Sunday, Apr 12, 2009
The debt party turns nasty
The Times: Lenders accused of dirty mortgage tricks
Halifax, Britain’s biggest lender, has been accused of undervaluing customers’ properties when they come to remortgage, forcing them on to more expensive deals. Brokers say borrowers may see as much as 40% wiped off the value of their homes, although prices have fallen by an average 21% from their August 2007 peak, according to Halifax’s own house-price index.
Posted by quiet guy @ 12:31 AM (1170 views) Add Comment
10 Comments
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1. paul said...
And they stand accused of dirty tricks (also known as the heinous crime of marking to market) by none other than ... The Times.
2. ketha said...
Oh god... anecdotal at best. 'Brokers' are concerned they can't shove things through like before! If they're down-valuing new props by 40% they probably know something you don't. Houses have gone down ON AVERAGE by 20%.. that's assuming you paid the right price in the first place.. plenty didn't. The system of valuation is independent of the 'deals' end so there is very unlikely to be a motivation to rip off customers particularly here. People are in total denial about what's going on, this is more evidence.
3. Dan said...
It realy is about time the Times were subjected to the scrutiny of some independent Media Watchdog. They are complete Bulls.
Every story they print is 'designed and engieered' to ramp up, and talk up the housing market.
And they are all vested interest pieces. There are a LOT of buy to letters amongst the journalists at the Times.
What a RAG!
4. nubbers said...
This will be good for those waiting to buy. Homeowners will be forced to realise now that their properties are not worth what they think they are, so when they come to sell in a few years time, there will be less of a psychological hurldle to overcome.
I do have to wonder why the lenders did not take this attitude from 2004 or earlier, when they would have had the most relevant experience and incentive to realise that anyone buying at that time at a high LTV is likely to end up in negative equity. I guess they will still be demanding large deposits for a few years after house prices have bottomed out and start to rise again.
5. britishblue said...
I agree that houses are still way overvalued, however there is a slightly more sinister side to this.
The banks have to re-capitalise and pay back debts. Guess where they will get the money from? The general public!. This works as a hidden form of taxation. The most overt one is the spread between libor and the lending rate and the base rate and the the lending rate. Low base and libor rates have enabled the banks to massively increase this spread (and make more profit). What people jumping into the market don't realise is that if interest rates go up, the banks are unlikely to reduce this spread. If this all kicks off at the same time you could see a dead cats bounce in the housing market and then a second decline as the rates bank charge re the base and libor rise to record highs. Lifetime trackers for first time buyers could be a huge millstone for the future.
6. a saver said...
Agree with all the comments above. Likely/possible future losses need to be factored in.
Was talking to a guy who works for a property management company. He said that he's been trying to buy for months now and every single time the bank values the property way below the offer price, leaving him too big a gap to bridge.
Where is he trying to buy? St Andrews, one of the most overinflated property markets in the country, where asking prices are still silly. It will take a lot to persuade the Scottish diehards that they are not entitled to see double digit annual value inflation in their house.
7. Cheekie Charlie said...
The negative feedback loop in perfection.
8. jonb said...
Am I missing something?
Surely it is Halifax's mortgage valuations that determine their index, not the other way round. So if Halifax are undervaluing properties, that undervaluation is already reflected in their index. Halifax's index has fallen by more than any of the others, but not significantly more, and in many cases, from a higher peak price.
9. drewster said...
@jonb,
Halifax's index is based on the actual amount paid for the house when sold. It is not based on the estimated valuation, nor is it based on the mortgage amount.
Obviously the bank's willingness to lend affects house prices. We've been saying this all along, but it's only recently that the general public have realised this.
10. Grumpy Middle-aged Git said...
We may abhor the continual ramping perpertrated by the Times property hacks but if the readers' comments to this article are anything to go by, at least its readers are more savvy. Or is it just HPC stalwarts trying to set the record straight - I managed to refrain from commenting - just.