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Ft: Homeowners Face Payment Shock

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I have no sympathy for those idiots BTL and 4x4 plasmas. However, caught in this mess will be lots of poorer people and families. Again, some of you will say 'if you cant afford dont borrow' but in todays UK PLC, with shite jobs and mimimum wages why should home ownership be forever out of reach?

This is going to get very nasty indeed. UK Subprime meltdown in q2 08.

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http://www.ft.com/cms/s/0/d212fd44-6dbf-11...00779fd2ac.html

Homeowners face payment shock

By Jane Croft, Retail Banking Correspondent

Published: September 28 2007 13:59 | Last updated: September 28 2007 13:59

Homeowners with patchy credit histories are set to face a 26 per cent jump in their monthly mortgage payments due to the global credit squeeze, according to a new report.

Standard and Poor’s, the ratings agency, said that 80,000 UK borrowers who are due to come to the end of existing mortgage deals now face a huge “payment shock” because subprime mortgage lenders have been pushing up interest rates and tightening lending criteria in recent weeks.

Many subprime mortgage lenders such as GMAC and Kensington are now asking borrowers to put down a larger deposit of 25 per cent - rather than the 10 per cent which was required just a few weeks ago.

In its report S&P believes the global credit squeeze - which has seen lenders struggle to raise funding and securitise mortgage assets into the capital markets - will make it much harder for borrowers to re-mortgage on similar terms.

Tougher rules will prevent subprime customers with poor credit records from remortgaging because lenders may refuse to offer them a new deal when they come to the end of their current rate. This would leave them stuck on expensive standard variable rates.

This will mean borrowers’ monthly payments will rise sharply which could in turn lead to greater home repossessions and more borrowers falling into arrears.

In the report S&P says: “the likely scale of this upcoming effect - and the potential subsequent impact on borrowers’ payment behaviour - is relatively severe by recent standards.”

It says that borrowers are facing “one of the largest payment shocks witnessed since the 1990s.”

Andrew South, analyst at S&P, says that a borrower who took out an interest-only mortgage in October 2005 might have paid an interest rate of 7 per cent - or around £500 a month for a £85,000 mortgage.

However, even if this borrower were now able to get a new mortgage deal, the best rate available would be around 8.25 per cent which would push up monthly payments by 18 per cent to £589.

S&P believes more realistically that subprime borrowers will only be able to get rates of 9.25 per cent which in this case would push up monthly payments by 32 per cent to £661.

In the worst case scenario, a borrower unable to get another deal elsewhere, would revert to their existing lender’s standard rate. This is likely to be 11.25 per cent, pushing up their monthly payments by 60 per cent to £800.

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Most don't want to listen.......... and prefer the Sun to the FT :unsure:

Pardon :P ...can't say I have read either, but what is about to unfold has been on the cards for a period of time, and has not been kept a secret.

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I took out a self cert mortgage (i'm self employed) in October 2004 with a 5.25% 3 year fix, I have just fixed again at 6.1% no fees, which considering the 1% rise in base rate and the current turmoil I am well pleased with.

btw - just noticed i'm member 198 and it's now over 10,000!!

Edited by Get A Grip

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If you are sub-prime and take out a fixed rate mortgage with a subprime lender for 2 years and do not miss any payments will you not be considered more prime by the end of your term?

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If you are sub-prime and take out a fixed rate mortgage with a subprime lender for 2 years and do not miss any payments will you not be considered more prime by the end of your term?

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we've heard this all before- and guess what? the BTL folks get a fixed deal which saves them from repo.

also wasn't the big crash meant to be q3 2007? now its q2 2008. In 2008-the crash will start in 2009- in 2009 the crash will start in 2010..................................... ?

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Most don't want to listen.......... and prefer the Sun to the FT :unsure:

...what you fail to understand these people prefer to look at pictures....the FT's pictures don't hit home ...the secret of communication is 'know your audience'.......the Sun does it well..... :lol::lol::lol::P

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we've heard this all before- and guess what? the BTL folks get a fixed deal which saves them from repo.

also wasn't the big crash meant to be q3 2007? now its q2 2008. In 2008-the crash will start in 2009- in 2009 the crash will start in 2010..................................... ?

Q3 2007 ... Q3 2008 crash delayed by some very innovative book keeping ... but don't worry it'll catch up with them sooner or later.

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Q3 2007 ... Q3 2008 crash delayed by some very innovative book keeping ... but don't worry it'll catch up with them sooner or later.

...look at the last crash ..started '88 many people didn't feel the pain until '92..'93...are you trying to rush things...?.... :lol::lol::lol::P

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