Jump to content
House Price Crash Forum
Sign in to follow this  
numpty

Mortgage Lending

Recommended Posts

I have been puzzled for some time as to why banks get involved in mortgage lending. The mortgage rates they charge are around 5%. They must pay around 2-3% to obtain the funds. I am assuming much of this has been obtained from Japan where rates have been nearly zero, and I assume they have had to put in place a hedge to protect them from currency movements. Then they have to administer the loans and in due course take their share of losses.

In the past there was cross selling of financial products but this has now fallen by the wayside.

I would have thought investing in say Gilts could have better returns

Please can you enlighten me?

Share this post


Link to post
Share on other sites

this is one reason why the credit tighening is coming. a lot of banks have been borrowing from the us at low rates and making small profit. according to the telegraph the other day the make about 0.2 pct on lending. but when you are lending 15 billion a month extra you can see how it adds up.

also what people dont know is that for every pound you deposit in the bank they can lend several times that amount. especially on secured loans, ie houses. so you deposit 100,000 and they give you 4.5 pct, they can lend 300,000 and charge 4.5 pct and you see a good profit. thats essentially how they do it.

but as not enough of us deposit money they borrow from overseas and that is going to stop as the money from the us and japan is drying up. so even if rates dont go up here, the money supply will stop and getting credit will be harder.

this is something people on this site miss. when houses fall in value it will be harder to get a mortgage and so you may not be able to buy when the prices come down, because no one will lend you the money.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 301 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%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.