Simon Brown Posted December 2, 2011 Share Posted December 2, 2011 Think you will find your wrong, On a repayment mortgage the amount of interest you pay on the loan gets less as the loan shrinks. Try putting some figures through a online loan calculator. Fairy Nuff, I'm used to the interest-only mortgages that we have in Switzerland. Apologies to Shirley. Quote Link to comment Share on other sites More sharing options...
leicestersq Posted December 2, 2011 Share Posted December 2, 2011 Merv won't let any of the retail banks fall, so the first bank to fall will be the Bank of England. I reckon Merv would let banks fail, I am pretty sure he understands the moral hazard problem of bailing them out. Remember, it was the Treasury not the bank of England that bailed out our insolvent banks. Quote Link to comment Share on other sites More sharing options...
leicestersq Posted December 2, 2011 Share Posted December 2, 2011 Think you will find your wrong, On a repayment mortgage the amount of interest you pay on the loan gets less as the loan shrinks. Try putting some figures through a online loan calculator. So by 'typical' £140,000 mortgage, they mean one that is repayment, and one that is part way through it's term? Wouldnt it be simpler to mean one that is at the start of the contract? Quote Link to comment Share on other sites More sharing options...
bmf Posted December 2, 2011 Share Posted December 2, 2011 Of course he can't. Nor can any central banker. Because banks have not yet been made to fess up to the quality of the assets on their books (or otherwise) so nobody can know. I'm sure I recall reading that Spain's banks, Santander being a leading example, still mark to the top of the market in the context of property loans e.g. the mortgage asset is marked to the value of the property at the market rate when the mortgage was taken out, not what it is now. The so called "stress tests" were a whitewash. Because, if banks were made to fess up, I'd imagine it's bye bye Santander and a whole heap of others. And so, on it goes. Until a borrower defaults, the bank have a piece of paper saying that the borrower will repay say £400k. Until default that contract means what it says. It's therefore worth the same as before. The borrower owns the property so the value of the property is off the bank's books. When the borrower defaults the bank assumes the property ownership. At this point mark-to-market occurs. This is why banks are on pretend and extend, hoping against hope that the market picks up. If we had a wave of defaults due to IR rises this would push all the "reality gap" onto the bank's books, in many cases nearly instantly drowning them. Quote Link to comment Share on other sites More sharing options...
DTMark Posted December 2, 2011 Share Posted December 2, 2011 Merv won't let any of the retail banks fall, so the first bank to fall will be the Bank of England taxpayer. Let's not forget that in the aftermath of the Northern Rock debacle, Mervyn successfully argued for the ability to prop up banks in secret without the taxpayer being able to find out. There is no distinction between the State and the private banking sector now. Quote Link to comment Share on other sites More sharing options...
long time lurking Posted December 2, 2011 Share Posted December 2, 2011 It`s like this if we don`t bail out the banks your mortgage repayment's will go through the roof ,said Merv That's what it sound`s like to me but I hope i'm wrong Quote Link to comment Share on other sites More sharing options...
inflating Posted December 2, 2011 Share Posted December 2, 2011 Of course he can't. Nor can any central banker. Because banks have not yet been made to fess up to the quality of the assets on their books (or otherwise) so nobody can know. I'm sure I recall reading that Spain's banks, Santander being a leading example, still mark to the top of the market in the context of property loans e.g. the mortgage asset is marked to the value of the property at the market rate when the mortgage was taken out, not what it is now. The so called "stress tests" were a whitewash. Because, if banks were made to fess up, I'd imagine it's bye bye Santander and a whole heap of others. And so, on it goes. I'm so fed up with the lot of them I can't tell you Quote Link to comment Share on other sites More sharing options...
A.steve Posted December 2, 2011 Share Posted December 2, 2011 (edited) http://www.dailymail.co.uk/news/article-2068875/King-Our-systems-crisis--Governor-warns-mortgage-rates-likely-soar-tells-banks-slash-bonuses.html That's disappointing. I'm always inclined to pay attention to Mervyn King, but to ignore the Daily Mail. What a conundrum. Is King reported somewhere more credible? My suspicion is that if 'mortgage rates surge' - it will be mortgage rates for new mortgages - be they for first time buyers or those trading up.... while those who have existing relationships will retain access to funding at a lower rate than the majority. This needs to happen in order to avoid banks forcing mass bankruptcy. If I'm right, we should expect the prices at which property changes hands to fall abruptly, while the valuation of owner-occupied mortgaged property will remain stubbornly high - effectively chaining the incumbent occupiers to a mortgaged house with the same approximate 'valuation' to their current debt. A question I've mulled for some time is the extent to which it is legal/possible for mortgage lenders to discriminate among borrowers in this way... so as to minimise the equity of existing mortgagees... in order to recover their outstanding debts while charging significantly higher rates to new entrants. For example, could a bank say property X's owner has an income of £50K - which means interest payments of £20K are affordable... it's an existing mortgage with history - which means it qualifies for our reduced rate for long-term customers - so, the value of the property can be £20K*(1/preferential_rate) - and the preferential rate can be anything from 2% to 4% - giving a valuation between £500k and £1m - fudged as necessary to match available reports on the area... all the while saying to new borrowers that the rate is 8%, and that their £20K payments are only sufficient to service £250K. Edited December 2, 2011 by A.steve Quote Link to comment Share on other sites More sharing options...
'Bart' Posted December 2, 2011 Share Posted December 2, 2011 warned the 'extraordinarily serious and threatening' crisis in the eurozone is damaging Britain And it was all Sunshine, Lollipops and Rainbows before then wasn't it Merv? Those feckless Europeans, especially that Frenchman, Jacques Use! Quote Link to comment Share on other sites More sharing options...
DTMark Posted December 2, 2011 Share Posted December 2, 2011 And it was all Sunshine, Lollipops and Rainbows before then wasn't it Merv? Those feckless Europeans, especially that Frenchman, Jacques Use! Anyone think that there might just be a connection between the timing of Osborne's budget and the ramping up of the "Europe will destroy us all" rhetoric? Quote Link to comment Share on other sites More sharing options...
MrWallace Posted December 2, 2011 Share Posted December 2, 2011 Of course he can't. Nor can any central banker. Because banks have not yet been made to fess up to the quality of the assets on their books (or otherwise) so nobody can know. I'm sure I recall reading that Spain's banks, Santander being a leading example, still mark to the top of the market in the context of property loans e.g. the mortgage asset is marked to the value of the property at the market rate when the mortgage was taken out, not what it is now. The so called "stress tests" were a whitewash. Because, if banks were made to fess up, I'd imagine it's bye bye Santander and a whole heap of others. And so, on it goes. The answer is probably bloody obvious but what will happen to us if Santander go under? Our mortgage is with Santander. Quote Link to comment Share on other sites More sharing options...
Simon Brown Posted December 2, 2011 Share Posted December 2, 2011 The answer is probably bloody obvious but what will happen to us if Santander go under? Our mortgage is with Santander. Another comapny will buy the mortgage from the liquidators and you'll end up paying them. Quote Link to comment Share on other sites More sharing options...
Simon Brown Posted December 2, 2011 Share Posted December 2, 2011 The answer is probably bloody obvious but what will happen to us if Santander go under? Our mortgage is with Santander. Another comapny will buy the mortgage from the liquidators and you'll end up paying them. Quote Link to comment Share on other sites More sharing options...
exiges Posted December 2, 2011 Author Share Posted December 2, 2011 Another comapny will buy the mortgage from the liquidators and you'll end up paying them. and whoever buys that mortgage will probably put your rates up. Quote Link to comment Share on other sites More sharing options...
The Masked Tulip Posted December 2, 2011 Share Posted December 2, 2011 According to Andrew Neil on the Beeb right now behind the scenes Mervyn King is even more worried about the economy than he has let on publicly. Quote Link to comment Share on other sites More sharing options...
Simon Brown Posted December 2, 2011 Share Posted December 2, 2011 and whoever buys that mortgage will probably put your rates up. Only if allowed by the original contract. Quote Link to comment Share on other sites More sharing options...
leicestersq Posted December 2, 2011 Share Posted December 2, 2011 According to Andrew Neil on the Beeb right now behind the scenes Mervyn King is even more worried about the economy than he has let on publicly. Publically he appeared to be as worried as any public figure can be worried in public. Quote Link to comment Share on other sites More sharing options...
DTMark Posted December 2, 2011 Share Posted December 2, 2011 The answer is probably bloody obvious but what will happen to us if Santander go under? Our mortgage is with Santander. See Northern Rock for worked example: The Spanish taxpayer will buy the defaulting loans ("the bad bank") and so pick up all the liabilities. The non defaulting loans will be sold to another bank, so your mortgage carries on. Quote Link to comment Share on other sites More sharing options...
DTMark Posted December 2, 2011 Share Posted December 2, 2011 Publically he appeared to be as worried as any public figure can be worried in public. Probably because he knows that the banks are going to completely ignore his calls to build capital buffers, pay their bonuses anyway, and come back to the taxpayer for more, since the moral hazard precedent has already been set. Rinse and repeat until total sovereign collapse. Quote Link to comment Share on other sites More sharing options...
robo1968 Posted December 2, 2011 Share Posted December 2, 2011 Publically he appeared to be as worried as any public figure can be worried in public. But privately he's making his public feelings more public... Bet they are crapping themselves..... it's going to happen on their shift Quote Link to comment Share on other sites More sharing options...
JustYield Posted December 2, 2011 Share Posted December 2, 2011 So by 'typical' £140,000 mortgage, they mean one that is repayment, and one that is part way through it's term? Wouldnt it be simpler to mean one that is at the start of the contract? It's just maths. 1% increase => 1000 p.a. on a typical 140K repayment mortgage. i.e. there is still 140K left to repay. Not sure what you're disagreeing with. Quote Link to comment Share on other sites More sharing options...
PopGun Posted December 2, 2011 Share Posted December 2, 2011 Except when the term ends - then there may be fewer cheap offers. Banks will have to strengthen their balance sheets somehow. I'm on a Nationwide BMR, effectively a tracker capped at 2%+ base rate for the length of the loan. If I'd of switched to another fix, I wouldn't be allowed to go back onto the BMR, only the SVR (uncapped) after the term end. No brainer really (at the moment anyway). Quote Link to comment Share on other sites More sharing options...
PopGun Posted December 2, 2011 Share Posted December 2, 2011 I reckon Merv would let banks fail, I am pretty sure he understands the moral hazard problem of bailing them out. Remember, it was the Treasury not the bank of England that bailed out our insolvent banks. Apart from maybe a very minor sacrificial lamb, there's no way the banks will be allowed to liquidate whilst still under state control. Quote Link to comment Share on other sites More sharing options...
inflating Posted December 2, 2011 Share Posted December 2, 2011 Currently the Most Read http://www.dailymail.co.uk/home/index.html But I wonder if it's going to be true, and not just theatre to get more QE or even NIRP - although apparently more QE is ruled out for now or so Reuters news suggests http://uk.reuters.com/article/2011/12/02/uk-britain-boe-preview-idUKL5E7N14KI20111202 Quote Link to comment Share on other sites More sharing options...
Venger Posted December 2, 2011 Share Posted December 2, 2011 Apart from maybe a very minor sacrificial lamb, there's no way the banks will be allowed to liquidate whilst still under state control. Originally I thought you joined HPC under the guise of someone who was looking to upsize, but so many of your posts suggest you don't want to see house prices losing value. More of the stories I'm reading talk about banks selling assets to raise capital. Or to shrink down so they meet Capital 1 Tier Ratios. I think they could do this with part of their mortgage books too. I can't see why not to liquidating if and when alternatives to not doing so would be worse. If and when markets overcome vested interests. And many a person, including many homeowners not stretched out with debt, can find advantages in house prices falling. The ones who wouldn't do well are more than countered by those would be favoured by lower prices. Non owners are voters too. Quote Link to comment Share on other sites More sharing options...
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