncle tom said...
1) To clarify - when I said that the crunch would relax eventually, I didn't mean any time soon, or that we would see a return to the reckless lending of the last few years. Think about three years down the line before normal, sane lending resumes.
2) The rumours about attacks on Iran are almost certainly being fed by people who know they'll cause a brief spike in the oil price that they can profit from. There's an outside chance the Israelis will do something stupid, but that's only likely to be a hit 'n' run raid. I can't see Bush starting a new war when he's only got six months to go - he's stupid, but not that stupid (I think..!)
10. lierbag said...
techieman, it is a 'doom scenario' of sorts, but fueled - not by the rantings and ravings of the increasingly hysterical doom-monger brigade (for which the internet provides an ever- welcoming home) but by the observations and forecasts of sensible and highly-regarded commentators, such as Matt Simmons, Kenneth Deffeyes and Colin Campbell.
In particular, I like the no-nonsense 'let's look at the charts and graphs' approach of The Oil Drum, at:
http://europe.theoildrum.com/
which you will be well aware of, but for anyone to whom to whom the site may be unfamiliar, is currently running Euan Mearns' 'A State of Emergency' post - outlining the UK's fate in stark and uncompromising detail.
I opened 'The Guardian' on Saturday morning to read random stories including; a farmer having had his red diesel supplies nicked, a motorist complaining that the petrol had been repeatedly siphoned out of his car, and the news that airlines are instructing pilots to fly slower to conserve fuel. Now imagine what shape society is going to be in when the oil price doubles.
I'm by no means a cheerleader for apocalyptic societal change - as I reckon I'm the same as most of you out there in the 'victim' demographic. What I do take issue with, are the contributors to this forum whooping for joy at the house price collapse, while failing to notice that the rest of the modern oil-dependent society which we've come to depend on, is gradually crumbling away under their feet.
I'd suggest people read associated, rational, sites, like energyswitch.org.uk
The more that people appreciate that the present hiatus isn't just a 'blip' before everything returns to normal, the better.
11. gardeniadotnet said...
9. uncle tom said...
>1) To clarify - when I said that the crunch would relax eventually, I didn't mean any time soon, or that we would see a return to the reckless lending of the last few years. Think about three years down the line before normal, sane lending resumes.
Still too conservative for me Uncle.
I belong to the "Complete Global Financial and Economic Breakdown" camp. Not the snappiest of titles, I'll grant you, but the facts speak for themselves.
12. planning4acrash said...
First of all, as a result of globalisation, import or export mean squat because all oil is bought in Dollar on international exchanges. The UK's only benefit is its ability to tax north sea oil. Basically a theft of Scottish resources by the London b(w)anking elite. Used to pay for things like the Iraq war. We don't benefit squat from any of it!
Secondly, oil will be at $400 or $500+ If Iran is attacked, and Bush has until the end of the year to get this through.
13. lierbag said...
Uncle Tom: ' 2) The rumours about attacks on Iran are almost certainly being fed by people who know they'll cause a brief spike in the oil price that they can profit from. There's an outside chance the Israelis will do something stupid, but that's only likely to be a hit 'n' run raid. I can't see Bush starting a new war when he's only got six months to go - he's stupid, but not that stupid (I think..!)'
The rumours are actually being fed by US military movements and the naval build-up in the area; the - shades of Iraq - continuing slew of anti-Iranian rhetoric and sanctions (over a domestic nuclear power programme they actually have every legal right, internationally, to pursue) and the fact that Iran will interpret any Israeli attack, as an attack by the US, by proxy. Satrting a new war is also a fantastic excuse for suspending the normal 'democratic' process . . .