Mutual Slashes Ltvs To 50%

[Converted Lurker]

Earl Shilton, the Leicester-based mutual, has slashed the LTV on all its products to 50% due to over-demand.

It was previously 90% for introduced business and 95% for direct.

A spokeswoman for the mutual says that the recent increase in demand has resulted in case processing taking up to a month instead of its usual 10-day turnaround.

She says: "This isn't acceptable."

She adds: "The problem is that when you're a small society you can easily get a bad reputation, so we'd rather slightly close the door to business now and reopen it in due course."

But she says that she expects the reduction to have a minimal effect since around 75% of the mutual's business is below 75% LTV due to its higher lending charge.

Intermediaries generate 45% of Earl Shilton's mortgage business, which totalled £64.3bn for the 12 months to March 2007.

http://www.mortgagestrategy.co.uk/cgi-bin/...h=401&f=402

[_w_]

That is very interesting...

Why would brokers redirect their business to them if they have higher charges? Unless 90% LTVs aren't available from the rest of the industry?

There haven't been news of lenders pulling 90% LTV deals have there?

Who would those 90% LTV customers have normally gone to I wonder?

Edited March 14, 2008 by williamdb

[StainlessSteelCat]

Surely the answer is to get more back office monkeys... Or perhaps they don't have any more cash to lend out.

[HovelinHove]

No one wants business at the moment, so whoever has the current highest LTVs or cheapest rates is getting flooded with applications, so they 'close the door' by lowering LTV below everyone else, and increasing rates. It is the opposite of what happened on the way up as banks outdid each other for more and more insane lending products, only the chase to the bottom is going to be much faster. This pace of events will be reflected in the property market, as soon as the sellers realise the spring bounce isn't going to happen (IMHO that is all that is holding the market up from collapse at the moment) panic will ensue and live revaluations will occur on line as people compete for buyers as they try to offload their 'luxury' two bed BTL 'investment' that has been empty for 6 months. As prices drop further, the banks will lower the LTV further as they don't want to be stuck with negative equity. There will be more forced sellers as some banks effectively introduce margin calls on investment properties.

[Guest muttley]

This is the new definition of a "mutual". You pay half and we'll pay half.

[thecrashingisles]

This is the new definition of a "mutual". You pay half and we'll pay half.

I hope it catches on.

[Timm]

Surely the answer is to get more back office monkeys... Or perhaps they don't have any more cash to lend out.

My first reaction was that they seem very prudent, and should be taken as a good example of a responsible business model.

Then I realised that they are a (very) small mutual who have been lending at 95% LTV until yesterday.

You're right. They've got no money.

[lets get it right]

My first reaction was that they seem very prudent, and should be taken as a good example of a responsible business model.

Then I realised that they are a (very) small mutual who have been lending at 95% LTV until yesterday.

You're right. They've got no money.

It is very hard to understand the collective madness that is going on.

If you asked me for a loan I would consider how much you earn, your work record, how stable your employment is and how secure is the asset the loan is secured against. And then, if I was satisfied with all the answers, I might lend you up to 75% of the value of the asset - with the 25% as a hedge against the possibility of the asset falling in price and/or my costs in recovering the loan if you defaulted.

All seems like common sense to me. Why haven't banks or building societies got any?

Surely there must be some people in there over the age of 40 who remember what happened in the early 90s. Surely they can't be so stupid as to think property prices go up forever? Can they? It's too daft for words. There must be more to it.

[thecrashingisles]

All seems like common sense to me. Why haven't banks or building societies got any?

Surely there must be some people in there over the age of 40 who remember what happened in the early 90s. Surely they can't be so stupid as to think property prices go up forever? Can they? It's too daft for words. There must be more to it.

I think they were at the mercy of the really big money which decided, in its wisdom, that average nominal house prices can only ever go up. Why would they listen to the lowly people involved in the property business? And why would they even speak up when they are suddenly making a fortune out of it?

What the modelers ended up doing was testing their theory to destruction. The banks pushed prices up into an unsustainable bubble which was bound to explode.

[Converted Lurker]

My first reaction was that they seem very prudent, and should be taken as a good example of a responsible business model.

Then I realised that they are a (very) small mutual who have been lending at 95% LTV until yesterday.

You're right. They've got no money.

£64 bil of lending in a year is not 'small potatoes' for a mutual, I posted this to highlight another milestone in sea change, if that's not mixing up my metaphors are they metaphors? Been one of those weeks

[xux42]

She adds: "The problem is that when you're a small society you can easily get a bad reputation, so we'd rather slightly close the door to business now and reopen it in due course."

Looks like slamming the door in the face of business!!

Top quote!

I would have thought some borrowers will be literally cr@pping themselves reading stuff like this.

Keep an eye on colleagues over the next few weeks. Old loudmouth unusually quiet? Slightly wide, tired or strained eyes? Long absences at lunchtime 'sorting out the mortgage'? Phones slamming down.

MUHAHAHAAAA!!!

[_w_]

£64 bil of lending in a year is not 'small potatoes' for a mutual, I posted this to highlight another milestone in sea change, if that's not mixing up my metaphors are they metaphors? Been one of those weeks

I think the conclusion to be drawn is that the big clearing banks those 'minor' players depend on for financing are turning off the taps.

The next question is: are the clearing banks, those that are benifiting from all this free liquidity from cbs, reducing their own lending operations to the same extent or are they just abusing their position at the expense of fair competition?

Edited March 14, 2008 by williamdb

[thedebtisreal]

Wow, all these mortgage companies with "too much" business. Apparently even pricing pressures are not disuading customers

I'll tell you what. Crown, CL and myself should set up a mortgage business where we charge customers £25,000 if we can find them a 90% mortgage.

[Antsy]

Wow, all these mortgage companies with "too much" business. Apparently even pricing pressures are not disuading customers

I'll tell you what. Crown, CL and myself should set up a mortgage business where we charge customers £25,000 if we can find them a 90% mortgage.

Good luck hunting...