Mortgage Market About To Go Down The Tube

[bobby9983]

Hi guys,

I'm afraid the credit crunch is about to catch up with our mainstream residential mortgage market. Now readers of this may well be on here because either they don't own property and are willing prices down so they can afford to buy, can't afford to trade up so are willing prices down so they can or, have already sold and are just having a laugh now becasue they got out while the going was good - lucky you.

The credit crunch started in August. First went the second charge loan market - to the benefit of daytime TV advertising. Next went the sub prime and self cert market. Then the bridging finance market. Now with Commercial First leaving the non conforming commercial market only the high street banks are left. Over the last 2-3 weeks buy to let lenders have been withdrawing product ranges every few days and today some of the big players MX and BM have effectively withdrawn by introducing highly uncompetitive ranges that just don't fit your average rental income. Today the Mortgage Works and UCB homeloans have capped their loan to values at 75%. The only lenders with decent rates are Natwest & C&G and they are swamped with applications so will pull their ranges too.

The residential mortgage market has seen 100% plus mortgages go. Today The Mortgage Works pulled the last 100% product. I predict that in 2-3 weeks there won't be any 95% products and soon loan to values may reduce even further.

This will effectively kill the housing market, a slow and painful death by a thousand cuts, forcing repossession upon many, not because of negative equity, but because they simply won't be able to afford their revert rates and won't have a product to remortgage to.

[eric pebble]

Hi guys,

I'm afraid the credit crunch is about to catch up with our mainstream residential mortgage market. Now readers of this may well be on here because either they don't own property and are willing prices down so they can afford to buy, can't afford to trade up so are willing prices down so they can or, have already sold and are just having a laugh now becasue they got out while the going was good - lucky you.

The credit crunch started in August. First went the second charge loan market - to the benefit of daytime TV advertising. Next went the sub prime and self cert market. Then the bridging finance market. Now with Commercial First leaving the non conforming commercial market only the high street banks are left. Over the last 2-3 weeks buy to let lenders have been withdrawing product ranges every few days and today some of the big players MX and BM have effectively withdrawn by introducing highly uncompetitive ranges that just don't fit your average rental income. Today the Mortgage Works and UCB homeloans have capped their loan to values at 75%. The only lenders with decent rates are Natwest & C&G and they are swamped with applications so will pull their ranges too.

The residential mortgage market has seen 100% plus mortgages go. Today The Mortgage Works pulled the last 100% product. I predict that in 2-3 weeks there won't be any 95% products and soon loan to values may reduce even further.

This will effectively kill the housing market, a slow and painful death by a thousand cuts, forcing repossession upon many, not because of negative equity, but because they simply won't be able to afford their revert rates and won't have a product to remortgage to.

Well!!! What a difference a few months make!! Not so long ago a corpse was able to take out a "mortgage" for pretty well anything it liked!!

See 13th post down - http://www.housepricecrash.co.uk/forum/ind...15&start=15

[worried]

http://www.dailymail.co.uk/pages/live/arti...in_page_id=1770

"Lenders are increasingly refusing to hand out mortgages unless borrowers put down a large deposit.

The Woolwich is today launching a ten-year mortgage fixed at 5.29 per cent - but it is only available to those with a 40 per cent deposit.

There is also a punishing 6 per cent early repayment penalty."

[Ursus]

40% Deposit

Won't take long for it to reflect houseprices. If only all lenders wanted that

[29929BlackTuesday]

Hi guys,

I'm afraid the credit crunch is about to catch up with our mainstream residential mortgage market. Now readers of this may well be on here because either they don't own property and are willing prices down so they can afford to buy, can't afford to trade up so are willing prices down so they can or, have already sold and are just having a laugh now becasue they got out while the going was good - lucky you.

The credit crunch started in August. First went the second charge loan market - to the benefit of daytime TV advertising. Next went the sub prime and self cert market. Then the bridging finance market. Now with Commercial First leaving the non conforming commercial market only the high street banks are left. Over the last 2-3 weeks buy to let lenders have been withdrawing product ranges every few days and today some of the big players MX and BM have effectively withdrawn by introducing highly uncompetitive ranges that just don't fit your average rental income. Today the Mortgage Works and UCB homeloans have capped their loan to values at 75%. The only lenders with decent rates are Natwest & C&G and they are swamped with applications so will pull their ranges too.

The residential mortgage market has seen 100% plus mortgages go. Today The Mortgage Works pulled the last 100% product. I predict that in 2-3 weeks there won't be any 95% products and soon loan to values may reduce even further.

This will effectively kill the housing market, a slow and painful death by a thousand cuts, forcing repossession upon many, not because of negative equity, but because they simply won't be able to afford their revert rates and won't have a product to remortgage to.

Great post bobby (can this be moved to the pinned credit tightening thread?). Very clear.

funny how it all becomes obvious in hindsight isn't it? Seems so clear and logical.

Keep posting bob - we could do with some clarity here!

[HovelinHove]

You've nailed it Bobby.

Basically the residential property market is going to completely die. Those on this site who want to buy in at the bottom will need to have humungous deposits, credit scores of 999, and ultra secure jobs. This is going to make the crash of the early 90s look like a picnic, this is so much worse, I've never in my life seen anything like it. Even big developers are experiecing the same problem, the Crossharbour development in London has suddenly been put on hold half way through construction...could it be that the banks have shortened the credit lines.

Unfortunately it is going to be catastrophic for the economy too. Unemployment is going to rocket as businesses have their overdrafts cut, and financing for projects dries up. Only cash rich companies will come out unscathed, and even those will use this an excuse to tighten their belts. Luckily the company I work for has over 80 billion dollars in the bank, I just hope it's not fu(king HBOS!

[talksalot81]

The funny thing is that, as the credit situation has worsened, I have been getting more and more offers of mortgages! Maybe if they had chased the higher earners in the first place instead of forgetting us in favour of low earning sheeple, this mess would never have happened!

[Leonard Hatred]

The Woolwich is today launching a ten-year mortgage fixed at 5.29 per cent - but it is only available to those with a 40 per cent deposit.

If I bought a small place, I could actually meet that condition. But why bother?

Prices will be cheaper a few months after that

[Bloo Loo]

Its a credit crunch.

there is a reason its called that.

pundits assessing the FV of housing need to understand the plain English name of the problem.

[thecrashingisles]

The funny thing is that, as the credit situation has worsened, I have been getting more and more offers of mortgages! Maybe if they had chased the higher earners in the first place instead of forgetting us in favour of low earning sheeple, this mess would never have happened!

The people who stand to lose the most are the high earners who can still afford to buy at the moment on a sensible multiple. They'll end up trapped in a home way below what they could reasonably expect for their income level.

Anyone borrowing money to buy property now is a fool.

Edited March 20, 2008 by thecrashingisles

[Hardy Spicer]

BBC Today programme:

Bath and something like Peter Shilton building societies withdrawing nearly all mortgage products as too many applicants.

[Bloo Loo]

BBC Today programme:

Bath and something like Peter Shilton building societies withdrawing nearly all mortgage products as too many applicants.

Shock, Horror, next you are going to have had an account with a bank/BS to even get a mortgage

[lets get it right]

The funny thing is that, as the credit situation has worsened, I have been getting more and more offers of mortgages! Maybe if they had chased the higher earners in the first place instead of forgetting us in favour of low earning sheeple, this mess would never have happened!

Me too! Every day I am cold called by people offering me mortgages out of the blue.

They say things like 'Would you like to buy this parcel of mortgages? The amount outstanding is £100 million secured against property worth £180 million.'

I usually say 'Worth how much?' And they say "£179 million".

And I say 'Sorry, bad line, how much?' And they say '£178 million'

Not a time for snap decisions.

[lets get it right]

Shock, Horror, next you are going to have had an account with a bank/BS to even get a mortgage

Ahh, the good old days. I remember the first time I got a mortgage almost feeling privileged. I think my Dad thought I was getting above myself.

[sambino]

I think it will go back to the old days where you got your mortgage off the local authority not banks and they only lent you 2x your salary

[bobthe~]

http://www.dailymail.co.uk/pages/live/arti...in_page_id=1770

"Lenders are increasingly refusing to hand out mortgages unless borrowers put down a large deposit.

The Woolwich is today launching a ten-year mortgage fixed at 5.29 per cent - but it is only available to those with a 40 per cent deposit.

There is also a punishing 6 per cent early repayment penalty."

I almost bought this product in May. The LTV was the same I think, but the rate was 5.59 IIRC. Sounds like it has gone down a bit.

The 6% penalty was there then as well.

Bet the booking fee is at least a grand.

We paid 600, which we lost when the seller pulled out. He put it on the market for 150k more back in december.

Biggest favour anyone has ever done us I reckon.

[Dubbya]

BBC Today programme:

Bath and something like Peter Shilton building societies withdrawing nearly all mortgage products as too many applicants.

I think it's the Earl Shilton Building Society.

Nice idea though; the Peter Shilton Building Society - "Best Savings Rates from a...Permanent"

[mrg]

ok..so given that I have no way and no intention of buying for at least two years is there something to be said for starting a relationship with a few more BS or Banks now..via a savings account or something

In order to be first in the queue for one of these scarce mortgages?

I have a credit score of 959..presumably because I am self employed and have never owned property

So which BS's and Banks would be worth sending 50 quid a month to starting now? Or is that too little or just mad?

[steve99]

I think it will go back to the old days where you got your mortgage off the local authority not banks and they only lent you 2x your salary

Or building society where you had saved 20% deposit and held an account for at least 2 years etc etc, however this would be good and would set the price for housing close to realistic building costs without having to take out a mortgage the speculative part of the deal as we now do.

[laurejon]

I think it will go back to the old days where you got your mortgage off the local authority not banks and they only lent you 2x your salary

Yep, fine if you work for the local council or in the Civil Service.

However if you work for private industry 2x earnings would get you a tent from millets with some change for the bus to the local soup kitchen.

[Lepista]

Yep, fine if you work for the local council or in the Civil Service.

However if you work for private industry 2x earnings would get you a tent from millets with some change for the bus to the local soup kitchen.

Sorry Laurejon, I only seem to be shouting down your comments at the moment - it's not personal, honest

Anyway, this is GOOD, because if people can only ever afford a house for £100, then guess what - house prices drop to be that price. At 2x earnings, and 20% deposit, this would give an house price of around £65k.

It is irrelevant as to what the price is now. They are only this price now because the credit has been available for lending 9x salary with 0% deposit. So guess what, average houses have recently been priced at around £225k.

OK, supply might totally dry up, and people would not want to sell unless they HAD to, but the houses that sold would only sell for that amount.

[gilf]

This will effectively kill the housing market, a slow and painful death by a thousand cuts, forcing repossession upon many, not because of negative equity, but because they simply won't be able to afford their revert rates and won't have a product to remortgage to.

Good post bobby unfortunately you are about 3 years too late. The great and the good of this site (not including myself in that) have predicted this scenario for about 3 years.

What I find so amazing is that this whole situation seems to have been a surpise to so many people, all that has surprised me is the situation has gone on so much longer than I initially expected, therefore making the pain so much worse in the longer run.

[R K]

Or building society where you had saved 20% deposit and held an account for at least 2 years etc etc, however this would be good and would set the price for housing close to realistic building costs without having to take out a mortgage the speculative part of the deal as we now do.

Ahh happy days. I have fond memories of the National & Provincial Building Society. The world will be a better place without the Adam Applesh*ts we have had to endure for the past 10 years.

[roadtoruin]

Sorry Laurejon, I only seem to be shouting down your comments at the moment - it's not personal, honest

Anyway, this is GOOD, because if people can only ever afford a house for £100, then guess what - house prices drop to be that price. At 2x earnings, and 20% deposit, this would give an house price of around £65k.

It is irrelevant as to what the price is now. They are only this price now because the credit has been available for lending 9x salary with 0% deposit. So guess what, average houses have recently been priced at around £225k.

OK, supply might totally dry up, and people would not want to sell unless they HAD to, but the houses that sold would only sell for that amount.

You seem to suppose no lower limit to price would or should apply, but 2x average salary would be below conventional building cost and therefore unsustainable. There might be some supply in depressed abandoned areas down at that price- but then that's not where the housing is needed.

With no supply you'd have to have a queue for council houses and a queue to buy houses at this fictional low rate; I can't really see why you think this situation would be good except for landlords.

It's a nice idea but doesn't get past first base - it'd be back to Laurejons Millets tent I'm afraid...

[grey shark]

What I find so amazing is that this whole situation seems to have been a surpise to so many people, all that has surprised me is the situation has gone on so much longer than I initially expected, therefore making the pain so much worse in the longer run.

The bit that really p1sses me off is that Northern Rock collapsed 6 months ago , even then banks and lenders although tightend up there lending criteria a little still carried on , they still couldn't see how much sh1t they were all in .

Obviously these last 6 months have been like a denial period for the banks and lenders , now at last the've woken up and are now firmly in the anxiety and fear stage , by mid summer it will be panic , next year capitulation .