Thursday, Aug 06, 2009
Is thisanything to worry about
Lovemoney.com: Cheap Chinese mortgages arrive in the UK
Bank of China, the world's third-largest bank, has started lending cheap tracker mortgages to UK homebuyers. Cliff D'Arcy finds out if these deals are really as good as they seem...
Posted by novice pete @ 09:30 PM (611 views) Add Comment
5 Comments
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1. mander said...
Are the Chinese investing their US dollar reserves in the UK mortgage market? A lifeline for the Buy To Let?
2. Mr Plumbase said...
So they intend to lend us our own money back to us! And to think all they do is make dangerous toys and dodgy consumer goods, unlike us who er.... have all that city talent and knowhow.
3. britishblue said...
It all depends whether you can borrow in sterling or whether you have to borrow in the foriegn currency as to whether it is a good deal or not. The chinese currency has been undervalued for years, If you were to borrow in the chinese currency then there is a strong likllihood that the in the next 10 to 20 years the currency could appreciate leaving you with a mortgage much larger than you started with.
Been there, got the teeshirt with a swiss franc mortgage.
4. nomad said...
Solid advice britishblue, born of experience let's hope it gets repeated in the mainstream press.
5. stillthinking said...
Their loans will be in sterling, deposits will be in sterling, their capital base will be in yuan/dollars. The big snag with the entry of a new healthy bank is that our existing taxpayer guaranteed banks won't be able to scalp their customers in the face of competition, so much more likely we have to pick up losses.
Or to put it another way, the good/bad bank split will gradually proceed along good bank(Bank of China) and bad banks(RBS,LLoyds,NR,UK banks). Of course all the good assets will be able to move to the cheaper costs of new entrants, also Santander, but the UK banks will never be able to get rid of their risky loans, why would a new entrant take them? This kind of split is not so great, basically the consequence is to bust the UK banks by purifying their debts into toxic, and at some point people will ask if this split was going to happen why didn't we split the banks ourselves to maintain a presence of UK banks in the UK.
There are billions of debts floating around out there, good and bad. The -only- interest the new banks have is to cherry pick the good and totally ignore the bad. Further, their existence weakens political pressure to lend, because political pressure to lend is a reflation strategy, flood the system with money to restore pricing, it isn't a make-money-from-lending strategy at all, Darling can't blackmail the new entrants so they won't bother.