Banks Force Up Average Deposits To 50%

[okaycuckoo]

Who the hell earns 13k a year?

Lots and lots of people. And many of them have a £150,000 mortgage on a two-bed apartment plus a list of unsecured creditors as long as an orangutan's arm.

Don't worry, you'll be paying for all of it - whether through MIR or The Great Bank Robbery-Bailout. You can afford it, being a high earner.

[eric pebble]

Are you suggesting that Mr Applegarth Snr should have (to use a banking pun) made a well timed withdrawl and deposited his wad elsewhere?

Yup.

[eric pebble]

Somebody's Gran died I reckon.

Inheritance Tax?

[Mrs Bear]

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

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........

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

If all those came straight off the top of your head, with no help from Roget, I salute you.

[Guest Parry aka GOD]

If all those came straight off the top of your head, with no help from Roget, I salute you.

More likely MS Word Thesaurus.

[Wait & See]

Lots and lots of people. And many of them have a £150,000 mortgage on a two-bed apartment plus a list of unsecured creditors as long as an orangutan's arm.

Don't worry, you'll be paying for all of it - whether through MIR or The Great Bank Robbery-Bailout. You can afford it, being a high earner.

It's starting to look like 24k is not the average salary anymore. Your a high earner if your on more than 20k a year. WTF!!

Everyones wasted now. The NuLabour holocaust is nearly complete.

[awaytogo]

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?!

The lenders know property prices are still to high, they are lending now with the risk of loss being on the borrower.

[leicestersq]

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

I am not sure that banks can force the price of anything down deliberately.

But if house prices do fall by 50%, the banks wont lose anything as long as all the borrowers have more than 50% equity in the initial loan, it will be the borrower that takes that particular loss.

I think that the banks expect interest rates to rise, and they are using this opportunity to increase the total amount of equity that all the mortgagees in the UK have. I would be doing the same thing if I ran a bank.

[OnlyMe]

The lenders know property prices are still to high, they are lending now with the risk of loss being on the borrower.

Exactly. House prices are double what is sustainable.

The more propping the bigger the job/industry and service sector job losses will be.

Many companies, in light of the taxes that will be required to pay for the nihilistic bankers economy will be looking to minimise their exposure to this country.

[Rachman]

So that makes it better then does it, with the falls in values that total loan is now 75% secured and 50% unsecured and if the borrower defaults on the lender the total loss to the lender is 40% of the total money lent

It looks like the lenders are now lending more sensible limiting their risk.

I had understood the NRK together was 95% and up to 30% unsecured.

In any event, I've got a good idea, I'll take the risk away from the bank of losing the capital - I will sell it to a rock solid offshore company, let's call it Granite. I'll then get all of the capital back plus a lot. All I have to worry about then is people being able to make their loan payments (for which I am merely a cashier). The risk to NRK was never the value of the homes, nor the amount of money owed, nor even the payment of those loans. NRK's problem was wholesale funding to replace the short term funding they already had. They could not write any more business, the markets got wind and refused to let them sell off any more portfolio to get more capital in to lend (no-one would buy the paper in 'Granites' any more).

And, lo, their model was buggered.

Granite was massively exposed until the government guaranteed the whole lot - then it was Krug all round.

[Neil B]

I love the example....:-)

£180k deposit by 25. Fantastic! , given probably only 3-4 years out of University (I'm presuming graduates by the solid £95k combined income), and the savings habits of most 22-25 year olds, I somehow doubt even 1/10th of the £180k deposit has come from 'savings'.... Clearly the bank saw right through that.

£400k property at 25 anyway, what is the rush with some people at the moment?

... Also they (the couple) probably had other debts and banks take this into consideration. I think this sums up the attitude of young people these days - I want it all and I want it now.

[Rachman]

... Also they (the couple) probably had other debts and banks take this into consideration. I think this sums up the attitude of young people these days - I want it all and I want it now.

or perhaps they have been working their nuts off for 5 years and have managed to earn £5K a month between them, and in the last 5 years (60 months) have managed to live on only £2,000 a month ish (say by living with someone's parents). And so they have the £180K in cash.

People don't know, but want to surmise and think it must be 'so unfair'.

[Deleriad]

I had understood the NRK together was 95% and up to 30% unsecured.

That's right. You used the unsecured element to pay your deposit, moving costs, refurbishment costs and, for those foolish enough, a nice car or holiday in Ibiza. At the time people argued that this was no different to buyers either borrowing from their parents or taking out credit from other avenues.

There was one extra element though. The loan element was more like a credit card with a very high borrowing limit in that you could increase your loan size up to its 30% maximum just by asking or borrow back any repayments you had already made to it at any time. Basically they were trying to tempt people into dipping further and further into easy access debt. It was a loan shark product.

[Agentimmo]

or perhaps they have been working their nuts off for 5 years and have managed to earn £5K a month between them, and in the last 5 years (60 months) have managed to live on only £2,000 a month ish (say by living with someone's parents). And so they have the £180K in cash.

People don't know, but want to surmise and think it must be 'so unfair'.

You could be right. The couple could be a pair of serial savers.

But this example is really p*ssing in wind as far as the housing market is concerned. This couple must be representative of < 1% of all new buyers. Maybe the only couple like this in the whole country, given the current low volumes of transactions? (Assuming they have saved and saved and not counting on a dead granny for the inheritance ).

They are about to pump £180K of cash into a market that the experts say will fall by 5-10% this year. Non-experts think even more.

Good luck to them if they really exist..........

[Guest KingCharles1st]

QUOTE (Charterhouse @ Aug 9 2009, 12:53 PM) *

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.

----------------------------------------------

WTF? (Laughing Gnome)

----------------------------------------------

I'm sure if this is a Charterhouse post it is correct.

So if you only need 50% LTV, the interest is double that of a loan needing 90% LTV

Hows that then?

Sorry, it's been so long since I have looked at that sort of low LTV I just don't get it.

Edited August 11, 2009 by KingCharles1st

[Tiger Woods?]

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.

Yes, the destruction of the middle class is nearing completion...

[interestrateripoff]

Who the hell earns 13k a year?

Lots of people, however due to your lack of knowledge perhaps you should move into organising liar loans for people.

Charterhouse - So sir how much do you earn?

Customer - £13k a year

Charterhouse - Nonsense no one earns that amount you must be on at least £26k, I'll put that down for you.

Edited August 11, 2009 by interestrateripoff