2 Years Of 25% Deposits...

[TheCountOfNowhere]

Just had a thought.

We've had 2 years of the banks giving out great mortgages deals to people with 25%+

So, say, the average selling price is about 170K.

20,000 new mortgages per month for 2 years.

That would mean they've taken in about £20 Billion.

These are just estimate/guesses on my part, anyone got any better/real figures ?

Even if you double the sale price and double the new mortgages the figure will be about £80 Billion

Not nearly enough to whack up interest rates and start repossesing is it ?

That's peanuts compared to their massive debts/government bail out !!!!!

Put's the whole scam into context I think.

Yikes

P.S. Edited to revise figures.

Edited July 1, 2010 by TheCountOfNowhere

[Confounded]

Just had a thought.

We've had 2 years of the banks giving out great mortgages deals to people with 25%+

So, say, the average selling price is about 170K.

20,000 new mortgages per month for 2 years.

That would mean they've taken in about £20 Billion.

These are just estimate/guesses on my part, anyone got any better/real figures ?

Even if you double the sale price and double the new mortgages the figure will be about £80 Billion

Not nearly enough to whack up interest rates and start repossesing is it ?

That's peanuts compared to their massive debts/government bail out !!!!!

Put's the whole scam into context I think.

Yikes

P.S. Edited to revise figures.

Interestingly I was pondering the same thing recently (i.e have they taken in enough to give themselves scope to drop the market again). I read recently that the average deposit for house purchases over the last few years have been over 50%.

I went on the figures of 30k mortgages per month for 24 months and came up with a figure of around £60billion

Enough new funds to allow a drop of a 4% of percent (based on £1.5 trillion of mortgage debt)

I know it is not that simple but as you say it does put the mess we are into some perspective.

[TheCountOfNowhere]

Interestingly I was pondering the same thing recently (i.e have they taken in enough to give themselves scope to drop the market again). I read recently that the average deposit for house purchases over the last few years have been over 50%.

I went on the figures of 30k mortgages per month for 24 months and came up with a figure of around £60billion

Enough new funds to allow a drop of a 4% of percent (based on £1.5 trillion of mortgage debt)

I know it is not that simple but as you say it does put the mess we are into some perspective.

Yeah, cant say for sure what the real figures are but even if you double this, dobule that, then you are still dealing with figures that are £10s of billions.

The BoE was printing 20 Billion a month at one point to keep the scam going and the special liquidity scheme keeps going.

The deficit is 150 Billion.

The debt is 1 Trillion.

The interest on the debt is staggering.

I've said it a few times now...it's a long 18 year japanese type crash, that's the only way they will save the banks and keep "their" society going.

Makes me think of the decline of Rome.

As you said, put's it into perspective.

[MinceBalls]

Interestingly I was pondering the same thing recently (i.e have they taken in enough to give themselves scope to drop the market again). I read recently that the average deposit for house purchases over the last few years have been over 50%.

I went on the figures of 30k mortgages per month for 24 months and came up with a figure of around £60billion

Enough new funds to allow a drop of a 4% of percent (based on £1.5 trillion of mortgage debt)

I know it is not that simple but as you say it does put the mess we are into some perspective.

I don't understand how this works....

If I buy a house for 200K but put a deposit of 50K I need a loan / mortgage of 150K from the bank.

I don't give my bank 50K do I? I just need 25% less than the asking price in order to make the purchase.

The benifit to the bank is that if house prices fall by up to 25% they don't take a hit.

The banks asset is not the 25% deposit that they never had it is their LOAN book - ie: the asset is the interest they recoupe on the loan.

How does what you have both said make any sense? I'm happy to be corrected.

[VeryMeanReversion]

Banks don't get to keep the deposit, they just lend out the balance.

Or are you referring to the fractional reserves effect?

[MinceBalls]

Banks don't get to keep the deposit, they just lend out the balance.

Or are you referring to the fractional reserves effect?

As I said above. I have noticed that there seems to be lots of people on here that think the required deposit goes to the bank.

A deposit is simply a way of the bank taking less risk if house prices go down (their loan remains less than the value of the property)

The asset is the loan

[TheCountOfNowhere]

Of course the banks dont get to keep the deposit, they get to keep the house.

Same difference !!!! It's their balance sheets we're talking about.

You're not a home owner till it's paid off.

Them that's on interest only mortgages are only renters that have paid masisve deposits for the privellege.

The question is how secure are they to:

whack up interest rates,

make more money

reposses them that are over-stretched,

force down prices,

start lending to FTBs again

get back to normal.

Edited July 1, 2010 by TheCountOfNowhere

[VeryMeanReversion]

Of course the banks dont get to keep the deposit, they get to keep the house.

That's more like it, I thought you had gone a bit mad but didn't like to mention it.

So your point is that the more recent borrowers have significant equity so are in a position to be gouged via higher interest rates and repos. That's better.

VMR.

[MinceBalls]

Of course the banks dont get to keep the deposit, they get to keep the house.

Same difference !!!! It's their balance sheets we're talking about.

You're not a home owner till it's paid off.

Them that's on interest only mortgages are only renters that have paid masisve deposits for the privellege.

The question is how secure are they to:

whack up interest rates,

make more money

reposses them that are over-stretched,

force down prices,

start lending to FTBs again

get back to normal.

Question: if a bank loans 50% of a 200K mortgage (so they loan 100K) what do they put on their balance sheet? The whole 200K? Or the 100K loan secured against an asset?

[Confounded]

That's more like it, I thought you had gone a bit mad but didn't like to mention it.

So your point is that the more recent borrowers have significant equity so are in a position to be gouged via higher interest rates and repos. That's better.

VMR.

Bingo.

[Fairies Wear Boots]

You can't do this sort of calculation can you?

Someone has 50K in bank for years. Buys house with mortgage, bank gains (?) 50K in equity, but bank loses 50K on deposit.

[muggle]

Where does the person who sold the house put the money from the sale (including the deposit) ?

[NEO72]

Don't forget about those good little mortgage slaves overpaying for the past few years too - giving the banks even more wriggle room when prices continue falling

When people (ok, not on here) complain that they should be lending more/higher ltvs, why should they? They get to charge high interest rates relative to base rate, and the punters are giving them a nice 25% cushion (average deposit for the past couple of years) against any falls.

[TheCountOfNowhere]

That's more like it, I thought you had gone a bit mad but didn't like to mention it.

So your point is that the more recent borrowers have significant equity so are in a position to be gouged via higher interest rates and repos. That's better.

VMR.

I'm not exactly sure i'm not mad

Yes, sorry, I didnt quite get that point across, but you're spot on.

[MinceBalls]

Where does the person who sold the house put the money from the sale (including the deposit) ?

The 'money' doesn't exist. Its some numbers on your account.

[Georgia O'Keeffe]

Where does the person who sold the house put the money from the sale (including the deposit) ?

Cantonal Bank!

[Timm]

Where does the person who sold the house put the money from the sale (including the deposit) ?

They could:

1. Buy another house.

2. Pay off their mortgage.

3. Put the money on deposit in a bank.

4. Buy some stuff.

[TheCountOfNowhere]

They could:

1. Buy another house.

2. Pay off their mortgage.

3. Put the money on deposit in a bank.

4. Buy some stuff.

They could spent 1/3 of it on booze, 1/3 of it on loose women then squander the rest.

[RichB]

Question: if a bank loans 50% of a 200K mortgage (so they loan 100K) what do they put on their balance sheet? The whole 200K? Or the 100K loan secured against an asset?

I rather suspect that it would be as follows:

Item 1: A AAA* rated loan for 100k @ 5% worth 200k when repaid over 25 years.

Item 2: A property worth 200k to be assigned to the customer in 25 years

By any reasonable reckoning thats at least £400k they have on their books for now...

[MinceBalls]

I rather suspect that it would be as follows:

Item 1: A AAA* rated loan for 100k @ 5% worth 200k when repaid over 25 years.

Item 2: A property worth 200k to be assigned to the customer in 25 years

By any reasonable reckoning thats at least £400k they have on their books for now...

Clever them.

Or stupid.

Yes, that's right, just plain stupid.

[Tired of Waiting]

Just had a thought.

We've had 2 years of the banks giving out great mortgages deals to people with 25%+

So, say, the average selling price is about 170K.

20,000 new mortgages per month for 2 years.

That would mean they've taken in about £20 Billion.

These are just estimate/guesses on my part, anyone got any better/real figures ?

Even if you double the sale price and double the new mortgages the figure will be about £80 Billion

Not nearly enough to whack up interest rates and start repossesing is it ?

That's peanuts compared to their massive debts/government bail out !!!!!

Put's the whole scam into context I think.

Yikes

P.S. Edited to revise figures.

I read in a BoE or FSA report recently that the UK banks can stand a maximum loss of 150bn. It was a stress test.

(I did mentioned it, and put a link, in some thread. Sorry but I don't remember where.)

Edit to add:

if we have some 20 million houses, at around 150k each, so our housing stock is worth

3 000 000 000 000

3 trillion. I think about a third is own outright. So, 2 trillion may have mortgages. 150bn is 7.5% of 2 trillion. Is this the maximum fall we can have without breaking our banks again?

Edited July 1, 2010 by Tired of Waiting

[easy2012]

Yeah, cant say for sure what the real figures are but even if you double this, dobule that, then you are still dealing with figures that are £10s of billions.

The BoE was printing 20 Billion a month at one point to keep the scam going and the special liquidity scheme keeps going.

The deficit is 150 Billion.

The debt is 1 Trillion.

The interest on the debt is staggering.

I've said it a few times now...it's a long 18 year japanese type crash, that's the only way they will save the banks and keep "their" society going.

Makes me think of the decline of Rome.

As you said, put's it into perspective.

Refusing to clear things out will indeed just prolong pain (but pain per unit time is less). Ultimately, the misallocated resources just tied up resources in the society,

e.g. a person owing £500k mortgage who can't service it would be better of being made bankrupt so he can start afresh and achieve greater things

rather than becoming a loan zombile for the next 20 years.

Interest rate are not determined by 'demand for credit' as BoE would like you to believe. Because BoE is an unregulated monopoly when it comes to money, it sets the price

of money.

[TheCountOfNowhere]

I read in a BoE or FSA report recently that the UK banks can stand a maximum loss of 150bn. It was a stress test.

Good -oh, just about there then....rates up soon...repossessions to start afresh. Banks to get funding from saleas of their dubious assets rather than the hard working tax payer.