150,000 Customers At Lloyds Are In Negative Equity

[interestrateripoff]

http://www.dailymail.co.uk/news/article-1384091/150-000-customers-Lloyds-negative-equity.html

Around 150,000 homeowners who have a mortgage with Lloyds Banking Group are in negative equity, the banking giant admitted yesterday.

The astonishing figure highlights the mortgage misery facing families around Britain, many of whom took out super-size loans during the boom.

They are being crippled by the toxic combination of a large mortgage – but a home which is plunging in value.

.......

The scale of the problem is massive because Lloyds is Britain’s biggest mortgage lender with three million mortgage customers.

It admitted 13.5 per cent of the total value of its mortgage portfolio is caught in the negative equity trap, and about five per cent of its customers.

An interesting turn of phrase in this report super-size loans, although still not putting why people had to take out super-size loans. Although the stats are a little alarming that around 5% of it's customers are 13.5% of it's mortgage portfolio...

I'd be interested to see a breakdown of the stats to see how many of these are caught in negative equity because of the loan to by the house and how many are in negative equity because they just couldn't stop MEWing.

[200p]

LLOY down from news about the £3bn loss. Reward failure, socialise the losses.

I posted the other day about when RBS and LLOY shareprices move off their lows, then the housing market will start to recover.

[Georgia O'Keeffe]

LLOY down from news about the £3bn loss. Reward failure, socialise the losses.

I posted the other day about when RBS and LLOY shareprices move off their lows, then the housing market will start to recover.

I very much doubt LLoyds and RBS will still exist (at least not as PLCs) when the housing market genuinely starts to recover from its bottom

[Landagan]

"Negative equity means that the size of your loan is larger than the value of your property, a nightmare which traps people in their homes."

So this is a nightmare, but trapping young couples in shared equity boxes, paying way above their means - effectively castrating them, is ok.

[Pent Up]

I like this bit:

They are being crippled by the toxic combination of a large mortgage – but a home which is plunging in value.

I also like the phrase 'super size loans' gives a binge eating over indulgence feel. I'll use that from now on I think.

[Pent Up]

LLOY down from news about the £3bn loss. Reward failure, socialise the losses.

I posted the other day about when RBS and LLOY shareprices move off their lows, then the housing market will start to recover.

LLOY Losses for Q1 was £3.5bn after £3.2bn was set aside for PPI claims. Which means that they made a loss of £0.3bn before this was taking into account. So they are back in the red again after making returning to profit last year.

Also heard on the radio something about there total income for Q1 being down 13% and losses from loans to Irish banks being much bigger than expected. although didn't quite catch what was said.

[Bloo Loo]

didnt they just set aside £3bn for misselling ppi yesterday?

thatll help all those mewers somewhat.

[pathfinder]

okay so now add on how many interest only products were sold from 2004 where no repayment vehicle was in place.

Uh oh.

[Bloo Loo]

okay so now add on how many interest only products were sold from 2004 where no repayment vehicle was in place.

Uh oh.

and how many of those were 6 times joint income for the DINKY's...now with the first sprogs on the way?

[Georgia O'Keeffe]

and how many of those were 6 times joint income for the DINKY's...now with the first sprogs on the way?

Given UK prices and this being the Halifax its clearly down to the financially irresponsible oiks oop north overpaying. Buying a whippet and flat Cap is one thing but Northerners should simply never have been given the benefit of the doubt of financial responsibility regarding taking out mortgages

Edited May 6, 2011 by georgia o'keeffe

[pathfinder]

How about they have 1.1 million customers.

Of that there was a growth of 10-15% in the interest only market from 2004.

http://www.thisismoney.co.uk/mortgages-and-homes/mortgages-features/article.html?in_article_id=504465&in_page_id=58

Interest only protects you pretty well from failing to make payments so you could assume they have not flagged themselves as screwed. No doubt Lloyds is assuming all the customers on interest only are repaying into a saving scheme as it is almost bang on the 13.5% negative equity estimate.

So the worst case could be closer to 20-28.5% and that is assuming no further falls. Something tells me the taxpayer bought a lemon .. what a shocker.

Edited May 6, 2011 by pathfinder

[erranta]

http://www.dailymail...ive-equity.html

An interesting turn of phrase in this report super-size loans, although still not putting why people had to take out super-size loans. Although the stats are a little alarming that around 5% of it's customers are 13.5% of it's mortgage portfolio...

I'd be interested to see a breakdown of the stats to see how many of these are caught in negative equity because of the loan to by the house and how many are in negative equity because they just couldn't stop MEWing.

No breakdown of type or mention of 'Interest Only' mortgages - at a guess over 90% are with no repayment vehicle!

The banks should be forced to take a 50% hit on losses with their 'lured in' victims and it should be taken out of their bonuses.

If the frauds(bankers) had not come up with the conjured monies (they never had in the first place to lend and can't account for in their bank vaults [just paper promises]) house prices would only have risen by a fraction above wages!

Edited May 6, 2011 by erranta

[Bloo Loo]

No breakdown of type or mention of 'Interest Only' mortgages - at a guess over 90% are with no repayment vehicle!

The banks should be forced to take a 50% hit on losses with their 'lured in' victims and it should be taken out of their bonuses.

neg equity doesnt really affect banks in the normal way...so what a client is underwater?, as long as the repayments come in, all is tickety boo.

Of course, the sub story here is MBS....and CDOs based on these MBS....other banks are relying on the underlying value to support their high returns...and insurers ( CDS ) holders are relying on underlying values to support the MBS in the cases of default.

It is here, in the shadow banking system, that we see the damage....with the knock on unaatractiveness of such investments due to...higher CDS premiums, and lower, if any returns...this means a greater mortgage famine unless the Central bank is lending against current MBS assets.

[Wahoo]

Seems a small number. I'd have expected a figure nearer 1.5 million.

Are they including Halifax customers?

Also, this is just the start. Have you seen the latest Global Economic indicators?

They're talking about the latest boom having run it's course. Boom! What a load of BS. There never was a boom.

The markets have been propped up by QE.

This might turn into a really nasty blood bath.

[arrgee1991]

If 13.5% is in negative equity now, what will it be in a year's time ? 20%? 30%?

Those in negative equity won't/can't sell, so this will restrict supply even more.

I think we are looking at the death of the housing market. No one can afford to sell, no one can afford to buy.

[cashinmattress]

This number, is of course under-reported. Just like everything else in our corrupted banking system, if you can call it that.

But, large scale negative equity is hardly a surprise when we had interest only and 100% plus mortgages facilitating the property market for years.

Not surprisingly though, people are still eager to gamble on an IO mortgage, even when faced with what will be a generation long decline from the peak.

Serves people right for being so financially inept.

[Wahoo]

If 13.5% is in negative equity now, what will it be in a year's time ? 20%? 30%?

Those in negative equity won't/can't sell, so this will restrict supply even more.

I think we are looking at the death of the housing market. No one can afford to sell, no one can afford to buy.

Property gets transferred to the banks. They have turned digital numbers into fixed assets. Job done.

[arrgee1991]

Property gets transferred to the banks. They have turned digital numbers into fixed assets. Job done.

The only way that will happen is if the banks turn around to their "customers" and say you have to maintain a 90% LTV or else you have to sell. No bank would do that. Back in the 1990s people were forced to sell as they could not meet the payments. With low interest rates, people can make the payments, even in extreme cases. It wouldn't surprise me if there are 200% LTV mortgages out there.

[Bloo Loo]

The only way that will happen is if the banks turn around to their "customers" and say you have to maintain a 90% LTV or else you have to sell. No bank would do that. Back in the 1990s people were forced to sell as they could not meet the payments. With low interest rates, people can make the payments, even in extreme cases. It wouldn't surprise me if there are 200% LTV mortgages out there.

sadly, MBS clients and investment banks will do just that to their lesser banking asset makers.

[Pent Up]

The only way that will happen is if the banks turn around to their "customers" and say you have to maintain a 90% LTV or else you have to sell. No bank would do that. Back in the 1990s people were forced to sell as they could not meet the payments. With low interest rates, people can make the payments, even in extreme cases. It wouldn't surprise me if there are 200% LTV mortgages out there.

You are right as long as they are a tracker or attractive fixed rate. Once the deal ends it's SVRs for them at around 4.5 - 5% which can be a big jump from what they were paying. It won't wipe them all out but it will tip many over the edge.

[plummet expert]

I like this bit:

I also like the phrase 'super size loans' gives a binge eating over indulgence feel. I'll use that from now on I think.

Not long ago a mortgage was easily obtained from any broker, who would probably fill the form in for you, ask how much you needed and then ask, "do you want to go large?" It was all fantasy land. Grant schapps failed to reply to my letter ( despite acknowlegement) because he did not want deal with thetruth about the UK housing market.

You only have to look across the channel to find houses at half the price of 'borrow whatever you like' Britain. The French earn about same as we do! It is Govt policy wich has lead to the crisis and now also a lack of council homes too. Pathetic govts for so long of all types.

[arrgee1991]

Not surprisingly though, people are still eager to gamble on an IO mortgage...

But for a lot of people, like me, that gamble has paid off. I have had an IO mortgage since 1992, and with some luck in selling shares at the right time and using bonuses and a redundancy payment to reduce the capital, now have a low mortgage and a decent underpayment reserve I can dip into should I need it.

IO mortgages are great if you're income is erratic and you can make overpayments from time to time. Where they don't work is when your income is predictable and you have maxed out.

People would be financially inept regardless and not question the bottom line figures. I remember endowment mortgages.

[Bloo Loo]

Not long ago a mortgage was easily obtained from any broker, who would probably fill the form in for you, ask how much you needed and then ask, "do you want to go large?" It was all fantasy land. Grant schapps failed to reply to my letter ( despite acknowlegement) because he did not want deal with thetruth about the UK housing market.

You only have to look across the channel to find houses at half the price of 'borrow whatever you like' Britain. The French earn about same as we do! It is Govt policy wich has lead to the crisis and now also a lack of council homes too. Pathetic govts for so long of all types.

yeah but a Mcflurry costs 2.25 euros, and 98p here.

[Bloo Loo]

But for a lot of people, like me, that gamble has paid off. I have had an IO mortgage since 1992, and with some luck in selling shares at the right time and using bonuses and a redundancy payment to reduce the capital, now have a low mortgage and a decent underpayment reserve I can dip into should I need it.

IO mortgages are great if you're income is erratic and you can make overpayments from time to time. Where they don't work is when your income is predictable and you have maxed out.

People would be financially inept regardless and not question the bottom line figures. I remember endowment mortgages.

endowment IS an IO mortgage.

[cashinmattress]

IO mortgages are great if you're income is erratic and you can make overpayments from time to time.

I am fully aware of what an IO/endowment mortgage is, but I fail to see what this statement means.

How does overpaying the mortgage interest and shortening the repayment term become a good policy for erratic, or even steady income earners?

What you are doing is lessening the time that your principle repayment parallel investment has to accrue interest etc..

Explain?