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Ineviatble Trouble Ahead

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I have 2 friends trying to get a mortgage for £450,000:

1) They have savings of £300,000, own all of their cars, only use one credit card and repay it in full every month, have no debts, own a business with £500,000 of assets that are all paid for with a turnover of £250,000, draw £85,000 a year and own a property worth £450,000. They have no debts at all.

2) They have £36,000 savings, £100,000 collateral in a property being sold, cars are on balloon finance, repay minimum on credit cards every month, have loads of interest free finance and have a household income of around £75,000. They can only

It seems like a stupid question, but which one did the bank refuse and which one did they offer a mortgage to straight away? The answer is the second one as they have a credit history. The fact that they are already substantially in debt works in their favour. The first couple who were prudent have had to finance their other property, which is a more expensive mortgage.

What amazes me is the policy of the banks hasn't changed, the policy of "if you have debts and are repaying as you have to, we are happy to lend you more". My 3 year old knows that it is common sense that if a person has no debts, and has shown prudence, he would be happier to lend his pocket money to them than the couple with loads of debts and have shown no prudence.

With the banks still using the old credit scoring, they are going to run into trouble again.

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I have 2 friends trying to get a mortgage for £450,000:

1) They have savings of £300,000, own all of their cars, only use one credit card and repay it in full every month, have no debts, own a business with £500,000 of assets that are all paid for with a turnover of £250,000, draw £85,000 a year and own a property worth £450,000. They have no debts at all.

2) They have £36,000 savings, £100,000 collateral in a property being sold, cars are on balloon finance, repay minimum on credit cards every month, have loads of interest free finance and have a household income of around £75,000. They can only

It seems like a stupid question, but which one did the bank refuse and which one did they offer a mortgage to straight away? The answer is the second one as they have a credit history. The fact that they are already substantially in debt works in their favour. The first couple who were prudent have had to finance their other property, which is a more expensive mortgage.

What amazes me is the policy of the banks hasn't changed, the policy of "if you have debts and are repaying as you have to, we are happy to lend you more". My 3 year old knows that it is common sense that if a person has no debts, and has shown prudence, he would be happier to lend his pocket money to them than the couple with loads of debts and have shown no prudence.

With the banks still using the old credit scoring, they are going to run into trouble again.

all your first friend needs to do is get a mortgage with the bank he currently banks with, they would easily lend him the money, the computer system might refuse him, but stuff like that does not slip by a bank manager if you speak to them face to face.

Edited by mfp123

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I think the situation changes all the time. Last year I couldn't get £200k, now I can get 800k. No sense in it at all. The incentive schemes offered to intermediaries are the main problem. My 800k came from a bank I have an old history with and a £1 savings account - which apparently makes me a "valued customer".

I have 2 friends trying to get a mortgage for £450,000:

1) They have savings of £300,000, own all of their cars, only use one credit card and repay it in full every month, have no debts, own a business with £500,000 of assets that are all paid for with a turnover of £250,000, draw £85,000 a year and own a property worth £450,000. They have no debts at all.

2) They have £36,000 savings, £100,000 collateral in a property being sold, cars are on balloon finance, repay minimum on credit cards every month, have loads of interest free finance and have a household income of around £75,000. They can only

It seems like a stupid question, but which one did the bank refuse and which one did they offer a mortgage to straight away? The answer is the second one as they have a credit history. The fact that they are already substantially in debt works in their favour. The first couple who were prudent have had to finance their other property, which is a more expensive mortgage.

What amazes me is the policy of the banks hasn't changed, the policy of "if you have debts and are repaying as you have to, we are happy to lend you more". My 3 year old knows that it is common sense that if a person has no debts, and has shown prudence, he would be happier to lend his pocket money to them than the couple with loads of debts and have shown no prudence.

With the banks still using the old credit scoring, they are going to run into trouble again.

Edited by fallingbuzzard

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all your first friend needs to do is get a mortgage with the bank he currently banks with, they would easily lend him the money, the computer system might refuse him, but stuff like that does not slip by a bank manager if you speak to them face to face.

I hope they don't bank with any of the many Internet banks, or most of the high street banks then.

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The banks want perpetual debt, if you repay them the money they only make a nice large sum at the beginning of the mortgage but by the end of the term they hardly make any interest.

This was the beauty of MEW for the banks, they need to keep you in debt to make money, number 2 does indeed appear the better option for perpetual profits, number 1 will just pay you back and more alarmingly may pay you back early. As long as 2 keeps working you'll keep getting the minimum and profit accordingly.

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I have 2 friends trying to get a mortgage for £450,000:

1) They have savings of £300,000, own all of their cars, only use one credit card and repay it in full every month, have no debts, own a business with £500,000 of assets that are all paid for with a turnover of £250,000, draw £85,000 a year and own a property worth £450,000. They have no debts at all.

2) They have £36,000 savings, £100,000 collateral in a property being sold, cars are on balloon finance, repay minimum on credit cards every month, have loads of interest free finance and have a household income of around £75,000. They can only

It seems like a stupid question, but which one did the bank refuse and which one did they offer a mortgage to straight away? The answer is the second one as they have a credit history. The fact that they are already substantially in debt works in their favour. The first couple who were prudent have had to finance their other property, which is a more expensive mortgage.

What amazes me is the policy of the banks hasn't changed, the policy of "if you have debts and are repaying as you have to, we are happy to lend you more". My 3 year old knows that it is common sense that if a person has no debts, and has shown prudence, he would be happier to lend his pocket money to them than the couple with loads of debts and have shown no prudence.

With the banks still using the old credit scoring, they are going to run into trouble again.

Isn't this insane?

I could/should use my credit card for petrol etc. and pay it off at the end of the month, but I am worried I might overlook a payment and damage my credit rating for decades. So now I don't use my credit card at all and have no debts, which is probably even worse!

We are still a long way down the rabbit hole.

Edited by Laughing Gnome

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It always surpises me how people share their detailed financial picture with HPC posters!

Personally, I have a quite shocking credit history and was offered £300k mortgage with a 25% deposit last week. (No intention of taking that much.)

Credit history seems to have surprisingly little relevance in a mortgage application in my experience. It's a secured loan after all, and with enough deposit, the bank have literally nothing to lose.

If first couple are willing to use some of those assets for security then I think they could raise the money in a heartbeat.

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Isn't this insane?

I could/should use my credit card for petrol etc. and pay it off at the end of the month, but I am worried I might overlook a payment and damage my credit rating for decades. So now I don't use my credit card at all and have no debts, which is probably even worse!

We are still a long way down the rabbit hole.

You really think it matters that much if you miss a payment? I got 6 weeks behind on payments with a credit card on a 0% transfer a couple of years ago simply becuase I thought I'd set up a direct debit and I hadn't - it was my fault. However, my credit score from Experian is 999 out of 999 - couldn't be any higher. You can play the game for years just to make yourself "credit-worthy". i.e. taking out debt you don't need whilst ensuring you don't financially lose out on it.

The system is a joke, you just have to know how to play it.

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I could/should use my credit card for petrol etc. and pay it off at the end of the month, but I am worried I might overlook a payment and damage my credit rating for decades. So now I don't use my credit card at all and have no debts, which is probably even worse!

I set up an Outlook reminder for the first payment date for the previous month (i.e. the first day on which you can pay off the previous month's balance) for my credit card, and then pay it off online by Visa debit from my current account. I've been doing this for the almost six years I've had a credit card, and the only occasions I've failed to pay it off on the exact day have been the odd ones when I've been on a long-haul flight or otherwise unable to get to any Internet access. I don't trust direct debits as far as I could throw them (because if the payee makes a mistake and takes more than he's entitled to, you've got the problem of clawing it back), but if I did I could set up a DD to pay the card off in full each month, too.

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I hate banks.

And spell checkers.

Edited by Bloo Loo

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1) They have savings of £300,000, own all of their cars, only use one credit card and repay it in full every month, have no debts, own a business with £500,000 of assets that are all paid for with a turnover of £250,000, draw £85,000 a year and own a property worth £450,000. They have no debts at all.

2) They have £36,000 savings, £100,000 collateral in a property being sold, cars are on balloon finance, repay minimum on credit cards every month, have loads of interest free finance and have a household income of around £75,000. They can only

(1) could be much more risky than (2) simply because it is a small business that they are taking a large income from; if the physical assets are as small as that, and they are essentially relying on the value of their business/management skills, then that income is potentially unreliable from an outsider's perspective. Furthermore, if that fails they not only lose most of their assets but both of their jobs too. Number (2) appear to be salaried and presumably in 2 different uncorrelated jobs, possibly a much safer risk.

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  • 284 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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