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City Fears 400,000 Will Default On Mortgages

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City fears 400,000 will default on mortgages

City experts today warned that Britain was on the brink of a mortgage crisis as tens of thousands of households struggle to repay home loans.

New figures suggest as many as 400,000 households could be failing to make mortgage repayments on time by the end of the year.

The grim warning came as Lloyds Banking Group became the latest high street bank to report a surge in the number of borrowers three or more months behind in repayments.

Lloyds reported losses of £4 billion for the first half of the year after it saw toxic debts balloon by more than five times to £13.4 billion.

Chief executive Eric Daniels blamed the losses on the shocking state of the finances at troubled HBOS, which was taken over by Lloyds in a deal orchestrated by Gordon Brown.

The group is 43 per cent owned by the taxpayer who is now nursing a heavy loss on its investment.

Lloyds said 83,153 customers were behind with repayments at the end of June — up 26 per cent in six months. Nationalised bank Northern Rock yesterday reported a 28 per cent surge to 22,141 and Royal Bank of Scotland is due to announce figures on Friday.

Many of those in trouble were similar to the high-risk sub-prime borrowers at the heart of the credit crunch and global financial crisis.

In June, the Council of Mortgage Lenders forecast 360,000 households to be more than three months behind with mortgage repayments.

But Ed Stansfield, housing expert at Capital Economics, today said that number will hit 375,000 or more.

The sudden rate of increase revealed by high street banks this week suggests it could be as much as 400,000.

Mr Stansfield said: “The big picture when you look at the state of the economy is that unemployment is rising and some of the types of lending which took place during the housing boom means that many households are now in trouble.

“The risk is that this creates a problem that matches or even exceeds that seen during the housing crash of the early Nineties.â€

The figures from Lloyds show that of the 83,153 customers struggling with their mortgages, 57,029 were low risk “prime†borrowers, 9,513 were buy-to-let borrowers, and 16,611 had subprime or self-cert loans, also known as “liar loansâ€.

Mr Daniels said: “2008 was a difficult year for the banking industry and the first half of 2009 proved no less challenging. While the environment will remain challenging, management expects the economy to stabilise in the second half and start recovering slowly in 2010.â€

Lloyds now expects house prices to fall by seven per cent this year against its earlier forecast of a 15 per cent slump.

Northern Rock yesterday reported losses of almost £725 million after it wrote off more than £600 million in bad loans.

Lloyds, for years seen as a safe bank, merged with the far more aggressive HBOS last year to save the Halifax and Bank of Scotland owner from collapse.

Barclays and HSBC, which did not require government bailouts to survive the financial crisis, this week reported combined profits of £6 billion driven by their strong investment banking businesses.

The shocking figures on mortgages came on an otherwise good day for economic news. The Halifax's house price index showed a 1.1% rise in prices last month, which followed a 1.3% increase shown by the Nationwide for July last week.

Thanks Gordon! Cheaper property is on the way because of your inept financial ability .

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Interesting statistic that 350k (ish) are 3 x months in arrears, and yet the CML have re-adjusted their repossesion forecast down.

Surely the banks are therefore not actively pursuing reposessions then?

If this is the case, how long before the dam breaks and one of the major banks decides to pursue reposessions with vigour?

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Interesting statistic that 350k (ish) are 3 x months in arrears, and yet the CML have re-adjusted their repossesion forecast down.

Surely the banks are therefore not actively pursuing reposessions then?

If this is the case, how long before the dam breaks and one of the major banks decides to pursue reposessions with vigour?

Perhaps they are just hoping for the recovery to rescue everyone in default and make up the late payments.

Or the banks are hoping people are playing the stock market to cover the mortgage?

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It's about 8 months supply at current volumes - in repos alone let alone death and divorce!

I can't see the situation improving there, what with the forecast unemployment and salary levels.

My only real worry is that maybe the banks won't repossess with any vigour - after all, are these loans not now insured by us, the taxpayers?

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Interesting statistic that 350k (ish) are 3 x months in arrears, and yet the CML have re-adjusted their repossesion forecast down.

Surely the banks are therefore not actively pursuing reposessions then?

If this is the case, how long before the dam breaks and one of the major banks decides to pursue reposessions with vigour?

the banks pledged to Gordon they would slow down the proceedings lark.

Used to be a letter at 2 months, start proceedings at 3 months and clock ticks from their.

Now, the possession time is extended and the proceedings will start at 6 months.

the dam will break, but its costing the taxpayers a fortune.

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the dam will break, but its costing the taxpayers a fortune.

Not doing the borrowers any favours either. Debt racks up, house worth less.

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The banks will be under intense Government pressure not to repossess. I think we can expect further state intervention, with the taxpayer underwriting any losses on missed payments.

Absolutely agree with that. The banks aren't totally suicidal - if they start repossessing they know there's a 99% chance of a dramatic price slump and they'll lose money on other loans. They're hoping that any losses on current bad loans will be re-imbursed by HM Govt. Still, if a "recovery" does really get underway, one or two banks will then be tempted to jump the gun, and that's when things may get really interesting.

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Absolutely agree with that. The banks aren't totally suicidal - if they start repossessing they know there's a 99% chance of a dramatic price slump and they'll lose money on other loans. They're hoping that any losses on current bad loans will be re-imbursed by HM Govt. Still, if a "recovery" does really get underway, one or two banks will then be tempted to jump the gun, and that's when things may get really interesting.

the banks are only getting interest from the government,

I dont think BTL qualify, but second homes do.

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The banks will be under intense Government pressure not to repossess. I think we can expect further state intervention, with the taxpayer underwriting any losses on missed payments.

The housing market is critical to the UK economy, Gordon has made it so. Huge wealth tied up in housing, luckily it's productive for the nation so must be saved at all costs.

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The banks will be under intense Government pressure not to repossess. I think we can expect further state intervention, with the taxpayer underwriting any losses on missed payments.

It's an interesting scenario, and one which shows we are no-where near the end of this recession.

The government insists that nationalised banks should not pursue reposession proceedings, therefore the banks still have a huge pile of shit on their books that they are not able to do anything about, therefore they lose huge amounts, therefore there is no foreseable privatisation in sight and government has to sit on a load of banks that are losing huge amounts until they become profitable.

Repeat and continue.

The only way out of this recession is for banks to recognise the shite on their books and write it down, and for those who have taken out loans they cannot afford to default.

To do anything else is just "kicking the can down the road". But hey, as long as the government can at least put up a repectable fight at the next election, who gives a crap right. :rolleyes:

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I am confused.com they say there are 178 reposessions every day.

Are the banks leaving these repos empty, or are they going to auction

Well going by what I see where I live, they are standing empty!

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The housing market is critical to the UK economy, Gordon has made it so. Huge wealth tied up in housing, luckily it's productive for the nation so must be saved at all costs.

Sure is. If you read the recent article posted somewhere on here it claimed 57% of the nations 'wealth' is tied up in residential property.

For the worlds 5th largest economy (ca 2007) it's a 'sair fecht' that we base our national economic strength upon something so wholly un-valuable to the rest of the world.

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This is going to start back feeding on its self. Taxes will have to go up to pay for the bad debts which will mean everybody will have less money. This will mean more people will have problems paying their mortgage. And if people have less money to spend more companies will go out of business more unemployed repeat the cycle.

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This is going to start back feeding on its self. Taxes will have to go up to pay for the bad debts which will mean everybody will have less money. This will mean more people will have problems paying their mortgage. And if people have less money to spend more companies will go out of business more unemployed repeat the cycle.

Ouroboros

250px-Serpiente_alquimica.jpg

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The housing market is critical to the UK economy, Gordon has made it so. Huge wealth tied up in housing, luckily it's productive for the nation so must be saved at all costs.

What have we got left to secure our ginormous indebtedness? Houses, commercial property and land, it is about the only thing that can support the colossal amounts of money that will be required to kick start or economy that has been sold down the river...all that is left is a good as useless banking structure, struggling service industry and a padded and well fed public sector. :huh:

All I can say is watch out for insurance it will be the only thing in the future that will be around to cover the cost of our reckless spending ways. ;)

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Once the dam breaks, the government will have no choice but to Nationalise the Housing Stock..... the mortgaged housing stock that is.

The "underwater homeowners" will become council tenants, and the government will have to re-house them toward lower cost, former BTL properties, while trying to sell off the more marketable properties in an attempt to recoup even a small fraction of the losses.

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Absolutely agree with that. The banks aren't totally suicidal - if they start repossessing they know there's a 99% chance of a dramatic price slump and they'll lose money on other loans. They're hoping that any losses on current bad loans will be re-imbursed by HM Govt. Still, if a "recovery" does really get underway, one or two banks will then be tempted to jump the gun, and that's when things may get really interesting.

no they're lemmings. One will start the repo's in earnest, the others will all pile in shortly after. Last time N Rock figured out if you were 3 months behind, you were going to get repossesed so started proceedings as soon as that hit to try and get as much as possible before the market dropped even further. They've been told by the gubment to hold off for 6 months. That period has just ended - I'm expecting a flood of actions coming soon.

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Bugger me, I now know as a matter of fact that house prices are set to slide. And the slide, when it begins, is going to go southwards at a rate of knots. No-one is going to buy a house in winter, they'll be lucky to pay for Christmas. No-one will ever pay for a house enough to cover the sellers' negative equity. The next half year will be grim as fook. Leverage is coming back to beat the boomtime buyers around the head big time very soon, and it was a very big leverage stick iirc.

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They've been told by the gubment to hold off for 6 months. That period has just ended - I'm expecting a flood of actions coming soon.

The .gubbins will just extend it - as far as they can.

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I don't know why the government don't just nationalize the housing losses on a personal basis. So starting with the 2007 peak, and then adding 10% a year to that, just to keep the dream alive.

They can pay for that by introducing a rental tax. So we HPC'ers can never afford a home, and the BTL lot and property owning class can sit back and reap the rewards.

After all, it was an American problem that came blowing this way. Without that, house prices would have never stopped rising!

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