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Mortgage Arrears Linked To Low Deposits

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Can't copy & paste (copyright infringement), but summary is:

- 3.2 per cent of homeowners who put down 20-30 per cent of their mortgages were in arrears on repayments

- 7.1 per cent of homeowners who put down put down 10 per cent or less were in arrears.

- Among those whose loans were 110 per cent or more of the property value, arrears rates were 28 per cent.

- The findings suggest that large loans to first-time buyers are unlikely to resume in the foreseeable future.

I think an LTV cap is a good thing (80%?). If what we are seeing is not a temporary effect because of the credit crisis, but a long term return to sensible lending, then we could have a long term continuation of buyer/seller the stalemate.

Either prices drop, or the only people (bar the odd exception) buying & selling property be those that bought before 2000 and therefore have a lot of equity, effectively trading houses between themselves and leaving FTB out of the market. And this leaves a demographic generation priced out for a long long time (10+ years?).

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FT Link

Can't copy & paste (copyright infringement), but summary is:

- 3.2 per cent of homeowners who put down 20-30 per cent of their mortgages were in arrears on repayments

- 7.1 per cent of homeowners who put down put down 10 per cent or less were in arrears.

- Among those whose loans were 110 per cent or more of the property value, arrears rates were 28 per cent.

- The findings suggest that large loans to first-time buyers are unlikely to resume in the foreseeable future.

I think an LTV cap is a good thing (80%?). If what we are seeing is not a temporary effect because of the credit crisis, but a long term return to sensible lending, then we could have a long term continuation of buyer/seller the stalemate.

Either prices drop, or the only people (bar the odd exception) buying & selling property be those that bought before 2000 and therefore have a lot of equity, effectively trading houses between themselves and leaving FTB out of the market. And this leaves a demographic generation priced out for a long long time (10+ years?).

It is still pretty amazing that even after putting down 30% up front, nearly 1 in 20 can't keep up...

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It is still pretty amazing that even after putting down 30% up front, nearly 1 in 20 can't keep up...

Well, yes, but let's not forget that conventional wisdom was to really stretch yourself when you move to your next house.

If your house went up from 150k to 250k, you could use that 100k as a deposit on a 500k house, and you have a 20% deposit. You may still need to borrow 400K though...

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It is still pretty amazing that even after putting down 30% up front, nearly 1 in 20 can't keep up...

What I am amazed at are the figures taking into account smi, which presumably would be arrears if the taxpayer wasn't paying? I wonder what the arrears would be like without that?

And we hear that banks are not repossessing families with kids. The banks and taxpayers must be losing a fortune on these high ltv loans.

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What I am amazed at are the figures taking into account smi, which presumably would be arrears if the taxpayer wasn't paying? I wonder what the arrears would be like without that?

And we hear that banks are not repossessing families with kids. The banks and taxpayers must be losing a fortune on these high ltv loans.

maybe they are working so don't get SMI; they could never afford the loan in the first place as affordability/income was never checked.......Maybe the FSA should impose affordability checks AND maximum LTV constraints.

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Well, yes, but let's not forget that conventional wisdom was to really stretch yourself when you move to your next house.

If your house went up from 150k to 250k, you could use that 100k as a deposit on a 500k house, and you have a 20% deposit. You may still need to borrow 400K though...

As I've heard said here before, houses are a huge leveraged hedge against inflation and looking at the figures in the UK, there will always be significant inflation over the longer term.

Assuming that you are not overpaying by paying over the odds in a bubble market and you are young, then makes sense to spend towards the top end of what you can afford as that will accrue a bigger advantage for you down the line.

Obviously, if prices are stupid because of a boom then stay well away.

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FT Link

Can't copy & paste (copyright infringement), but summary is:

- 3.2 per cent of homeowners who put down 20-30 per cent of their mortgages were in arrears on repayments

- 7.1 per cent of homeowners who put down put down 10 per cent or less were in arrears.

- Among those whose loans were 110 per cent or more of the property value, arrears rates were 28 per cent.

- The findings suggest that large loans to first-time buyers are unlikely to resume in the foreseeable future.

The problem with this is it might correlate exactly with:

- 3.2 per cent of homeowners who bought 10 years or more ago were in arrears on repayments

- 7.1 per cent of homeowners who bought 10-5 years ago are in arrears.

- Among those whose bought 5-2 years ago, arrears rates were 28 per cent.

- The findings suggest that the shorter time that you have owned your house, and thus the likelihood of it being worth less than you paid for it, the more likely you are to be in arrears.

tim

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As I've heard said here before, houses are a huge leveraged hedge against inflation and looking at the figures in the UK, there will always be significant inflation over the longer term.

Assuming that you are not overpaying by paying over the odds in a bubble market and you are young, then makes sense to spend towards the top end of what you can afford as that will accrue a bigger advantage for you down the line.

Obviously, if prices are stupid because of a boom then stay well away.

I agree that it is highly leveraged, though the leverage of 20:1 (or even ∞:1) has moved/is moving back to 5:1 or 4:1.

I don't know however that it is implicitly an inflation hedge, I would say that it is an inflation bet. When nominal prices outperform interest rates then you win the bet, when nominal prices under perform interest rates you lose. (To be more accurate we'd need to factor in deposit ratios and the risk free rate of return).

Over time, IMO, HPI cannot exceed wage inflation, so the house should maintain it's value in real terms.

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In other breaking new:

"Lung cancer link to smokers"

"Unprotected sex leads to pregnancy"

Sheesh. That Beeb... moronic.

I know. It doesn't take a genius to work this out - yet they still feel it warrants an article.

I suppose it goes hand in hand with all the other articles that proclaim 'we didn't see it coming' when referring to the credit crunch. That always gets me...

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There are low LTV clumps with RBS RMBS that are over trigger levels or very close, I think even if the LTV is good people can have problems paying

overall which should hopefully drag everyone else down out of insane deposit land.

http://www.investors.rbs.com/debt_securitisation/residential_mortgages.cfm?green=off

Arran Residential Mortgages Funding No. 1 PLC

Issued £4.75bn equivalent of securities denominated in dollars, euros and sterling backed by a static portfolio of prime residential mortgages originated by Royal Bank of Scotland plc.

Next Interest Payment Date: 12-Jan-11

Note 1

Number of Mortgage Loans in Pool 33,761

Weighted Average Seasoning (Months) 99

Weighted Average Remaining Term (Months) 179

Average Loan Size (£) 93,838

Weighted Average Current LTV (by value) 58.87%

Weighted Average Yield of Loans Above LIBOR 156 bps

Balance of Loans 90 Days or more in Arrears 2.73% (>3.00% ? FALSE)

Arran Residential Mortgages Funding No. 2 PLC

Issued £6.5bn equivalent of securities denominated in dollars, euros and sterling backed by a static portfolio of prime residential mortgages originated by National Westminster Home Loans Limited, a direct subsidiary of The Royal Bank of Scotland plc.

Next Interest Payment Date: 20-Dec-10

1 Asset Profiles

a Number of Mortgage Loans in Pool 23,437

b Weighted Average Seasoning (Months) 93

c Weighted Average Remaining Term (Months) 177

d Average Loan Size (£) 75,820

e Weighted Average Current LTV (by Value) 62.91%

f Weighted Average Yield of Loans Above LIBOR 144bp

Balance of Loans More Than 90 Days in Arrears 3.40% (>3.00% ? TRUE)

Arran Residential Mortgages Funding No. 3 PLC

Issued £4.42bn equivalent of securities denominated in dollars, euros and sterling backed by a static portfolio of prime residential mortgages originated by Royal Bank of Scotland plc and National Westminster Home Loans.

Next Interest Payment Date: 16-Dec-10

1 Asset Profiles

a Number of Mortgage Loans in the Pool 41,410

b Weighted Average Seasoning (Months) 111

c Weighted Average Remaining Term (Months) 158

d Average Loan Size (£) 61,449

e Weighted Average Current LTV (by Value) 58.91%

f Weighted Average Yield on Loans Above LIBOR 137bp

Balance of Loans More Than 90 Days in Arrears 2.79% (≥3.00% ? FALSE)

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Well, yes, but let's not forget that conventional wisdom was to really stretch yourself when you move to your next house.

If your house went up from 150k to 250k, you could use that fictional 100k profit as a deposit on a 500k house, and you have a 20% deposit. You may still need to borrow 400K though...

Slightly corrected for you.

150 to 250 is +66.67%, present gap to fund to 500 = 250

500 without same 66.67% inflation is 300, gap to fund from 150 to 300 = 150

+66.67% HPI means 66.67 larger gap to fund 150/250

Oh..... look... bankers are getting more bonuses and women have gone out to work to use second incomes to fund larger mortgages.

The inflation has happened but it's easy to see who really profited from it isn't it?

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In the last recession/HPC late 80's early 90's (high interest rates)...people with mortgages greater than the value of their homes it was very common for people to hand the keys back to the lender, then they had a good chance of getting a nice cheap secure housing association/council property.....this time they are trying to hang on to what they have as long as they can continue paying the min payment possible, value does not come into it, a roof over their heads does.....this time there are no other viable housing options out there. ;)

Edited by winkie

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It is still pretty amazing that even after putting down 30% up front, nearly 1 in 20 can't keep up...

Although there will always be an intrinsic rate of unforeseen redundancy, and if buyers don't have mortgage protection then they could be in arrears pretty quickly.

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  • 245 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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