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Subprime & Mortgage Resets


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A number of posts have recently been highlighting the removal of sub-prime motgages (or keeping them, but at a penal lending rate).

I assume that the sub-prime mortgage is typically a self-cert, which has been at a fixed rate.

There could be serious double whammy in the offing here once reset time arrives (a la ARM mortgages in the US):

1. The new fixed rate deal will be at a MUCH higher rate than the existing mortgage

2. There could be a big ooh errr if the mortgage lender starts to ask for proof of income (and actually goes to the trouble of checking it...) for a new remortgaged self-cert.

So, we could have a situation where a self-cert mortgage resets to the SVR (painful), and the mortgagee will not be able to transfer to another fixed rate deal.

What was that about no sub-prime lending in the UK...... It couldn´t happen here as we do not do ARM mortgages.......

PS. Is there not about 2,000,000 mortgages about to be reset imminently?..............

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A number of posts have recently been highlighting the removal of sub-prime motgages (or keeping them, but at a penal lending rate).

I assume that the sub-prime mortgage is typically a self-cert, which has been at a fixed rate.

There could be serious double whammy in the offing here once reset time arrives (a la ARM mortgages in the US):

1. The new fixed rate deal will be at a MUCH higher rate than the existing mortgage

2. There could be a big ooh errr if the mortgage lender starts to ask for proof of income (and actually goes to the trouble of checking it...) for a new remortgaged self-cert.

So, we could have a situation where a self-cert mortgage resets to the SVR (painful), and the mortgagee will not be able to transfer to another fixed rate deal.

What was that about no sub-prime lending in the UK...... It couldn´t happen here as we do not do ARM mortgages.......

PS. Is there not about 2,000,000 mortgages about to be reset imminently?..............

sub prime are people with a history of bad debts, people who cant manage money. These people shouldnt have been able to get mortgages under normal circumstances. In UK terms, sub prime are people who don't have regular work, miss payments, on and off benefits, gambling and drink habits... (sorry for any generalizations).

someone on a self cert, may not be sub prime, it depends how good they are with money...

Edited by moosetea
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OK then, so it will be all those Lie To Buyer´s that will get creamed? I would imagine that there may be a rather large number of them out there......................

My sister is one of them. 2 years ago she told me to "go to the mortgage advisor and say what house you want and they'll tell you what you need to 'earn' to get it - easy!"

Really!

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sub prime are people with a history of bad debts, people who cant manage money. These people shouldnt have been able to get mortgages under normal circumstances. In UK terms, sub prime are people who don't have regular work, miss payments, on and off benefits, gambling and drink habits... (sorry for any generalizations).

someone on a self cert, may not be sub prime, it depends how good they are with money...

Not entirely true.

It is up to the ratings people.

Sub Prime is basically people who are slightly less likely to repay their mortgage in full.

Which is quite a broad definition.

Edited by ?...!
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Guest grumpy-old-man
sub prime are people with a history of bad debts, people who cant manage money. These people shouldnt have been able to get mortgages under normal circumstances. In UK terms, sub prime are people who don't have regular work, miss payments, on and off benefits, gambling and drink habits... (sorry for any generalizations).

someone on a self cert, may not be sub prime, it depends how good they are with money...

iirc haven't you just purchased a house recently ? or do I have you mixed up with someone else ?

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A number of posts have recently been highlighting the removal of sub-prime motgages (or keeping them, but at a penal lending rate).

I assume that the sub-prime mortgage is typically a self-cert, which has been at a fixed rate.

There could be serious double whammy in the offing here once reset time arrives (a la ARM mortgages in the US):

1. The new fixed rate deal will be at a MUCH higher rate than the existing mortgage

2. There could be a big ooh errr if the mortgage lender starts to ask for proof of income (and actually goes to the trouble of checking it...) for a new remortgaged self-cert.

So, we could have a situation where a self-cert mortgage resets to the SVR (painful), and the mortgagee will not be able to transfer to another fixed rate deal.

What was that about no sub-prime lending in the UK...... It couldn´t happen here as we do not do ARM mortgages.......

PS. Is there not about 2,000,000 mortgages about to be reset imminently?..............

Yep, over 2 million mortgages are due to 're-set' within the next 12 months.

Assuming an average monthly increase in repayment of £150.00 (roughly a 2 percentage points increase on a now typical £150K mortgage as this will mostly affect recent buyers), we are looking at a total annual increase of £3.6 billion !!!

That's a lot of money already stretched home-buyers will have to find at a time when inflation is coming back with a vengeance .....

Impact on consumer spending (already under way) will be brutal and severe leading to sharp rise in job losses and unemployment.

Add to this a probable spike in oil prices (tensions with Iran, terrorist attack(s) in Saudi) and things could really get dicey

This is why IMO the current IR of 5.75% will be enough to bring HPC.

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sub prime are people with a history of bad debts, people who cant manage money. These people shouldnt have been able to get mortgages under normal circumstances.

And there for the grace of God, go you.

People set up business that don't work out. People get ill and have to leave work, some people have to become carers for an aged one and have to give up FT work. Some people experience redundancy, unemployment or an unexpected disaster.

How foolish of them for not having a big cash cushion to fall back on, like you.

Yes many people "can't manage money" but don't tar everyone with the same brush. Some may deserve a second chance, though the avenues for that are fast disapearing, as pretty soon you will need the credit rating of a Rothschild to get a mortgage.

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Yep, over 2 million mortgages are due to 're-set' within the next 12 months.

Assuming an average monthly increase in repayment of £150.00 (roughly a 2 percentage points increase on a now typical £150K mortgage as this will mostly affect recent buyers), we are looking at a total annual increase of £3.6 billion !!!

That's a lot of money already stretched home-buyers will have to find at a time when inflation is coming back with a vengeance .....

Impact on consumer spending (already under way) will be brutal and severe leading to sharp rise in job losses and unemployment.

Add to this a probable spike in oil prices (tensions with Iran, terrorist attack(s) in Saudi) and things could really get dicey

This is why IMO the current IR of 5.75% will be enough to bring HPC.

Don't forget that a lot of people will have bought the 3 piece suite, white goods etc on an "interest free" offer as well. If they can't afford the "balloon payment" they will be forced into monthly repayments at a ridiculous APR calculated from the start of the agreement. Typically these are 2 year interest free "deals" so would become payable at around the same time the mortgage resets...

...Oh dear! :o

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Which is what I'm afraid of, they might just drop them again like they did in 2005.

Its different this time round, I dont think they will be able to once inflation starts to pick up. The best they will be able to do is hold until they see clear signs that housing is tumbling then they may cut, however by then I think it will be far too late.

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someone on a self cert, may not be sub prime, it depends how good they are with money...

But they'll be able to prove their income, even if it is irregular and from multiple sources (e.g. someone who is self-employed). If I was a mortgage lender, I'd make a big distinction between someone who provided proof of irregular income at the level they'd previously self-certified, and someone coming along to renew a fix who had previously declared an income of £50k PA, and who now can only produce P60s to demonstrate £25. Assuming the former had documentation going back several years and had never acted irresponsibly, I wouldn't consider him sub-prime. As for the latter, I wouldn't touch him with a marlin spike.

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....self cert is ideally for people who run their own businesses or people with a salaried income and a business(es) income stream(s) .....the problem arises when the product is hijacked by some brokers to push through what in normal circumstances would not be acceptable and as we have seen in reported cases 'trust' in such a business can be a dangerous 'flag'....many lenders going for their annual bonuses were happy to oblige..... :lol::lol::P

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I think we may also see a snowball affect as more people with sub-prime mortgages default, the lenders will put up the interest rates further which will cause more people to default ...

There is no doubt that many people who thought they would be able to remortgage are going to be in for a shock. I was surprised the other day to find that Northern Rock don't have an early redemption penalty (at least not beyond the length of the deal). I suspect that they're well aware that a large proportion of their borrowers aren't going anywhere else.

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I think we may also see a snowball affect as more people with sub-prime mortgages default, the lenders will put up the interest rates further which will cause more people to default ...

There is no doubt that many people who thought they would be able to remortgage are going to be in for a shock. I was surprised the other day to find that Northern Rock don't have an early redemption penalty (at least not beyond the length of the deal). I suspect that they're well aware that a large proportion of their borrowers aren't going anywhere else.

What would be nice is some MSE or similar non-troll posts of people unable to remortgage! :)

That would ge the best thing since....well..... for ages!

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Which is what I'm afraid of, they might just drop them again like they did in 2005.

If they do, it will be minimal and therefore ineffective.

Don't forget, inflation is real and getting worse. The BOE cannot ignore it or its credibility (well, what's left of it will be be shot to pieces)

There is also the small matter of the value of Sterling.

To cut IR would sink the Pound resulting in a massive loss of confidence and a sharp rise in imported inflation.

Nope, it's all too late IMO - DEBT will do it.

As someone said, it is real whereas the value of a house is a matter of (very subjective) opinion ....

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Which is what I'm afraid of, they might just drop them again like they did in 2005.

Base rate irelivant this time round

consumers no more appetite for debt

Lenders no more appetite for rsk

Imagine the fat man in the restaurant in Monty Python (flying circus?)

Just another wafer thin loan Sir?

No f**k off I'm full

Anymore loans to these debtors will only delay the inevitable EXPLOSION

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If I was to say that 1/3rd of all mortgages were self certified or "Income none verified" Would you be surprised?

If I was to say that 1/5th of all outstanding mortgage debt was self certified or "Income none verified" Would you be surprised?

If I was to say that these figures were from 2003 long before I new of housepricecrash.co.uk and that I started a 1 man campaign to get the interest of either the FSA or the Serious Fraud Squad and I was told by both that they were not interested. That the Serious Fraud Squad actually said that it was not in the countries best interest to investigate.

Would you be surprised...?

You see I had seen HPI rocket but I could not rationalise how this was possible, it exceeded normal multiples... so how did it work?

Dig dig... ahha.. People are lying... Quick.. This isn't good...

Luckily we have government agencies and the Police to protect us...

Obviously they wouldn't have allowed this to continue.... imagine the debt....

Still...

What I think.... What I really think..

Infact I didn't know the phrase at the time, I only new what it was...

It was the UK going SubPrime in 2003.

and the FSA and the Police... well..

Edited by apom
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That the Serious Fraud Squad actually said that it was not in the countries best interest to investigate.

Would you be surprised...?

This isn't good...

Luckily we have government agencies and the Police to protect us...

Obviously they wouldn't have allowed this to continue.... imagine the debt....

CAN YOU PROVE THIS?

I reckon this tiime next year the press are going to be crying out for stories like yours - hang on to it and when the time comes make it stick there must be a judgement day for this.

The regulators and authorities ahve let down a lot of people this time round (or is it again?)

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CAN YOU PROVE THIS?

I reckon this tiime next year the press are going to be crying out for stories like yours - hang on to it and when the time comes make it stick there must be a judgement day for this.

The regulators and authorities ahve let down a lot of people this time round (or is it again?)

I can't, the email was in a long discarded hotmail account.... I left it too long went back and it had been wiped...

2003 was a period of outrage for me.

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  • 442 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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