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APerson

Morgage bailout in the event of a crash?

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24 minutes ago, Clarky Cat said:

Isn't there already support for people made unemployed - Support for Mortgage Interest (SMI)?  

 

They could make it pay off your principle as well like it used to.

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29 minutes ago, Clarky Cat said:

Isn't there already support for people made unemployed - Support for Mortgage Interest (SMI)?  

I'm sure some kind of broader scheme could be concocted similar to this - aiming to "help" "hard working families" stay in their homes, but loading them up with more debt. Perhaps a Help to Buy or shared ownership kind of thing where the government or housing association takes up the negative equity but you end up paying off another loan or rent. 

Just extend the SMI scheme to cover capital repayment as well as interest, So effectively the debt gets transferred to the government

Then alter the repayment structure so that it is taken out of their benefits & means test the repayments (in the same way as student loans) so if/when they are in work 25% of their net pay is taken until the debt is cleared.

Not that I'm advocating such a system, But that's how I'd design it if I had to. 

 

Edited by Council estate capitalist

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23 minutes ago, Council estate capitalist said:

Just extend the SMI scheme to cover capital repayment as well as interest, So effectively the debt gets transferred to the government

Then alter the repayment structure so that it is taken out of their benefits & means test the repayments (in the same way as student loans) so if/when they are in work 25% of their net pay is taken until the debt is cleared.

Not that I'm advocating such a system, But that's how I'd design it if I had to. 

 

And then write off the 25% anyway

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5 hours ago, APerson said:

I've been thinking:

In the event of a crash leading to mass unemployment and/or substantial interest rate increase rises many people would fail to be able to make their morgage payments. House prices would also crash which would lead many to go into negative equity.

At this point would the government be under pressure to step in and start to bail out home owners or put restrictions on the banks reposessing houses?

If this is the case is it a good idea to enter into the housing market before a crash inorder to benefit from a bailout?

There are very few properties with mortgages on them.

 

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6 hours ago, APerson said:

I've been thinking:

In the event of a crash leading to mass unemployment and/or substantial interest rate increase rises many people would fail to be able to make their morgage payments. House prices would also crash which would lead many to go into negative equity.

At this point would the government be under pressure to step in and start to bail out home owners or put restrictions on the banks reposessing houses?

If this is the case is it a good idea to enter into the housing market before a crash inorder to benefit from a bailout?

Your thinking is not clear.

A HPI crash leading to mass unemployment???

The biggest crash the UK has seen was in the 90s with prices falling ~60% in nominal terms in places. That did not cause mass unemployment, rather the period from 92 -> late 90s were the best the UK had ever experienced, economically.

The UK economy != UK house prices, no matter how much people would think it is.

Substantial IR rise? Put a number to it 3%, 5% 10% 50%???

Again, how many houses have unfixed mortgage finance on them?

Pick a town, any town.

~30% of the population will be retired, so carrying little debt.

Another 30% will not be working - too young o unemployable.

That leaves ~40% working. How many will have debt?  How many have unfixed debt?

IRs could go to 100% and not affect me and 1000s other whove took out 2, 5 10 year fixes.

When my ~1.5% 5y fix ends Ill have credit card level debt left.

We've had ~10 years of ZIRP. I nthat time - IO mortgages aside - ~40% of active mortgages in 2009 will have been paid off. More will have been halved etc etc.

The number of new mortgages being written is tiny. Thats why the banks are panicing - noone can/wants to borrow, at least within MMR.

Even in the 90s only a small number could not meet their mortgage payments. 

The biggest financial risk the UK carries is unfunded public sector pensions.

Again, UK housing != UK economy.

 

 

 

 

 

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1 hour ago, Clarky Cat said:

Isn't there already support for people made unemployed - Support for Mortgage Interest (SMI)?  

I'm sure some kind of broader scheme could be concocted similar to this - aiming to "help" "hard working families" stay in their homes, but loading them up with more debt. Perhaps a Help to Buy or shared ownership kind of thing where the government or housing association takes up the negative equity but you end up paying off another loan or rent. 

SMI - Browns 'bail out  - ha ended. Or rather requires a charge.

The unflushed turd of brown's miracle economy - IO mortgages - is being taken care off.

Effectively IO mortgages are banned.

Anyone with an IO BTL will be selling up due to the tax changes.

Anyone with an IO OO mortgage and over 55ish will be moved to a RIO mortgage. Owner sigsn over house, Life compnay writes policy, bank takes a hit and shoves some capital in, lessons learnt and all that.

 

Anyone under 50ish with an IO mortgage shoudl have sold up ages ago.

 

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i had  no trouble getting good jobs in the 90's....i had bought a house after the crash from the Abbey who repo'd it from a couple...i originally took an endowment mortgage realised within a few years to switch to a repayment...an amortising mortgage....i personally witnessed repossessions....people were not pursued for the shortfall as they had no money...they were not off the hook though and it was a mark on their credit....

 

I had an IO mortgageat one point this century.. i took the position it was just renting from the bank with a leveraged position on going long the housing market.....i got rid of it and the house it was attached  to as I am now bearish the housing market...the property investment i have has no mortgage so makes no odds to me what it does....i don;t get off on big numbers to boast about down the pub....

Edited by Spindler

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4 minutes ago, Spindler said:

here's a thought what happens to RIO mortgages in a downturn do they stop offering them ?

Why would they?

I think you misundertand what RIO mortgages are.

These are not equity release rather they are a position that a  life co take on how long Mr n Mrs IO will take to die.

There's nothing magic about them. They are not sold, just offered as a bailout to a bank and the IO mortgage owner.

 

Homeonwer takes on a RIO mortgage and pays x%. When they die, the LifeCo claism the house.

IO home 'owner' has no claim on the property and has to pay an interest stream.

Life co gets a higher yielding income stream (the interest on the RIO) and it gets a chunk of capital - hopefully when they drop dead.

The interest stream is used as a hedge in a very large pool of life assets  - an ice high yielding stream, linked to life expectancy.

RIOs will be sold whilst there's over 55s with IO mortgages ending i.e. requireing the capital to be paid..

 

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ok so you have to have an IO and be say over 55 and prepared to give up any equity you have in it.....if not you have to sell it to get your equity..........i'm guessing this is the only track....you cant just rock up no property no mortgage of any kind and get a RIO at 55 with a chunk of deposit and get a property with a RIO mortgage

Edited by Spindler

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14 minutes ago, Spindler said:

ok so you have to have an IO and be say over 55 and prepared to give up any equity you have in it.....if not you have to sell it to get your equity..........i'm guessing this is the only track....you cant just rock up no property no mortgage of any kind and get a RIO at 55 with a chunk of deposit and get a property with a RIO mortgage

RIO requires ~50% equity and an retirement income stream to serve the mortgage.

Unlike ER the interest does not build up - the pensioner pays it.

Remember - this is not a new mortgage.

Then. when they go into care, the house is sold and the money distributed.

Im not sure how they handle care home care costs.

Its not  bail out. ADN its not goign to last long ~10 years. And its only go to be for  several 100k  people..

 

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2 hours ago, spyguy said:

RIO requires ~50% equity and an retirement income stream to serve the mortgage.

Unlike ER the interest does not build up - the pensioner pays it.

Remember - this is not a new mortgage.

Then. when they go into care, the house is sold and the money distributed.

Im not sure how they handle care home care costs.

Its not  bail out. ADN its not goign to last long ~10 years. And its only go to be for  several 100k  people..

 

intersting so if it was one pensioner and they croaked one week after that 50% equity can still be distributed to family....sounds better than ER where i've heard when the same happened quickly whatever was paid out as ER was dwarfed by the dues to the ER company

 

oh no i'm wrong you already said the life co claims the house but thats the luck of the draw and how they make it work ..some winner and some losers.....so when someone enters into that thats any inheritance gone...a lot of people dont like that....and i don;t mean the beneficiaries specifically....people like to leave something...but if their  means are limited its the best option.....and has to be taken on the chin all round....as you say these will disappear as time goes on...and they close themselves out

Edited by Spindler

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Just now, Spindler said:

intersting so if it was one pensioner and they croaked one week after that 50% equity can still be distributed to family....sounds better than ER where i've heard when the same happened quickly whatever was paid out as ER was dwarfed by the dues to the ER company

Yes.

Its a better deal than ER as the interest does not compond but ...... you do need a reasonable pension to service the debt. Each 100k rio will cost you 3%-4% at the mo, so 5k of your pension. Id guess fees are hefty too.

Again RIO are a bail out for the bank and IO mortagee, and a hedge for a lifeco - but its not free.

So Mr n Mrs IO - 400k house, 200k equity can stay in it if they pay 10k/y.

 

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i was about to ask a question but pretty sure i answered it myself if 400k house drops to 200k....thats the family stuffed but the financial institutions are all good unless you had a worse crash than 50% ad i'm sure they've crunched the numbers in their favour/hedged accordingly....

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36 minutes ago, Spindler said:

i was about to ask a question but pretty sure i answered it myself if 400k house drops to 200k....thats the family stuffed but the financial institutions are all good unless you had a worse crash than 50% ad i'm sure they've crunched the numbers in their favour/hedged accordingly....

With a RIO? Nothing. The 50% equity protects the RIO lender.

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11 hours ago, winkie said:

Why would a lender want to reposess a property that is falling?........they would probably charge the interest only, the debt still remains or the owner could hand back the keys to the 100% owner the lender as many did in the past.....lost a home, lost deposit and equity all up in a puff of smoke.....many walked away never to repay, some with young children got given a council home.;)

How many repossessions occur where they couldn't even afford the interest? Why would anyone pay their full mortgage if the bank wouldn't repossess? There has to be a threat of repossession and consequently there will be some repossessions if people don't keep up with their payments.

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16 hours ago, spyguy said:

Your thinking is not clear.

A HPI crash leading to mass unemployment???

The biggest crash the UK has seen was in the 90s with prices falling ~60% in nominal terms in places. That did not cause mass unemployment, rather the period from 92 -> late 90s were the best the UK had ever experienced, economically.

The UK economy != UK house prices, no matter how much people would think it is.

Substantial IR rise? Put a number to it 3%, 5% 10% 50%???

Again, how many houses have unfixed mortgage finance on them?

Pick a town, any town.

~30% of the population will be retired, so carrying little debt.

Another 30% will not be working - too young o unemployable.

That leaves ~40% working. How many will have debt?  How many have unfixed debt?

IRs could go to 100% and not affect me and 1000s other whove took out 2, 5 10 year fixes.

When my ~1.5% 5y fix ends Ill have credit card level debt left.

We've had ~10 years of ZIRP. I nthat time - IO mortgages aside - ~40% of active mortgages in 2009 will have been paid off. More will have been halved etc etc.

The number of new mortgages being written is tiny. Thats why the banks are panicing - noone can/wants to borrow, at least within MMR.

Even in the 90s only a small number could not meet their mortgage payments. 

The biggest financial risk the UK carries is unfunded public sector pensions.

Again, UK housing != UK economy.

 

 

 

 

 

Again, UK housing != UK economy.   So are they trying to cut the froth off...why would they allow falls ?

Was watching Wonders of the Universe....Prof Cox goes up to 18k feet to see the curvature of the earth in an English Electric Lightning.....his quote as he caressed the silver body prior to takeoff

...."this is an English Electric Lightning....back when we used to make things.....good things"

 

Germany is a manufacturing economy and they don't like speculation on house prices....to the point the companies that have bought swathes of Apartments in Berlin and have been jacking rents are now facing legislation including the whoesale forced purchase of their inventory.....

Edited by Spindler

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11 minutes ago, Spindler said:

Again, UK housing != UK economy.   So are they trying to cut the froth off...why would they allow falls ?

Was watching Wonders of the Universe....Prof Cox goes up to 18k feet to see the curvature of the earth in an English Electric Lightning.....his quote as he caressed the silver body prior to takeoff

...."this is an English Electric Lightning....back when we used to make things.....good things"

 

Germany is a manufacturing economy and they don't like speculation on house prices....to the point the companies that have bought swathes of Apartments in Berlin and have been jacking rents are now facing legislation including the whoesale forced purchase of their inventory.....

Who's they?

Why would any UKGOV allow falls - they have the past. They cannot aord to not allow falls, thats why.

What this obsession why manufacturing? Most German manufacturing is cars, ICE cars. Does not look liek a good bet at the mo.

You need people i gainful, productive  employment, competing and producing goods.

By value UK manufacturers more stuff then it did i n the 70s, the supposed good years. Most of the 70s good were sh1t.

 

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9 hours ago, Kosmin said:

How many repossessions occur where they couldn't even afford the interest? Why would anyone pay their full mortgage if the bank wouldn't repossess? There has to be a threat of repossession and consequently there will be some repossessions if people don't keep up with their payments.

They would be repocessed if they have no money to pay the mortgage rent.....many do continue to pay a mortgage if they are able, many did in the past and now own their homes outright, many signed up to low fixed rates over a period of time.

Of course there will be repocessions.......every case is different I would imagine.....but lenders are not in the business of holding empty property, and would still want back the money they lent, preferably from the existing debtor or a new purchaser with the ability and means to pay.;)

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What is it..........with all.........the full stops........being used.......as some sort.......of strange punctuation..........on this forum........?

Winkie......appears......to have.......a period friend......!!  Have both.....your.....periods synchronised...?!

Edited by elephant

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16 minutes ago, spyguy said:

Who's they?

Why would any UKGOV allow falls - they have the past. They cannot aord to not allow falls, thats why.

What this obsession why manufacturing? Most German manufacturing is cars, ICE cars. Does not look liek a good bet at the mo.

You need people i gainful, productive  employment, competing and producing goods.

By value UK manufacturers more stuff then it did i n the 70s, the supposed good years. Most of the 70s good were sh1t.

 

 

15 minutes ago, winkie said:

They would be repocessed if they have no money to pay the mortgage rent.....many do continue to pay a mortgage if they are able, many did in the past and now own their homes outright, many signed up to low fixed rates over a period of time.

Of course there will be repocessions.......every case is different I would imagine.....but lenders are not in the business of holding empty property, and would still want back the money they lent, preferably from the existing debtor or a new purchaser with the ability and means to pay.;)

in the 90's those who made it through had a golden time ahead of rising prices and falling rates(of course they didnt know that)......I do not see that ahead for todays leveraged crowd....they don;t even have wage inflation....I more than tripled my earnings between 92 and 2002.....

 

As the peak in London and the South East is already behind us I don't see anything turning this around and if Spyguy and his grasp on MMR is on the money.....it is down down down down down is it not ?

The worst thing for a leveraged asset holder is the asset falling in price thereby making the debt on the asset more onerous as a proportion of the value of the asset......we already know that a lot of HTB are already in negative equity....if they tried to sell and clear the mortgage and HTB....once the late to the party crowd heavily levered but buyers of existing property slip into Negative Equity...there will be howls.....its a rat trap ..and you've been caught..so goes the song

Edited by Spindler

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20 minutes ago, elephant said:

What is it..........with all.........the full stops........being used.......as some sort.......of strange punctuation..........on this forum........?

Winkie......appears......to have.......a period friend......!!  Have both.....your.....periods synchronised...?!

Pardon me, my intention was not to make you angry (another thread) been dotting since I joined.....been dotty for as long as I can remember.;)

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17 minutes ago, winkie said:

Pardon me, my intention was not to make you angry (another thread) been dotting since I joined.....been dotty for as long as I can remember.;)

I’m not angry......just intrigued.  Was odd seeing it in your posts but two separate users doing exactly the same is very unusual.  Is it a bit of an OCD thing, like your winking smilie at the end of every post?

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22 hours ago, winkie said:

or the owner could hand back the keys to the 100% owner the lender as many did in the past

I believe this is just a 90's myth - there was no 'handing back the keys and all was forgiven'  there was a debt to be repaid, default, repossession and credit history ruined.

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  • 225 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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