Saturday, Jun 12, 2010
Melanie Bien (Private Finance) - "The markets ground to a halt"
BBC Working Lunch: First Time Buyer news
Go to 4 Mins and 30 seconds into Friday's show for a debate on the new Bovis/Woolwich mortgage deal and then wait for Melanie B to explain why this tie up and mortgage package has come about.
Posted by jack c @ 03:17 PM (2297 views) Add Comment
15 Comments
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1. quiet guy said...
MB - Melanie Bien, Private Finance independent mortgage broker
NM - Naga Munchetty, Working Lunch presenter
MB: Bovis will basially be offering a guarantee to the Woolwich ... Bovis is taking on all the risk and the Woolwich isn't.
NM: It's quite interesting it's prepared to take on the risk because new builds are really perceived as those that are more likely to fall in price than more established properties aren't they?
MB: Well the market has ground to a halt so ... developers are trying to find ways in which they can get first time buyers to buy these properties and lenders are very reluctant at the moment; most of them will only lend a maximum of 75% LTV on a new build property so this is a big jump and will help first time buyers.
No. It's not intended to help FTBers; it's intended to help the builders.
At 09:10, Melanie finishes her interview with this little gem:
NM: I imagine you're still going to have parents having to help helping out first time buyers, still. Are you seeing a lot of that?
MB: Yes. The bank of mum and dad ... You need help with the deposit and then acting as guarantors on the mortgage as well (with a big smile)
Not content with bleeding the FTBers, they want to go up the food chain for the parents as well.
2. sureseam said...
Thoughts:
1) "great fool theory" in action
2) Reverting to 2.49% over base MLR after two years during which interest rates rise dramatically.
3) What's the betting that the insurance proxy goes under and the Woolwich gets the pain.
Selling these poison pills to their clientele could really damage the Bovis brand?
3. miken said...
Bovis taking on all the risk, rather than the mortgage provider. That's so funny and not sure that their shareholders will agree. Over the past 5 years Bovis share prices have halved. I'm sure they will halve again if they start taking risks like these.
B.T.W I've already seen 2 bed new flats in prime locations going from 1/4 million to 200k in the space of 6 months. Still no one wants them.
4. fjcruiser said...
Bovis offering guarantees ????LOL.
5. Mark Wadsworth said...
QG: "Not content with bleeding the FTBers, they want to go up the food chain for the parents as well."
Genius. That's the essence of Home-Owner-Ism, gradual transfers from the not-so-wealthy to the already-wealthy.
The bottom third of the population are completely priced out and have given up long ago, so now the quite-wealthy are going to be done over by the very-wealthy until in the end it's just the top decile bleeding the second-to-top decile to death (the bottom eight deciles being already bankrupted or at least hopelessly in debt) etc etc until all land and money ends up in the hands of a few hundred thousand people.
6. tenyearstogetmymoneyback said...
To me this sounds very similar to the old Mortgage Indemnity Guarantee policies which you had to take out in the Eighties.
The only diffrence is that Bovis are paying it (although presumably putting the price onto the house).
The thing that is new is the "arrangement fee". I reckon that at some time in the past the banks swapped the MIG
(which actually went towards an insurance policy) for the arrangement fee, which goes straight onto their bottom line
/ bankers bonuses and is of zero benefit to the person taking out the mortgage.
Jack C. I presume MIGs were of benefit to the buyers if they got into the unfortunate situation of being repossessed
7. Anon said...
Why don't they just make it compulsory that you have mortgage insurance? they could lump it in with house insurance, those at more risk pay more?
8. jack c said...
tenyearstogetmymoneyback - Mortgage Indemnity Guarantee's (MIG's) actually protected the lender although they were paid for by the borrower !. They were basically seen as unfair (and hence most lenders dropped them) because the borrower paid the insurance premium (MIG) but the lender derived the benefit if a default arose and the property was sold for less than the outstanding mortgage ie ultimately the borrower could still be chased for any shortfall. They do still exist but are now referred to as HLC - Higher Lending Charge.
It is also interesting that the Working Lunch presenters refer to this as "innovation" - as opposed to my simplistic way of thinking which is that prices are simply way too high !. Why else do they need the builder/developer to buy in an insurance policy so that the lender can stretch the LTV topped off with a deposit from BOMAD who also act as guarantors (property market madness)
9. quiet guy said...
@tenyearstogetmymoneyback
My understanding is that the Mortgage Indemnity Guarantee policies were designed to protect the lender instead of the borrower i.e. if the mortgage went bad, the lender collected on the policy and the borrower was still liable for the debt so it makes little difference to the borrower either way.
10. Cheekie Charlie said...
I actually worked for the repossession dept at Leeds Permanent/ Halifax in the 90s, and I can tell you even with a MIG in place the mortgage holder would still be pursued for the full amount of the shortfall if the property was in negative equity so the Insurance company could recover its loss. A genuine case of smoke and mirrors!
11. Clive34 said...
More FTBs buying new = fewer sales further up a chain. Dangerous scheme for the FTBs but actually good for bringing prices down as even less chance of second hand sellers offloading overpriced mid-range properties and above.
12. tenyearstogetmymoneyback said...
Thanks for the answers Jack C and Quiet Guy.
Having had one of these policies I knew that there was no chance of me getting any money from it,
but didn't realise I could still be chased for an outstanding amount. It sounds like having third party
car insurance that only pays out if a claim bankrupts you. At least the premium wasn't very high.
The ideal would be for someone to offer a "Jingle Mail" policy; something people get for free in
many of the USA states. However, over here, I suspect the premiums might be similar to the infamous
Escort Cosworth, where the typical insurance premium was the same as the cost of the car.
13. paul said...
Anyone taking out such a suicidal finance arrangement should ask the pertinent question "So if Bovis is taking on the risk of default, I won't be chased for any shortfall after repossession, right?"
And watch the Woolwich First Time Buyer Helper squirm.
recaptcha: fishy the
14. fallingbuzzard said...
"Shifting clients into market related investments". Thats the core of it because the only way that the banking system can recapitalise is by swapping its phony debt for kosher cash.
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