Thursday, December 18, 2008

How many !!!!!!

Two million planning mortgage payment holiday

Research from uSwitch.com reveals more than two million borrowers are considering taking a mortgage payment holiday.uSwitch.com believes collectively this could push their monthly repayments up by £54m and increase their total interest by £7.2bn. Despite the government's recent announcement to offer cash strapped mortgage customers a two-year freeze on interest repayments, 729,054 people claim they are considering or have already taken a holiday because they are expecting to be made redundant.

Posted by jack c @ 03:41 PM (2471 views)
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14 thoughts on “How many !!!!!!

  • titaniccaptain – “what a mess….” correct and this course of action will……… yes make it worse. Re-arranging the deck chairs on the Titanic springs to to mind (how apt)

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  • This has a connection Mark W’s post earlier re 500,000 likely to be 3 months in arrears. These ‘Holidays’ simply mean going into mutually agreed arrears and actually 2 million is probably much more accurate the way things are going. These are bad times, there are so many negatives and relentlessly debt is being encouraged as the answer simply because tomorrow is another day.
    From Wikpedia:
    ‘Chaotic systems are systems that look random but aren’t. They are actually deterministic systems (predictable if you have enough information) governed by physical laws, that are very difficult to predict accurately.’

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  • uSwitch press release, regurgitated by the newsfeed with a staff writer’s byline attached. Their statistics are extrapolated from a small sample of 1,051 mortgage holders. If they didn’t weight the sample correctly, their answers could be (and probably are) wildly wrong. Their research organisation, Research Now, do *online* fieldwork – not clear if it was a self-selecting sample which tend to bias heavily.

    Original release:
    http://www.uswitch.com/press-room/Index.aspx?downloadfile=TWO-MILLION%5B1%5D-PEOPLE-ARE-CONSIDERING-A-MORTGAGE-PAYMENT-HOLIDAY

    In fairness, the original release does quote the actual research and the extrapolations made.

    uSwitch is a comparison website funded by, you guessed it, commission from the advertised companies. Their interest is in getting people to switch mortgages via them rather than take payment holidays.

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  • This is a global problem that requires a global stance, the two-year freeze on interest repayments will help many households in this country and we are taking the lead in the world today with our policys being reflected on the international stage. If you cant help the situation keep out.
    Gordon Brown
    Prime Minister

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  • Payment holidays means rolled up debt and more interest owing putting more strain on the fractional reserve system. Can the interest owing ever now be paid off?

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  • well expected in a deflationary environment. real interest rates will in effect be very high. Most people are squeezed.Deep depression ahead folks!

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  • plato, well spotted on the link to arrears. Presumably if the banks allow their customers to take lots of payment holidays, it looks better than having lots of arrears.

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  • drewster…….

    Yes it’s all about the art of Spin……… sounds better…….. but isn’t………looks better……. but isn’t………feels better……….but……..etc.
    and how dizzy we all become!

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  • Surely the banks have to take a charge / reserve for this on their balance sheet, which restricts further the amount they will be able to lend to new borrowers. If the take up is as high as suggested this slows down the repo man but eventually he will come back on speed. An extremely bad idea. Still back and watch the carnage.

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  • “If the take up is as high as suggested this slows down the repo man but eventually he will come back on speed.”

    Indeed. He’ll come back with a vengeance. On angel dust with a nasty glint in his eye. This cosy little arrangement is papering over repossession statistics to the government and lenders’ mutual benefit. A way of sweeping the problem under the carpet for a short while.

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  • @plato
    ‘Chaotic systems are systems that look random but aren’t. They are actually deterministic systems (predictable if you have enough information) governed by physical laws, that are very difficult to predict accurately.’

    Not sure what you think is chaotic but:

    Chaos is to do with the predictability of a system’s behaviour in response to tiny changes in the system’s parameters. So for instance, if one were to create a model of the housing market and run it, and then run it again with the tiniest change to any of the starting parameters, then it might be described as chaotic if the the model produces two radically different outcomes (that become increasingly divergent through time as the error propagates). Is the housing market chaotic then (on a time scale of the next year or two)? For instance, if some muppet decided to lower interest rates by 0.000000001%, could house prices do anything whatsoever by the end of a two year time period from now (within reason – e.g. doubling in value) or would they continue their downward trajectory?

    I think the market is quite predictable (within margins of error) and is imho not chaotic at all.

    Underwater bubbles, on the other hand, do behave chaotically (in terms of the radial oscialltion of the bubble wall) if they are in the presence of an incident acoustic wave or impulse of sufficient magnitude. Here endeth the lesson.

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  • Guy’s all valid points made in relation to this article and just to expand a little further “payment holidays” have infact been around for several years (Halifax – major player by market share has had this option available on certain products for many years).

    What a lot of people do not realise (including dare I say it people who actively work in the mortgage market) is that upon attempting to re-mortgage confusion often arises in relation to those who have taken or are on a payment holiday in that the new lender will seek confirmation from the existing lender that all payments have been made on time and are up to date etc.. hardly suprising based on the administration/processing standards of most lenders that it get reported that the account is in arrears (because of the payment holiday) and believe me it is a nightmare to try and unravel.

    The whole thing (for me) has disaster stamped all over it

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  • There are 2 scenarios here, and probably only 2, either the house bubble busts say 30/40% but absolute carnage is avoided by devaluation/inflation ,or house prices keep dropping and dropping and dropping and we all get wiped our in the ensuing carnage, home owners and renters united alike.

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  • Looking back at that example I gave above trying to highlight how the housing market is not chaotic – it’s wrong in that if the BoE did lower interest rates by 0.000000001% everyone would think they’ve gone barking mad and I’m sure it would have an unpredictable effect on the markets! A better example would have been to say that if there was a difference between the two models of 0.000000001% in the average house price at the start of the simulation then it would not lead to a wildy different average house price prediction between the two models for two years time. As there would be no discernable difference in the result, it is not chaotic.

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