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Mortgage Mutterings: The week that was 21 – 25 November 2011

by: Mortgage Solutions
  • 25/11/2011
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Mortgage Mutterings: The week that was 21 – 25 November 2011
This is the Mortgage Solutions weekly talk back page.

Govt to underwrite new build mortgage risks

Mortgage Solutions | 21 Nov 2011 | 08:46
Mortgage Solutions

In 2008 the financial system nearly failed due to people getting mortgages they couldn’t afford to repay. Clever people packaged up the debt and ‘passed the parcel’. Banks then had a brainwave – we’ll only lend to those who can afford to repay. The UK government then decided that this is a foolish idea and that people should be allowed to borrow – even if they have no hope of repaying. We need you to spend, because that is what makes our economy run.

It is irrelevant that the average UK citizen is the most indebted in the world and that private UK debt exceeds GDP. It is irrelevant that the government has a debt mountain that will take 20 years to repay (if then). So don’t worry guys and gals – if you default, the taxpayer will pick up the tab, along with the tab to repay UK debt, MPs’ pensions and expenses, and any other great idea that springs to mind.

Oh, and at the end of the day, we may allow you to keep 30p of every pound you earn and will extend Tax Freedom day to 30 November annually. It is our avowed policy to ensure that the prudent continue to bail out the feckless.

Harry Katz
21 Nov 2011 | 09:25

Why make it complicated. When I purchased my house in the 1970s, I obtained a 95% mortgage and had a mortgage guarantee policy (paid by me via the lender). Why can we not go back to something like this?

Terry
21 Nov 2011 | 10:08

This scheme sounds good but could be dangerous for potential borrowers. However, when economists are predicting a 10% fall in house prices this year, having the government encouraging first-time buyers to get on to the ladder using a low deposit could be viewed as irresponsible.

Potential first-time borrowers would be wise to be sceptical about jumping into this scheme as property prices are still high and they could easily end up in a negative equity situation with a mortgage on a property that is worth less than the mortgage outstanding and preventing them from selling.

Is the government offering this scheme to help first-time buyers? Or is its main purpose to help out the house building sector, which is suffering? If this is not the case, why is the scheme only available for new build properties? It’s alright getting on the property ladder, but not if the rung breaks at the top and you’re stuck there. I will offer this scheme to my clients when it is available, but I will be giving some warnings about negative equity and the over pricing of new build properties

Bob Riach, Riach Independent Financial Advisers
21 Nov 2011 | 14:15

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Exclusive: Interest-only repayment vehicle letters will continue – Halifax

Mortgage Solutions | 21 Nov 2011 | 10:55
Simret Samra

If they are going to write such letters to their existing interest-only clients and the repayment plan doesn’t fit in with the standard Halifax idea, what are they going to do about it – force them onto repayment.

Somehow, I think that the FSA might be contacted about that! Clients do have their own minds and some might even say, at the end of the term I’m going to sell and return to rented. If they accepted them as interest only when they took out the mortgage, forcing the client into changing to repayment is against so many rules (written and unwritten) I can’t think where to start!!!

Or am I being naive and lenders can retrospectively rewrite agreements to the detriment of their client, forcing them into financial hardship.

El Tel
21 Nov 2011 | 11:38

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MS One to One with Halifax for Intermediaries’ Ian Wilson

Mortgage Solutions | 21 Nov 2011 | 11:01
Simret Samra

Halifax reminds me of a retired Heavyweight Boxing Champion and I remember when they used to be great.

Kevin Fowler
21 Nov 2011 | 13:11

On the ropes!! Regarding Ian’s comment “I can honestly say that I spend as much of my time with regional managers and BDMs and have never heard criticism of that process of writing to check to see what the plan is. If it’s a real issue for brokers, it’s quite unusual for me to not have heard any negative comment on it at one of our broker forums.” I believe the reason why he hasn’t heard any adverse comment is because it’s only just started to filter down to us and yes the clients don’t like it!

Michael Rogerson
22 Nov 2011 | 10:50

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FSA slammed for failing to investigate poor bank advice

Mortgage Solutions | 22 Nov 2011 | 08:36
Rahul Odedra

NEVER. They adhere to TCF!!!!!!!!!!!!!!!

Barry Davis
22 Nov 2011 | 09:57

Why would the FSA bite the hand that generously feeds it. This is why you will never see a bank have its licence removed.

KS
22 Nov 2011 | 11:02

I can’t remember a time when I wasn’t hassled (oops I should say propositioned!!) by a bank employee, (on what I might be planning with the deposit funds I hold, my home insurance or mortgage etc, etc), on a visit to my bank.

Banks are the equivalent (in the eyes of the FSA) to what the lion is to the Serengeti. They are at the top of the food chain and will always remain unchallenged by the FSA.

Justice and fair play is what the regulator dictates to others, not the other way around. On a happier note, I personally get more enjoyment out of picking on the perversions (like this) of the FSA than hoping to see change in them. If a change to the FSA’s subservience to banks ever appears, I think I will have died and gone to heaven.

Chris Ridgeway
22 Nov 2011 | 16:39

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High LTVs return, but FTBs don’t know it

Mortgage Solutions | 22 Nov 2011 | 16:29
Adrian Scott

It is not just mortgage funds that FTBs require, it is for the value of the UK housing market to fall, as it doubled between 2000 and 2007 due to the BTL bubble and easy credit.

I have been encouraging the government to remove tax incentives for landlords in order to discourage investors from entering the BTL market, so that property prices can fall and FTBs including tenants can join the housing ladder.

In addition, BTL investors should not be allowed to borrow more than 50% on second properties as in China. The government urgently needs to “burst the BTL bubble” in order that house prices can fall significantly.

My generation has benefited greatly over the past 25 years at the expense of the youngsters of today and this wealth needs to be redistributed now rather than awaiting for inheritances that may not come. This, in my opinion, is a much better option than putting taxpayers’ money at risk with mortgage indemnity guarantees for new property.

Colin Cloy
22 Nov 2011 | 17:14

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Wanted: Repo agents with own stab vests

Mortgage Solutions | 22 Nov 2011 | 15:29
The Insider

Back in the 1980s whilst working for Nationwide, I went to take possession of a property and was threatened by the brothers of the borrower. The father intervened (thank goodness) and told me that not only had his daughter married a feckless man, but that they’d been in this situation before. You just never know what you might be walking into…

Bill
22 Nov 2011 | 17:30

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FSA fines non-advised mortgage firm £28k; bans bosses

Mortgage Solutions | 24 Nov 2011 | 11:25
Mortgage Solutions

Will the FSA now do the same for banks?

David William
24 Nov 2011 | 12:05

Just what I was thinking David. Sounds like bank (non) advice or even Martin (I don’t advise) Lewis.

Ian Griffiths
24 Nov 2011 | 12:12

My first thought was the same – hmmmmm non-advised, but clients think that they are getting advice – that will be the banks then. Clueless FSA.

Anon
24 Nov 2011 | 13:18

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HSBC launches fee-free 90% deal at 3.84%

Mortgage Solutions | 24 Nov 2011 | 00:05
Kay McLellan

Hope this spurs the lenders that do allow broker intros to reduce their rates and fees.

Greg
24 Nov 2011 | 13:40

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Shapps in Radio 4 row over affordable housing figures

Mortgage Solutions | 25 Nov 2011 | 11:02
Vicky Hartley

In my opinion the term ‘affordable housing’ is a joke as lenders all want huge deposits on these properties, which makes them far from affordable. Yes, the houses are normally 25%-30% cheaper, but first-time buyers have not got large deposits (normally about 20%).

Paul
25 Nov 2011 | 12:24

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Ageism – the mortgage market’s dirty little secret?

Mortgage Solutions | 25 Nov 2011 | 12:38
Mortgage Solutions

Surely the rules regarding lending into retirement are now obsolete due to the recent changes in default retirement age. Lenders need to keep up to speed with the law!
John Hill
25 Nov 2011 | 13:58

The rules on lending into retirement are now completely bonkers. Surely a pensioner with a guaranteed income for life and looking for a low LTV deal is less risky than a first-time buyer who has been in a job for six months and looking for 90%?

If this is a reaction to what lenders anticipate will be in the MMR then the FSA will need to take a look at this area again.
David
25 Nov 2011 | 14:49

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This week’s star comment comes from Rob, who gives us his thoughts on the government’s housing strategy:

Govt to underwrite new build mortgage risks

Mortgage Solutions | 21 Nov 2011 | 08:46
Mortgage Solutions

Where does this idea come from that because someone doesn’t have a deposit they are a lending risk and “feckless”. If a person has a perfect credit rating and lives in an area where they cannot afford to save a deposit, because they have been forced to pay private rent at a time when it is higher than it’s ever been, then why should they be punished?

Many of these people will be a lot better off by getting on the ladder rather than being expelled to the rental sector for the significant future. If government can cover the banks’ risk and get some of these “prime” borrowers back onto the housing ladder then great, but why limit it to developers where only a chain of one benefits.

Open it to all first-time buyers, so the economy can then get the benefit of several properties in a chain. Five lots of stamp duty, five lots of VAT on sols, surveyors and EA fees, five lots of all the people involved in each transaction earning more, paying more tax, spending more in the shops, etc, etc, etc.

Rob
21 Nov 2011 | 09:52

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Thank you for all your comments,

From the Mortgage Solutions team

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