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Banks To Be Tested On 35% House Price Slump ----- Merged


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The national debt is £1.4trn, you want to roll that over at 5%? Never going to happen. The debt interest would be £150bn/yr by 2017. The most we can hope for is an 0.25% uptick this side of the GE and then back to 0.5% and QE3.

Come on Zugz, that's nonsense. Please tell me you know it's nonsense.

£375bn is covered already by the BoE with int. payments back to the Treasury so you can forget about that.

The rest was mostly sold before the crash at rates HIGHER than today. Most of the debt will be rolled at LOWER rates until base rate is > 4 or 5%.

Nobody learns anything by posting silly numbers pulled out of their ar5es.

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Isn't 35% one of those market percentages that regularly occur on the way up and on the way down. Often occurring "support/resistance" levels.


http://

www.investopedia.com/university/technical/techanalysis4.asp

Round Numbers and Support and Resistance

One type of universal support and resistance that tends to be seen across a large number of securities is round numbers. Round numbers like 10, 20, 35, 50, 100 and 1,000 tend be important in support and resistance levels because they often represent the major psychological turning points at which many traders will make buy or sell decisions.

It looks like they've gone for a middlish value but who knows maybe they should be stress testing for a 50% house price slump - in London at least and maybe even the South East as well :unsure:

Edited by billybong
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Test will be done, a report will be written, and it will go to the bottom of Gidiot's 'To Do' list.

The report will be published on the day another 'celebrity' gets thrown under the bus for tax evasion/kiddie fiddling etc, and it will pass without comment. Then we'll be surprised with another 'unforeseeable' bailout of a bank........

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Why would a 35% fall in prices affect the banks at all?

unless they think that millions of home owners will be able to just hand in the keys and walk away leaving the bank with all the negative equity, something which has never happened in the UK.

The 35% fall is part of the stress test. The stress will assume a recession, rising unemployment and the like. This will lead to people not being able to maintain their mortgage payments and being repossessed. Some of these people will be in negative equity as a result of the falls, leading to the bank not being able to get its money back and therefore suffering a capital hit.

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The 35% fall is part of the stress test. The stress will assume a recession, rising unemployment and the like. This will lead to people not being able to maintain their mortgage payments and being repossessed. Some of these people will be in negative equity as a result of the falls, leading to the bank not being able to get its money back and therefore suffering a capital hit.

I doubt it will affect many, only a third of households have mortgage debt anyway and if a 35% drop takes us to 2004 levels how many of that third bought in the last 10 years? The effect on employment ought to be positive, if the cost of living drops more can afford to accept low paying jobs. If it costs less to house us housing benefit can be reduced and therefore taxes. The rungs on the fabled ladder get closer as well, more turnover in the housing market therefore and the likes of b&q do more business. There are many positive effects of lower house prices, the only negative is felt by those up to their necks in debt living in houses they can't afford, personally I see that also as a positive, wealth is better allocated.

Id expect the net effect on the economy to be positive.

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In the article the photograph of the Prudential Regulation Authority's front door of its offices at 20 Moorgate has been taken with a neutral shot - not like the BoE's central offices on Threadneedle Street which nearly always gets the low-angle shot treatment.


http://

en.wikipedia.org/wiki/Camera_angle

It puts the importance of the Prudential Regulation Authority in perspective.

Edited by billybong
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I want the stress test done, passed and these banking gimps held responsible to the extent of their whole remuneation if the banks have to be bailed in ANY form whatsoever either directly or through theft, deption and the back door, including the mamipulation of interest rates. .

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Why would a 35% fall in prices affect the banks at all?

unless they think that millions of home owners will be able to just hand in the keys and walk away leaving the bank with all the negative equity, something which has never happened in the UK.

Not millions, but it has happened the keys were handed back, but mainly when two factors came into play, both negative equity and rising interest rates that caused financial stress......negative equity and comfortable repayments mean people will stick, they have to live somewhere.......costs are more important than value/worth.

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The 35% fall is part of the stress test. The stress will assume a recession, rising unemployment and the like. This will lead to people not being able to maintain their mortgage payments and being repossessed. Some of these people will be in negative equity as a result of the falls, leading to the bank not being able to get its money back and therefore suffering a capital hit.

Forgive this long rant, I don't do this often but today I feel OUTRAGED and in need of a rant!

As I keep on saying, I am not the brightest and find much of what is spoken about on HPC re equities and the like impossible to comprehend, but am I am wrong to understand that part of the reason banks and building societies are asking for 20% deposits (although 90% mortgages are coming back) is because properties are going to have to fall at some point as currently they are on a precarious teeter of complete an utter unaffordability?

Not being the brightest spark in the box, I am appreciative that at least there is, albeit a slow....dawning which I find hits me in waves of disbelief! I find I read threads on HPC and they slowly sink in and the sinking in takes place progressively over months so that I find myself waking up to yet another level/layer of total disbelief as to what is happening in the UK and in the world in a world spurred on by profit and greed without any thought to what life is like for the vast majority of the population.

This mornings wave was nothing new but these waves hit me in ways that somehow deepen the realization of just how f**k*d we all are living in countries sinking under the debt mountain where if the average house price is now £240,000 or something like that, and lenders are lending 4 x's income (is that correct?) then people need to be earning £60,000 and if part of that £60,000 is made up of a woman's wage and full or part time child care and car payments and and and MMR rules ...then how CAN house prices be going up?

Even if the average house price was around £180,000 we are still looking at £45,000 in earnings , and despite living in the post women staying at home age, surely property should be affordable to one wage earner? Someone yesterday said that a friend had gone for a mortgage as a single individual and was told they do not consider mortgages for single individuals unless they earn £27,000! Even then what is someone going to buy at 3 x's their income? I know people on this website say that affordability has more to do with what people can afford rather than income multiples and I assume the new MMR rules will allow people earning wads to borrow wads and all the other poor bas*ar*s nothing at all so they are left paying £800 + a month in rent to some bloody BTL landlord on a 6 month tenancy in a mouldy damp 2 bed next to the railway line! I guess what kind of shocked me about myself in the midst of this current wave of realization, is that recently I had started to think that I just was not keeping up. That we are after all 6 or 7 years past the crash and then there is inflation etc so of course property is back to its 2007 /2008 peak, but this wave made me re-think, for myself, the REALITY of this, and to someone not very bright but bright enough perhaps, from where I am sitting, property (regardless of its value now due to inflation) still looks like it needs to drop the 50% many on this website felt it needed to drop in 2008/2009, bringing the average house price down to £125,000 . And I can instantly hear people saying "but property will start to increase again because there is no house building", in other words affordable house prices would become quickly unaffordable if people can afford them! So what is the answer, concrete over greenbelt? So as we managed in the past with people buying property on one wage and supporting a family , if the population is making housing unsustainable without concreting over green belt then do we need to introduce a policy of one child per family like in China, but then I wonder (and I am NOT a UKIP supporter far far from it) but I do wonder about immigration in a country with very limited land and a housing/job crisis and more and more people on zero hours! But then can we stop immigration and sell our properties off to the Russians and Chinese, but presumably THEY are not buying properties that should be affordable (if not for a 2000 to 2007 unsustainable bubble ). And I just keep thinking of the word SUSTAINABLE . And this again makes me consider that as the BUBBLE inflated due to people being loaned 10x's their income and 100% loans (and I remember in 2006, 2007 the governement speaking about people perhaps having to take out loans over a couple of generations to be able to afford to buy) then surely if sensible lending is going to happen (without HTB and FFL) property has to come back to a level that sensible lending can be re-established, or am I talking rubbish?

So I am left wondering what would happen if the government and those with power to influence decisions, started to talk to the people, ALL the people, and put to them that the current situation (not just housing) is not sustainable and we are ALL going to have to do some serious thinking about the future without inciting racial hatred, without scapegoating the poorest etc., instead considering the whole situation not just with the balance tipped towards the richest and the rest having to suffer under severe austerity measures. Are we honestly saying that a new political party or an old party with a new radical edge would not get votes if they were to start to seriously consider where we are going and how, even at this late stage, we could stop the whole country going any more (!) bankrupt and perhaps, in ways that at the end of the day, benefited EVERYONE. Would this really be the kind of approach that would not got the vast majority vote?

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I will reserve judgement until I see the results of the tests - but this is not the action of someone who wants to stoke up HPI indefinitely.

We are also a year out from elections and you have to give some credit to Carney/Osborne for even raising this right now.

I'm sceptical it will uncover the full risk of property used as security for other borrowing or residential property bought by investment companies / BTLs.

Maybe it will be used to withdraw HTB2 in some parts of the country before they planned or further increase the mortgage qualifications.

Either way it is a dog whistle - as have many recent statements been - that risks are high if you are buying when valuations are at all-time high with interest rates at an all-time low.

Carney continues to grow on me - especially when I watch his press conferences.

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Forgive this long rant, I don't do this often but today I feel OUTRAGED and in need of a rant!

As I keep on saying, I am not the brightest and find much of what is spoken about on HPC re equities and the like impossible to comprehend, but am I am wrong to understand that part of the reason banks and building societies are asking for 20% deposits (although 90% mortgages are coming back) is because properties are going to have to fall at some point as currently they are on a precarious teeter of complete an utter unaffordability?

Not being the brightest spark in the box, I am appreciative that at least there is, albeit a slow....dawning which I find hits me in waves of disbelief! I find I read threads on HPC and they slowly sink in and the sinking in takes place progressively over months so that I find myself waking up to yet another level/layer of total disbelief as to what is happening in the UK and in the world in a world spurred on by profit and greed without any thought to what life is like for the vast majority of the population.

This mornings wave was nothing new but these waves hit me in ways that somehow deepen the realization of just how f**k*d we all are living in countries sinking under the debt mountain where if the average house price is now £240,000 or something like that, and lenders are lending 4 x's income (is that correct?) then people need to be earning £60,000 and if part of that £60,000 is made up of a woman's wage and full or part time child care and car payments and and and MMR rules ...then how CAN house prices be going up?

Even if the average house price was around £180,000 we are still looking at £45,000 in earnings , and despite living in the post women staying at home age, surely property should be affordable to one wage earner? Someone yesterday said that a friend had gone for a mortgage as a single individual and was told they do not consider mortgages for single individuals unless they earn £27,000! Even then what is someone going to buy at 3 x's their income? I know people on this website say that affordability has more to do with what people can afford rather than income multiples and I assume the new MMR rules will allow people earning wads to borrow wads and all the other poor bas*ar*s nothing at all so they are left paying £800 + a month in rent to some bloody BTL landlord on a 6 month tenancy in a mouldy damp 2 bed next to the railway line! I guess what kind of shocked me about myself in the midst of this current wave of realization, is that recently I had started to think that I just was not keeping up. That we are after all 6 or 7 years past the crash and then there is inflation etc so of course property is back to its 2007 /2008 peak, but this wave made me re-think, for myself, the REALITY of this, and to someone not very bright but bright enough perhaps, from where I am sitting, property (regardless of its value now due to inflation) still looks like it needs to drop the 50% many on this website felt it needed to drop in 2008/2009, bringing the average house price down to £125,000 . And I can instantly hear people saying "but property will start to increase again because there is no house building", in other words affordable house prices would become quickly unaffordable if people can afford them! So what is the answer, concrete over greenbelt? So as we managed in the past with people buying property on one wage and supporting a family , if the population is making housing unsustainable without concreting over green belt then do we need to introduce a policy of one child per family like in China, but then I wonder (and I am NOT a UKIP supporter far far from it) but I do wonder about immigration in a country with very limited land and a housing/job crisis and more and more people on zero hours! But then can we stop immigration and sell our properties off to the Russians and Chinese, but presumably THEY are not buying properties that should be affordable (if not for a 2000 to 2007 unsustainable bubble ). And I just keep thinking of the word SUSTAINABLE . And this again makes me consider that as the BUBBLE inflated due to people being loaned 10x's their income and 100% loans (and I remember in 2006, 2007 the governement speaking about people perhaps having to take out loans over a couple of generations to be able to afford to buy) then surely if sensible lending is going to happen (without HTB and FFL) property has to come back to a level that sensible lending can be re-established, or am I talking rubbish?

So I am left wondering what would happen if the government and those with power to influence decisions, started to talk to the people, ALL the people, and put to them that the current situation (not just housing) is not sustainable and we are ALL going to have to do some serious thinking about the future without inciting racial hatred, without scapegoating the poorest etc., instead considering the whole situation not just with the balance tipped towards the richest and the rest having to suffer under severe austerity measures. Are we honestly saying that a new political party or an old party with a new radical edge would not get votes if they were to start to seriously consider where we are going and how, even at this late stage, we could stop the whole country going any more (!) bankrupt and perhaps, in ways that at the end of the day, benefited EVERYONE. Would this really be the kind of approach that would not got the vast majority vote?

your whole rant is about one thing.

LIAR LOANS

the applicant, the agent, the bank manager, the senior banker, the investment banker...

ALL LIE.

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your whole rant is about one thing.

LIAR LOANS

the applicant, the agent, the bank manager, the senior banker, the investment banker...

ALL LIE.

BUT there is always another side isn't their Bloo Loo, people to buy into the lie and this is what I don't get, but then see it in myself, this the buying into. And yet from a very very young age I have sat bewildered never understanding how a few very powerful people can hold sway over a crowd disadvantaged by the few. The CROWD cannot be disadvantaged by the few, the CROWD has to be more powerful if the crowd /collective finds its voice. So do we need a strong voice voicing an alternative, a voice other than UKIP!! Is Russell Brand right are we all disenchanted by politics and what are the alternatives to buying into the lie or not buying it but then feeling disempowered by the few ? http://www.theguardian.com/news/datablog/2014/feb/20/is-russell-brand-right-are-we-disenchanted-by-politics I guess this website and the amazing people on it are a force for change but I do at times feel hellishly frustrated !

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Forgive this long rant, I don't do this often but today I feel OUTRAGED and in need of a rant!

part of the reason banks and building societies are asking for 20% deposits (although 90% mortgages are coming back) is because properties are going to have to fall at some point as currently they are on a precarious teeter of complete an utter unaffordability?

Don't just look at what they demand, look at the interest rate split. Using a £175K house to Chuck together a very simplistic example...

Best 90% rates fix at about 3.7% at present (£157.5k borrowed)

Best 75% rates fix at about 2.6% at present (£131.25k borrowed)

Best 60% rates fix at about 1.9% at present (£105k borrowed)

Over 2 years the interest paid on 25 year terms is...

90% - £11.3k with £149.5k capital outstanding

75% - £6.6k with £123k capital outstanding

60% - £3.8k with £98.3k capital outstanding

So... Then there's a 40% crash, and the house is worth £105k. The bank is not exposed on the 60% mortgage, they have a £44.5k exposure on the 90% mortgage and an £18k exposure on the 75% mortgage. Let's say the economy tanks and 1 in 10 of these houses is repossessed and auctioned at a cost of £10k.

The bank loses £28k on the 75% deal, and £54.5k on the 90% deal. But, their total income from interest over 2 years was:

£113k on the 90% loans (48% of the income is left)

£66k on the 75% loans (42% of the income is left)

Looks like the current lending rates are already set to account for a crash to me...

Obviously if you want to make it more complicated, you can, I.e. more of the high LTV loans are likely to result in default/repo if any crash is precipitated by or coincides with an IR rise that occurs after the initial fix period.

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BUT there is always another side isn't their Bloo Loo, people to buy into the lie and this is what I don't get, but then see it in myself, this the buying into. And yet from a very very young age I have sat bewildered never understanding how a few very powerful people can hold sway over a crowd disadvantaged by the few. The CROWD cannot be disadvantaged by the few, the CROWD has to be more powerful if the crowd /collective finds its voice. So do we need a strong voice voicing an alternative, a voice other than UKIP!! Is Russell Brand right are we all disenchanted by politics and what are the alternatives to buying into the lie or not buying it but then feeling disempowered by the few ? http://www.theguardian.com/news/datablog/2014/feb/20/is-russell-brand-right-are-we-disenchanted-by-politics I guess this website and the amazing people on it are a force for change but I do at times feel hellishly frustrated !

the crowd is not just the borrowers.

Its the sellers of the mortgages, the resellers of the mortgages, the regulators of the mortgages.

Liar loans ARE the crowd.

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your whole rant is about one thing.

LIAR LOANS

the applicant, the agent, the bank manager, the senior banker, the investment banker...

ALL LIE.

+1

Then there's the politicians who also lie (don't they just) and of course many of them are using the revolving door to and from that sector.

Then there's the media who mislead and misdirect - as well as lie themselves.

Edited by billybong
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Even if the average house price was around £180,000 we are still looking at £45,000 in earnings , and despite living in the post women staying at home age, surely property should be affordable to one wage earner? Someone yesterday said that a friend had gone for a mortgage as a single individual and was told they do not consider mortgages for single individuals unless they earn £27,000! Even then what is someone going to buy at 3 x's their income?

Working women (ie 2 wage households) shouldnt really effect house prices. The overall participation rate peaked in the late 80s, the female participation rate has been flat since 1990.

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the crowd is not just the borrowers.

Its the sellers of the mortgages, the resellers of the mortgages, the regulators of the mortgages.

Liar loans ARE the crowd.

There is no evidence that liar loans make a big share of new loans no matter how many times we write it in red capital letters.
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In the article the photograph of the Prudential Regulation Authority's front door of its offices at 20 Moorgate has been taken with a neutral shot - not like the BoE's central offices on Threadneedle Street which nearly always gets the low-angle shot treatment.

It puts the importance of the Prudential Regulation Authority in perspective.

Moorgate is pretty narrow there. Not sure what other angle you can get!

Obviously the stress tests have been signed off by all levels at the BOE. The PRA is simply the unit that has the technical skills to run the project.

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There is no evidence that liar loans make a big share of new loans no matter how many times we write it in red capital letters.

I expect teh average salary versus average purchase price tells a story.

I personally know 3 people on IO mortgages all who lied to get the loans.

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There is no evidence that liar loans make a big share of new loans no matter how many times we write it in red capital letters.

well, apart from the fact the average new mortgage is around £150,000.

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