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Shao Kahn

The Third Despatch From The Frontline...

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For newbies, this is third in the occasional series by me, a bored mortgage adviser at a major bank:

1) Downvaluations becoming more severe : worst case was seen today, with a place "valued" at £1.1 million being

downvalued to £350K (this was in London).

2) Each time before the BOE MPC meeting, tracker rates are withdrawn internally and then "repriced" the following day,

typically being increased from the last increment by the same amount that the repo rate was cut...

3) Massive increase of "credit score declines" caused not by adverse credit, but by the risk inherent in the lending

proposition. E.G although their mortgage calculator says that you can still get 90% LTV, NO-ONE does. 75% LTV and

below seems to be all that is accepted now.

4) Scepticism even of the most "prime" borrowers". E.G I agreed mortgage lending of £1 million a few months ago for a

man who was on a self-employed finance solicitor on £300K ltd company salary / dividends - fully provable, as I

reviewed his accounts - with an LTV of 75% for a country mansion - now, after three months and he is looking to go

ahead, they are about to decline the loan and won't even go above £800K on it...

5) BTL, whilst still officially advertised, is impossible to obtin, with the new, harser credit criteria.

6) A "specialised line" has been set up for the increasing amounts of customers in "financial difficulty"

7) Swapping from repayment to interest-only is only allowed on owner-occupier main residence mortgages of below 75%

LTV, any more than that LTV is not allowed and so they have to stay on repayment, and, finally, the best;

8) Any BTL not allowed to swap from repayment to i/o, no payment breaks allowed, all rate fees that were added to the

balance "encouraged" to pay off ASAP, and immediate possession proceedings instigated if two payments are missed.

Reduced to one payment for new-build properties unless they call in with a good reason...

There are more and I will post them as I remember them...

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The vicious downward spiral can't be far away. Where ftbs who've saved carefully can scrape together enough to get a mortgage deal on a former BTL property at a knockdown price.

Once completed, they then move into their new home leaving another BTL LL with a possibly unlet property and subsequent possession order. Then the spiral continues deeper and deeper. I reckon it'll be at least Mar/April until this cataclysm is picked up by the media. ie ftbs back in the market in some way doesn't mean the problems are over.

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Wow - interesting stuff. Great reduction.

Just wondering what sort of person would not call in if they missed a payment. I dont understand that, surely they cant forget? Surely they set up direct debits etc from their bank accounts and dont rely on writing a check each month?

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Wow - interesting stuff. Great reduction.

Just wondering what sort of person would not call in if they missed a payment. I dont understand that, surely they cant forget? Surely they set up direct debits etc from their bank accounts and dont rely on writing a check each month?

If a direct debit failed, one could conceivably fail to notice.

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Thx for the frontline info, very interesting.

You say LTV are now at 75% which is excellent news. What would you say is the maximum someone can borrow with relation to their salary, are we less than 4.0 x yet?

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For newbies, this is third in the occasional series by me, a bored mortgage adviser at a major bank:

1) Downvaluations becoming more severe : worst case was seen today, with a place "valued" at £1.1 million being

downvalued to £350K (this was in London).

2) Each time before the BOE MPC meeting, tracker rates are withdrawn internally and then "repriced" the following day,

typically being increased from the last increment by the same amount that the repo rate was cut...

3) Massive increase of "credit score declines" caused not by adverse credit, but by the risk inherent in the lending

proposition. E.G although their mortgage calculator says that you can still get 90% LTV, NO-ONE does. 75% LTV and

below seems to be all that is accepted now.

4) Scepticism even of the most "prime" borrowers". E.G I agreed mortgage lending of £1 million a few months ago for a

man who was on a self-employed finance solicitor on £300K ltd company salary / dividends - fully provable, as I

reviewed his accounts - with an LTV of 75% for a country mansion - now, after three months and he is looking to go

ahead, they are about to decline the loan and won't even go above £800K on it...

5) BTL, whilst still officially advertised, is impossible to obtin, with the new, harser credit criteria.

6) A "specialised line" has been set up for the increasing amounts of customers in "financial difficulty"

7) Swapping from repayment to interest-only is only allowed on owner-occupier main residence mortgages of below 75%

LTV, any more than that LTV is not allowed and so they have to stay on repayment, and, finally, the best;

8) Any BTL not allowed to swap from repayment to i/o, no payment breaks allowed, all rate fees that were added to the

balance "encouraged" to pay off ASAP, and immediate possession proceedings instigated if two payments are missed.

Reduced to one payment for new-build properties unless they call in with a good reason...

There are more and I will post them as I remember them...

Thanks for posting - all really interesting to hear from those at the coal face.

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Wow - interesting stuff. Great reduction.

Just wondering what sort of person would not call in if they missed a payment. I dont understand that, surely they cant forget? Surely they set up direct debits etc from their bank accounts and dont rely on writing a check each month?

In the past (i.e in the "boom" years), from the lender's point of view, the missed payment was always noticed, but, how can we say, was not immediatety "acted upon" - arrears letters would go out after three monts of missed payments.

This kind of set-up, though, is now long-gone - letters go out straight away.

With regard to "SoonNotAChainRetailer"'s post, they seem to be most aggressively looking to repossess BTL newbuild flats in Sheffield, Leeds & Liverpool. The south seems to be given a litte more leeway - although not much!

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For newbies, this is third in the occasional series by me, a bored mortgage adviser at a major bank:

There are more and I will post them as I remember them...

As usual very insightfull and usefull post matey - thanks

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The vicious downward spiral can't be far away. Where ftbs who've saved carefully can scrape together enough to get a mortgage deal on a former BTL property at a knockdown price.

Once completed, they then move into their new home leaving another BTL LL with a possibly unlet property and subsequent possession order. Then the spiral continues deeper and deeper. I reckon it'll be at least Mar/April until this cataclysm is picked up by the media. ie ftbs back in the market in some way doesn't mean the problems are over.

First time buyers with 25% deposit? Not many well have that. Bank of Mum and Dad (MEWing to help young Johnny onto the ladder) will no longer happen, as parents start to feel less financially secure themselves.

The downward spiral will most likely occur due to job losses, forced sales and further job losses etc.

Let's face it: this time is very very bad. We had 12-15% reduction without a recession. Another 30% should be about right IMHO.

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1) Downvaluations becoming more severe : worst case was seen today, with a place "valued" at £1.1 million being

downvalued to £350K (this was in London).

Now that one cheered me up considerably!

When I look on Rightmove and see not even at all nice 1 bed flats in horrible parts of Hackney with asking prices of a quarter of a million quid I tend to get a bit down :(

That sort of devaluation would bring them in line with what I was looking at in 2001 ish (Circumstances denied me of the cash I thought I had coming at the time, but easy come, easy go).

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Great bulletins SK. I especially like the following quote though I don't think the :o smiley is really big enough to do it justice...

1) Downvaluations becoming more severe : worst case was seen today, with a place "valued" at £1.1 million being

downvalued to £350K (this was in London).

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Thx for the frontline info, very interesting.

You say LTV are now at 75% which is excellent news. What would you say is the maximum someone can borrow with relation to their salary, are we less than 4.0 x yet?

At the decision in principle stage, then the higher the income, the more you can get, e.g if you were lucky enough to be on say £300K, the you can still get £1.5 million.

BUT - I say this is at the DIP stage. Underwriting then takes place. See my example of the lawyer who was on about £300 K who was in the end only allowed to have £800K. This was due to a risk assessment after the application was received. In this instance, he was buying a country mansion which the underwriting section decided could lose hundreds of thousands over the next few years. Thus, despite his income, his lending - on this property - was thoroughly down-revised.

There are many other factors that determine the eventual amount of lending that can be agreed. Like that Lloyds thread - they may well still offer 5x salary on their onlone calculator - but no-one gets it in the end.

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Now that one cheered me up considerably!

When I look on Rightmove and see not even at all nice 1 bed flats in horrible parts of Hackney with asking prices of a quarter of a million quid I tend to get a bit down :(

That sort of devaluation would bring them in line with what I was looking at in 2001 ish (Circumstances denied me of the cash I thought I had coming at the time, but easy come, easy go).

That's the deception of "asking prices" - the degrees between "asking prices" and "actual risk-assessed valuations" are becoming more and more apparent nowadays - it is causing many, many chains to collapse.

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That's the deception of "asking prices" - the degrees between "asking prices" and "actual risk-assessed valuations" are becoming more and more apparent nowadays - it is causing many, many chains to collapse.

Thanks from me too for all this SK.

Is this part of TCF? :D

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With regard to "SoonNotAChainRetailer"'s post, they seem to be most aggressively looking to repossess BTL newbuild flats in Sheffield, Leeds & Liverpool. The south seems to be given a litte more leeway - although not much!

Fascinating that they're keen to get their hands on Northern city newbuild flats, you'd have thought they'd want to do anything possible to avoid seizing them.

First time buyers with 25% deposit? Not many well have that. Bank of Mum and Dad (MEWing to help young Johnny onto the ladder) will no longer happen, as parents start to feel less financially secure themselves.

The downward spiral will most likely occur due to job losses, forced sales and further job losses etc.

Let's face it: this time is very very bad. We had 12-15% reduction without a recession. Another 30% should be about right IMHO.

I agree that the numbers with good deposits saved will be minimal, but there will be some. The point I'm making really is that this time you have the problem that any renters who go into the market to buy will most likely leave an over-extended BTL LL with a vacant property and a mortgage he can't service. So basically, getting ftbs back into the market isn't the panacea for the economy they think it is.

It's kind of where we're at now, I suppose, everything the govt tries to do to have a positive effect on the economy has an at least equal and opposite effect at some point down the line.

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Fascinating that they're keen to get their hands on Northern city newbuild flats, you'd have thought they'd want to do anything possible to avoid seizing them.

I agree that the numbers with good deposits saved will be minimal, but there will be some. The point I'm making really is that this time you have the problem that any renters who go into the market to buy will most likely leave an over-extended BTL LL with a vacant property and a mortgage he can't service. So basically, getting ftbs back into the market isn't the panacea for the economy they think it is.

It's kind of where we're at now, I suppose, everything the govt tries to do to have a positive effect on the economy has an at least equal and opposite effect at some point down the line.

I agree with that. I think that whatever the government do will be subject to the law of unintended consequences.

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First time buyers with 25% deposit? Not many well have that. Bank of Mum and Dad (MEWing to help young Johnny onto the ladder) will no longer happen, as parents start to feel less financially secure themselves.

The downward spiral will most likely occur due to job losses, forced sales and further job losses etc.

Let's face it: this time is very very bad. We had 12-15% reduction without a recession. Another 30% should be about right IMHO.

With regard to MEWing in general - what I have noticed is:

The DESIRE to MEW is still as high as it ever was. We still have as many people as ever wanting to do this.

But, the ACCEPTANCE of MEW applications has dropped off a cliff.

Why? Nowadays, credit scoring isn't just a question of "if you have a high enough score on Experian, you'll be fine, no questions asked" like it used to be, now, it does take into account this, but also comes with a fully-formed overall risk assessment built in.

Which means, many many disappointed would-be-MEWers.

Which is leading to rising defaults on unsecured debt. Which, means when you come to re-mortgage, you will have a default on your credit score, which means, you won't get a remortgage. Which is fine, as long as SVR's are so low. But, then a lot of people want to ReMTG - they want to "top up". With a default, you won't be able to do this with your existing or new lender...

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Thanks from me too for all this SK.

Is this part of TCF? :D

Perversely, if TCF is adhered to correctly, then it reduces overall secured lending, due to the requirement of having proper risk assessment procedures, which in theory is meant to offer the customer more choice and protection, but which actually gives them more protection but less choice - at least this is the way in which it seems to operate at my place - a curious kind of Ouroboros - and probably Gordos worst nightmare! :lol:

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How does it work for the home owner getting a remorgage, if the bank revalues the house lower then the existing morgage value?

Also for the first time buyer, if they agree a price to buy a home, but the bank value it lower than the agreed price, what happens then.

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For newbies, this is third in the occasional series by me, a bored mortgage adviser at a major bank:

1) Downvaluations becoming more severe : worst case was seen today, with a place "valued" at £1.1 million being

downvalued to £350K (this was in London).

2) Each time before the BOE MPC meeting, tracker rates are withdrawn internally and then "repriced" the following day,

typically being increased from the last increment by the same amount that the repo rate was cut...

3) Massive increase of "credit score declines" caused not by adverse credit, but by the risk inherent in the lending

proposition. E.G although their mortgage calculator says that you can still get 90% LTV, NO-ONE does. 75% LTV and

below seems to be all that is accepted now.

4) Scepticism even of the most "prime" borrowers". E.G I agreed mortgage lending of £1 million a few months ago for a

man who was on a self-employed finance solicitor on £300K ltd company salary / dividends - fully provable, as I

reviewed his accounts - with an LTV of 75% for a country mansion - now, after three months and he is looking to go

ahead, they are about to decline the loan and won't even go above £800K on it...

5) BTL, whilst still officially advertised, is impossible to obtin, with the new, harser credit criteria.

6) A "specialised line" has been set up for the increasing amounts of customers in "financial difficulty"

7) Swapping from repayment to interest-only is only allowed on owner-occupier main residence mortgages of below 75%

LTV, any more than that LTV is not allowed and so they have to stay on repayment, and, finally, the best;

8) Any BTL not allowed to swap from repayment to i/o, no payment breaks allowed, all rate fees that were added to the

balance "encouraged" to pay off ASAP, and immediate possession proceedings instigated if two payments are missed.

Reduced to one payment for new-build properties unless they call in with a good reason...

There are more and I will post them as I remember them...

Excellent info - please keep it coming. I have no further questions beyond those that have already been posed and you have answered. I just wanted to thank you for taking the time to keep us informed.

There appears to be a big difference between what is advertised as available and what is realisable as far as the would-be borrower is concerned.

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  • 284 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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