Monday, February 4, 2008

30-40% of mortgage lending sub prime

Despite the credit crunch UK mortgage market dominated by prime and self-cert residential lending

For all the recent focus on sub-prime mortgages in the US, the UK mortgage market continues to be dominated by prime and self-cert residential lending - and this applies to loans generated both via the intermediary sector and direct to consumer. IMLA, the Intermediary Mortgage Lenders Association, has collated estimates of 2007 mortgage volumes split between direct and intermediary business...

Posted by converted lurker @ 03:16 PM (1198 views)
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11 thoughts on “30-40% of mortgage lending sub prime

  • the entire BTL market is subprime. Money is not lent to individuals’ ability of servicing the debt, but to the asset itself in the expectation that its nominal value can only go up. Well that is not true. Average BTLs have £2m property portfolios with £1.6m in bank loans. what a bad balance sheet.
    If you mark to market the new flat developments, asset value is less than debt…. if that is not subprime

    the equation subprime = selfcert is too restrictive as it excludes the UK specific idiocy of the BTL

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  • Self cert mortgages are mostly subprime, especially if taken out in the last few years.

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  • I meant

    Subprime = selfcert + BTL + stretched FTBs + developer scams + etc + etc

    probably less than 10% of all outstanding mortgages but surely more than 50% of new mortgages in 2007!
    and you only need 2-3% of outstanding mortgages to be foreclosed to crash prices!
    remember that market prices are set at the margins

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  • japanese uncle says:

    Those charlatans who initially maintained that there was no subprime risks in the UK, must be named and shamed, so people wll no longer take him/her seriously, as they were not mistaken but were trying to misguide the public intentionally, in a vicous attempt to rig the market.

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  • it_is_going_with_a_bang says:

    The reason is simple… the is no other way of buying property other than sub prime for so many people because it’s so dam expensive in the first place.
    I was in a high street last week and the Financial Advisor Shop had huge lettering on the windows saying 125% mortgages, Self cert, with CCJ’s etc etc. all over the place.
    Having said that the sign on the door said closed and it was 11:30 am in the morning and all the lights were out 😉 not enough custom to stay open?!

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  • According to the IMLA (who I can’t see having an unbiased view anyway) there was “little movement in the size of the self cert and sub-prime markets”.

    However, in the July 2007 article below from Irwin Mitchell, “In 2006, the [sub-prime] sector grew by 28 per cent”.

    http://www.irwinmitchell.com/News/UKSubPrimeMarketSetToGrow.htm

    I think the sub-prime market in the UK is much bigger than anybody is admitting. Remember 6 months ago we were told there was no sub-prime.

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  • Just watched Panorama. Apparently houses have for some time been registered as being sold for far more than they actually sold for, with incentives from developers replacing deposits from BTLers. Therefore the bank “thinks” it has lent an 85% mortgage, when in reality it has lent 100%.

    So you can bet your bottom dollar that when the banks estimate 10% of its loan book as being “risky” (i.e. 100% LTV, with CCJs etc) it is probably closer to 50%.

    This thing is going to unravel so fast and so far it will be astounding. And dear old Nana Ukua, who bought her flat for £300,000 (because of the quality of the neighbours – snobby cow!!) and who has just had it revalued at 200k, says that she will probably have to wait for about a year before it’s worth 300k again.

    mwuah ha!!

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  • HAHA saw the panorama programme

    Yes that Nana woman actually believes that her flat is gonna be £300K again in a years time after the riff raff are cleared out (who operated a STUDENT LOAN SCAM, A BROTHEL AND A FAKE BANK!!!) ,

    That Barrat development had overgrown plants and looked in complete disrepair, not to mention those pikey kids running amock on one of those minature monkey bikes.

    it gonna be less than £150K more like.

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  • Nana Ukara is going to be waiting for a very, very long time before her Thamesmead turdhole is going to be worth £300k!

    I still can’t get over the lady that spent £1.5m odd on four houses she’d never seen.

    Deserve everything they get.

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  • Once upon a time..

    … banks and building societies were staffed by people who received no bonuses, started working for the company when they were 18 and retired when they 60 or 65 with a very nice pension and a golden handshake, after spending their entire career with the company.

    ..those people had the long term best interests of the company very much at heart, balancing the risks of lending against the need to maintain an adequate mortgage book with great care, the security of their own pensions being very much at the back of their minds.

    This self-protecting system began to fall apart twenty years ago. Today, the employees of these companies change employer with alarming frequency, and are barely concerned if their actions today will cause the company to go bust two years hence – much more important are the bonuses and commissions they can get now.

    While those in the back office try to install checks and balances to avoid signing up dodgy loans, those in the sales force try to find ways around them to get clients signed up.

    The industry is full of people turning a blind eye, or being pressured to misbehave – if one surveyor’s valuations are always lower than another’s, who gets the work?

    The system is ripe for an almighty crash – watch your savings…

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  • Landofconfusion says:

    > 1. confused76 said…
    >
    > the entire BTL market is subprime.

    Remember what Greenday (or whatever his name was) said? It’s the banks money so it’s the banks problem. Too true.

    > 3. confused76 said…
    >
    > and you only need 2-3% of outstanding mortgages to be foreclosed to crash prices!

    I’m not disagreeing with you but how do you work that one out?

    > 7. inbreda said…
    >
    > And dear old Nana Ukua, who bought her flat for £300,000 (because of the quality of the neighbours – snobby cow!!) and who has just had it revalued at 200k, says that she will
    > probably have to wait for about a year before it’s worth 300k again.
    >
    > mwuah ha!!

    My thoughts exactly.

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