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uncle_monty

Banks Force Up Average Deposits To 50%

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http://www.timesonline.co.uk/tol/money/pro...icle6788443.ece

From The Sunday Times

August 9, 2009

Banks force up mortgage deposits to 50%

Lenders’ are supposedly lending more than ever, but the average loan relative to value is still high, preventing a market rally

High-street banks are squeezing borrowers to such an extent that the average deposit on new loans can now be more than 50%, in the latest threat to the housing market recovery.

HSBC, which doubled its lending in the first half of the year, revealed in its results last week that its average loan relative to the value of the property fell to 49.9% in 2009 — down 9% compared with 2008.

This means the average deposit — or equity — supplied was more than 50%, or £100,000 on the typical £200,000 property.

Barclays’ average loan relative to value (LTV) fell to 46% in the first six months — 5% lower than the same period last year.

Lenders generally advertise their best deals as requiring a 40% deposit or equity but the results suggest that may not be enough.

The figures come in a week when the banks claimed they were lending billions to households and businesses to kick-start the economy. However, the small print of their accounts reveals a £26 billion gap between the funds they say they lent out and the reality. While Barclays said it lent £8.5 billion to households in the first half, net new mortgage lending (after redemptions) was just £2.2 billion. The rest was lending through its Barclaycard arm.

Lloyds said it lent £18 billion to borrowers in the first half but the net figure was just £1 billion, while Royal Bank of Scotland boasted of £7.2 billion of lending when in fact the net figure was just £4.1 billion.

HSBC said the main reason for the drop in the amount it will lend was fewer applications from borrowers with small deposits, but Sunday Times readers with enough equity to get the best deals have complained of being turned away.

First-time buyers James Newbound and his girlfriend, Alex, of London, both 25, had a combined income of £95,000 and a deposit of £180,000 — or 45% for a property worth £400,000 — made up of savings and money from their families. They applied for a two-year fix from HSBC — which says it requires a 40% deposit — but were refused.

Adrian Bell, an Anglican clergyman from Fakenham, Norfolk, applied to HSBC for a mortgage with a 40% deposit on a three-bedroom home in Norwich, where he plans to retire, valued at £157,000. He was turned down by both HSBC and Abbey.

He said: “We were accepted on the Friday for a mortgage only to be told on the Monday that the offer had been withdrawn. No reason was given, even though we were classed as a customer . . . with a perfect financial track record.

“Having been with HSBC for over 25 years I was amazed that we were refused with a £62,000 deposit. It took almost a year to obtain our retirement home, which we could well have lost by the delay.â€

The moves will worry thousands coming up to remortgage who think that, with decent equity, they will have access to the best deals. They are being urged to pay off as much of their debt as possible.

The Royal Institution of Chartered Surveyors (Rics), which last week said it thought house prices would end the year higher, is nevertheless worried that mortgage finance could derail the recovery.

Analysts say banks are pricing mortgages too high, deterring consumers from applying. Seema Shah of Capital Economics, the consultancy, said: “The extra cost of borrowing with a 10% deposit relative to 25% is two percentage points compared with just 0.07 points a year ago.â€

Banks consider mortgage lending a high risk business, given that house prices remain far above historic norms. Who'd have thought it?! :blink:

Edited by uncle_monty

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Banks consider mortgage lending a high risk business, given that house prices remain far above historic norms. Who'd have thought it?! :blink:

HA!! A bit of a change from the days of LIAR LOANS!! :P

Of course - LIAR LOANS are essentially what ruined the economy, and er..... what ruined, abolished, annihilated, blasted, blighted, broke, consumed, demolished, devastated, devoured, disintegrated, eradicated, felled, gutted, incinerated, killed, lost, obliterated, overwhelmed, ravaged, razed, ruined, sacked, shattered, smashed, tore down, totaled, wasted, wiped out, and wrecked the "housing market" as well........ :rolleyes:

So it's a case of - what goes round, comes round....

Edited by eric pebble

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http://www.timesonline.co.uk/tol/money/pro...icle6788443.ece

From The Sunday Times

August 9, 2009

Banks force up mortgage deposits to 50%

Lenders’ are supposedly lending more than ever, but the average loan relative to value is still high, preventing a market rally

OH RLY????

British banks dramatically scaled back new mortgage lending in the first half of the year, issuing little more than half the sum they lent in the same period a year earlier.

http://www.telegraph.co.uk/finance/persona...early-40bn.html

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I read somewhere else that most buyers were getting their cash deposits from parents.

That must be parents life savings. Its a shame.

They will lose the lot as I expect house prices to continue falling in the Autumn.

Hope they have safe pensions.

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I read somewhere else that most buyers were getting their cash deposits from parents.

That must be parents life savings. Its a shame.

They will lose the lot as I expect house prices to continue falling in the Autumn.

Hope they have safe pensions.

But your home is your pension isn't it ????

That seems to be the drivel that was quoted to me a few times in the last 6 months ......

Once again people don't understand the effect that correlation can have on their lives. If your largest asset is your house and your second largest asset is your savings, lending your savings to someone to buy a house seems like a really dumb idea to me .....

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HA!! A bit of a change from the days of LIAR LOANS!! :P

Of course - LIAR LOANS are essentially what ruined the economy, and er..... what ruined, abolished, annihilated, blasted, blighted, broke, consumed, demolished, devastated, devoured, disintegrated, eradicated, felled, gutted, incinerated, killed, lost, obliterated, overwhelmed, ravaged, razed, ruined, sacked, shattered, smashed, tore down, totaled, wasted, wiped out, and wrecked the "housing market" as well........ :rolleyes:

So it's a case of - what goes round, comes round....

i totally concur, the banks are going to force down property prices its just a matter of when, the problem is the govt they need to slash property prices now by 50% if not it will fall even further as they are slowly wrecking this country , companies going bust , mass unemployment , then you have got the companies that are relocating to cheaper foriegn climates if they don't do something soon there will be nothing left in this country and then nobody will have the money or jobs to fuel the property market, and before you start ranting it would not really benefit me as my mortgage is paid off i would quite happily cut the price of my property 50% if the one i want to buy falls by the same amount

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Do some analysis though.

Let's say we assume that banks can get themselves comfortable with the fact that house prices will not fall another 50%, and they can get themselves comfortable with lending at say 5% at 50% LTV.

In fact, they are charging say 6%.

The interest rate that they are charging on higher LTVs is therefore as follows, i.e. the borrowing rate on the additional lending beyond 50% LTV:-

60.0% LTV 15.00%

70.0% LTV 10.00%

80.0% LTV 8.33%

90.0% LTV 7.50%

100.0% LTV 7.00%

It's pretty clear that (assuming these assumptions are reasonable, which they seem to be...) lending at a 70% LTV or better is pretty damn sensible and safe. 80% still looks okay, actually, while 90% and 100% are a bit skinny marginwise.

I think people have a pretty good point saying that the banks are taking the p1ss atm.

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I suspect this will start to cause increased demand in the rental market (anyone staying with parents who needs their own place) thus pushing the rents back up to pre-2008 levels.. Great.

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Don't most people with mortgages have average equity of at least 50% (assuming 25 year lengths) - assuming they bought 10 years ago or more?

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Don't most people with mortgages have average equity of at least 50% (assuming 25 year lengths) - assuming they bought 10 years ago or more?

Most people remortgage every few years, and you may have heard of mortgage equity withdrawal? :D

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Most people remortgage every few years, and you may have heard of mortgage equity withdrawal? :D

Yup - a total scam -- pure evil imo - yet another one from the Moneylenders....

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I suspect this will start to cause increased demand in the rental market (anyone staying with parents who needs their own place) thus pushing the rents back up to pre-2008 levels.. Great.

countering that will be the unsolds offered out for rental, already happening to a small extent round my way (whole houses mostly, not so much in the way of flats, oddly enough)

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Although having read David Smith's usual bull in the same paper you'd have thought otherwise:

...the point remains. People have to live somewhere, so if not enough homes are being built, then housing will become more expensive, however much people would wish it otherwise.

http://property.timesonline.co.uk/tol/life...icle6741860.ece

People say, rightly, that volumes remain low. But they were low when prices were falling. In that thin market, demand was severely curtailed by the loss of two-thirds of mortgage funding. In the thin market we have now, mortgage availability is improving and there are more buyers than sellers.

http://business.timesonline.co.uk/tol/busi...icle6788548.ece

So there you have it, folks. Supply and demand. If only I'd thought of that. It's so simple. HPC cancelled. <_<

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Yup - a total scam -- pure evil imo - yet another one from the Moneylenders....

Well, if the equity is real, and you are going to use the money for something semi-sensible then I don't see the issue, borrowing secured is much cheaper than any other form of loan. But the belief that this money was in some way "free" and was real money rather than just more debt was a total disgrace. And the way that the nation got addicted to spending that cash on frivolity was incredibly stupid.

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Guest Parry aka GOD
Well, if the equity is real, and you are going to use the money for something semi-sensible then I don't see the issue, borrowing secured is much cheaper than any other form of loan. But the belief that this money was in some way "free" and was real money rather than just more debt was a total disgrace. And the way that the nation got addicted to spending that cash on frivolity was incredibly stupid.

Correct.

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Well, if the equity is real, and you are going to use the money for something semi-sensible then I don't see the issue, borrowing secured is much cheaper than any other form of loan. But the belief that this money was in some way "free" and was real money rather than just more debt was a total disgrace. And the way that the nation got addicted to spending that cash on frivolity was incredibly stupid.

Even worse was the 125% mortgage.

I knew someone who boasted, not only were they now a home owner with no money down, they also had 30K to spend as if it was cash in the bank.

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Even worse was the 125% mortgage.

I knew someone who boasted, not only were they now a home owner with no money down, they also had 30K to spend as if it was cash in the bank.

There was no such thing as a 125% mortgage. It was 100% secured and a 25% unsecured loan. I believe the highest that was ever written was for around 118% at the time.

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Guest Parry aka GOD
There was no such thing as a 125% mortgage. It was 100% secured and a 25% unsecured loan. I believe the highest that was ever written was for around 118% at the time.

Well I do know a lass that got 130% in late 2007. The additional money was to clear CC debts.

Spoke to her recently, she's in a whole trapped world of hurt. I did tell at the time, but no listen.

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There was no such thing as a 125% mortgage. It was 100% secured and a 25% unsecured loan. I believe the highest that was ever written was for around 118% at the time.

NR offered the unsecured loan at the same rate of interest as the secured bit. So i dont see what there was much difference.

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The Royal Institution of Chartered Surveyors (Rics), which last week said it thought house prices would end the year higher, is nevertheless worried that mortgage finance could derail the recovery.

And there was me thinking that it was "mortgage finance" that created the bubble and caused the crash!!

So is that the same "mortgage finance" that will continue to cause havoc in the UK until property prices fall to sensible and sustainable levels?

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Even worse was the 125% mortgage.

I knew someone who boasted, not only were they now a home owner with no money down, they also had 30K to spend as if it was cash in the bank.

Sounds like something out of an Ocean Finance tv advert.

"We've got more going out than we've got coming in"

"Let's buy a brand new car"

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