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The Masked Tulip

Hang On A Sec... If Nationwide Withdraw...

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If Nationwide, one of the UK's biggest mortgage lenders, withdraw the majority of its mortgage products thereby tightening up its mortgage lending... then that means a large number of its own customers coming to the end of fixed terms in the coming months will be unable to remortgage with them... unless, I assume, they go with punitive IRs.

But as most will not be able to pay punitive charges that means... that means they are screwed... Where else can they go for a mortgage?

What happens if you come to the end of a fixed term and then discover your own mortgage company will not give you a new product? You are stuck on their punitive variable mortgage rate and if you cannot afford it... Oh dear...

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Exactly why everyone should be budgetting for SVR.

I've just built a spreadsheet and, frankly, we're screwed if rates don't drop to 2% sharpish.

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This is something I find most gratifying. It should now be clear to all that the market is setting interest rates, not the BOE.

The risk premium for credit demonstrates the problems which are now entrenched, and which the industry obviously sees as long term.

This is The Nationwide, not some local mortgage shop!

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The CML said that there would be a shortfall of some 30Bn needed by the mortgage market this year. Are these the early signs? The figure could need revising anyway as that was said some months ago.

It could be like musical chairs, except not finding a chair (new mortgage) could cost you the house that you were living in!

p-o-p

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It might be a cgnao like thought, but what happens if all banks decide to stop giving any new mortgages? As TMT says, they could just carrying screwing their existing customers without taking on any new risk. God help the housing market if that happens.

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It could be like musical chairs, except not finding a chair (new mortgage) could cost you the house that you were living in!

Not quite... if you can meet the SVR, then you're still in the game. This is quite important... I envision a lot of cars & plasma TVs being sold for peanuts 0 and unsecured loans being taken out by the over-stretched simply to make the mortgage payments. I'll believe that the party is in full-swing when we hear that the only people who can get unsecured credit have no mortgages. ;)

It is this squeeze that I think will plunge the UK into retail recession.

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It might be a cgnao like thought, but what happens if all banks decide to stop giving any new mortgages? As TMT says, they could just carrying screwing their existing customers without taking on any new risk. God help the housing market if that happens.

Dont say that :ph34r: .....

on the other hand my 10% deposit may be enough to purchase outright in the end :P

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Guest Shedfish
It might be a cgnao like thought, but what happens if all banks decide to stop giving any new mortgages? As TMT says, they could just carrying screwing their existing customers without taking on any new risk. God help the housing market if that happens.

if the Nationwide are effectively out, mortgages are going to be in very short supply very soon.. unlike houses - there'll be loads of them

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And of course the banks don't mind withdrawing their mortgage products as they make on the way down as well as on the way up. Consider the fact that fractional reserve banking allows the bank to "underwrite" your mortgage (take the rap if you don't pay) - but what do they care - they get to repo your house and even if they sell it for half of what you "paid" for it, they still make. The money lent was just a number on an electronic balance sheet - it was backed by your ability to pay for 25 years and maybe a small deposit. The house is really only worth as much as there is money in the economy NOW, at this point in time - credit is just a notion but it keeps many enslaved for life. That's the idea. In many moslem countries, like Egypt, houses can be bought within a couple of years and paid for up front, with real, earnt, money. That's how it should be - not a yoke on your shoulders for life.

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Aren't Northern Rock doing the same? Probably explains why the smaller building socities such as Monmouthshire today announced they would no longer give out mortgages to people out of their area - people must be so desperate they are looking around everywhere.

But if 2 or 3 of the big boys do this then that will leave potentially millions on IRs they cannot afford.

I had glanced over the Nationwide news today and not really taken it in but having just glanced at several of tomorrow's papers, and seeing what a big story they are making of the Nationwide decision, then this is potentially the BIG PUSH towardst he BIG CRASH of UK house prices... unless it is an attempt by Nationwide to push the BOE to reduce IRs.

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Is it possible that the lenders want to lose their existing borrowers too? Do they know that bad debts and reposessions are going to reach fearsome levels and are getting out of the game before it is too late?

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I've been on Nationwide's SVR since 1987. It was normal back then to be on SVR. IIRC there was not much else. I can't be ar$ed with these new fangled mortgage products. Too much small print. Although I'm considering going in and asking if the can give me anything better than SVR for the last few years of my mortgage term. I've been making overpayments and never defaulted, so would I get something decent, do you reckon?

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I seem to remember a few years ago a lot of 'experts' on TV continually banging on about the huge amount of people who ARE on SVRs at their lender of choice. They were encouraged to 'sort themselved out' and get a discount, f/r, cashback, capped, blah blah, etc.

Most people who take out fixed or discount rates, etc. are therefore fairly recent borrowers and if they extended themselves, relying on continual low rates when they come to renew, well, time to wake up and smell the coffee!

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It might be a cgnao like thought, but what happens if all banks decide to stop giving any new mortgages?

I think it remarkably unlikely that banks will stop mortgage lending all together. If they did that, they'd have to suffer larger write downs for the properties they're forced to repossess and auction.

It is going to be in the lenders' interest to replace the most unreliable payers among their victims with fresh blood. If you have a character on a 90% mortgage from 2000, say - who's paid down a further 10% - and now finds themselves unable to keep up the interest payments, the bank needs to recover 80% of the 2000 price. If a new customer offers 20% deposit and borrow the rest using a mortgage (at SVR) then this reduces the lender's exposure *and* stabilises their income stream.

There will always be mortgages on offer... one scary question, however, is this: Will lenders only be interested in people who already have a lot of collateral? Will they prefer to sell to a retired person who owns their own home outright - since then they can repossess two homes rather than one when the BTL venture fails? It all depends how forward thinking the lenders' policies are going to be, and how they decide to model risk.

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Is it possible that the lenders want to lose their existing borrowers too? Do they know that bad debts and reposessions are going to reach fearsome levels and are getting out of the game before it is too late?

Very good point.

If it was my bank, this is exactly what i would do.

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Stuart Law from Assetz doesn't see a problem though. ;)

"While the economy suffers at the hand of credit crunches and Wall Street crises, it's important to remember that it is possible to take advantage of the one thing that has taken a positive drop in recent months - the base rate set by the Bank of England."

http://news.assetz.co.uk/articles/4084.html

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Don't get overexcited yet. All they've done according to the other thread is add 0.2% to their tracker. Hardly forcing families destitute into the gutters.

(Okay, yes, also 0.5% to their fixed rate.)

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What's that burning smell in the distance? Why of course, the UK market is about to become toast! :) The lenders are beginning to realise that they won't be paid back, which took a very long time. Think of all that "money" (equity) evaporating into thin air as prices crash and people just walk away from their BTLs. Here you go! And thanks for the good thread MT.

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The banks need HPC like a hole in the head, but slowly, slowly increase interest and morgage re-setters will look else where for better deal, getting them off their books.

Also true for FTB.

They have already calculated what impact this could do to housing market, and will be looking to off load rather than take a larger hit later on with HPC.

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How many current borrowers is this going to affect, those coming out of a low rate fixed deal yes, those on a limited time discount deal yes.

Who does it not affect, those already paid up homeowners, those on long term fixed rate deals of 5+ years (Dunno what things will be like when they finish), those on long term discount deals i.e a couple of percent below the SVR, those with a tracker deal tracking the BOE base rate and finally those who revert to a decent rate after a fixed period i.e 0.5 , 0.7 , 1% above the BOE rate for the term of the mortgage after a deal ends.

I am in the last band, 3 years left on a fixed rate then reverting to BOE rate + 0.6% for term if this works out better than the other offerings in 3 years time.

But yes agree this could have a massive affect on housing prices, on the other hand it could cause alot of people to batten down the hatches and stay where they are to weather the storm and put off that move up the ladder, 1 because it would be too risky and 2 because getting the credit to move may just not be there.

BTL landlords may decide to hold on to their property realising that if they sell the chances of getting another BTL property with a mortgage at a decent rate will be pretty slim whilst at the same time many FTBs will also be unable to buy and so will have no option but to turn to renting, forcing up rental prices.

Its all guess work and the same with most of the posts on here, there is always more ways than one to look at them if you have a VI.

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If Nationwide, one of the UK's biggest mortgage lenders, withdraw the majority of its mortgage products thereby tightening up its mortgage lending... then that means a large number of its own customers coming to the end of fixed terms in the coming months will be unable to remortgage with them... unless, I assume, they go with punitive IRs.

But as most will not be able to pay punitive charges that means... that means they are screwed... Where else can they go for a mortgage?

What happens if you come to the end of a fixed term and then discover your own mortgage company will not give you a new product? You are stuck on their punitive variable mortgage rate and if you cannot afford it... Oh dear...

You can't technically remortgage with your existing lender tmt, you can take an alternative product or a further advance, but the point you make is nevertherless a valid one. Nationwide have traditionally been a 90pct plus ltv lender concentrating on 90pct and 95pct ltv products respectively, but, as a broker I have seen the trend of offering high ltv products change as lenders become increasingly desperate to secure low ltv clients and avoid potential negative equity situations, also lenders are at present having their own difficulties raising money to lend, so if you were a lender, would you want to be lending to someone who had 5pct equity in their property last year (in which case it is probably now 1pct) or to someone who had 40pct equity in their property last year??? The ongoing problems for the people out there is that if they have little equity left in their property then they will probably have to accept their existing lenders svr rate as 100pct remortgages are non-existent.

best regards

Carrington

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Don't get overexcited yet. All they've done according to the other thread is add 0.2% to their tracker. Hardly forcing families destitute into the gutters.

(Okay, yes, also 0.5% to their fixed rate.)

Zeno's Wallet paradox.

People said this some months ago when Libor went up. Its only 0.X %, people can always economise.

So everytime his bills go up, Zeno just halves his outgoings and carries on. He never has a problem.

Sooner or later this can't be true.

It certainly does over one of the most common Bull arguments one used to hear here: Oh it'll be fine, any trouble and I'll just remortgage and get a better deal... oops.

We never hear from those people anymore funnily enough.

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But if the banks have no cash and are hoarding what little they have whilst also trying to get as much bad debt off their books as possible... well, they are all in the same boat aren't they... Who do you go to? Where do you go? The next 6 - 12 months are going to be painful for large numbers of home owners.

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  • 293 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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