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Sub-prime mortgages re-emerge. What could possibly go wrong...?


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38 replies to this topic

#1 John Drake

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Posted 07 August 2013 - 08:36 AM

Astonishing...

 

Sub-prime mortgages re-emerge in wake of Funding for Lending scheme
Loans designed for borrowers who have 'experienced one-off event resulting in adverse credit record', says lender

http://www.theguardi...ages-re-remerge


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#2 archibald

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Posted 07 August 2013 - 08:40 AM

So, if you have a black mark on your credit history you should never be able to get credit/mortgages/etc in the future?



#3 John Drake

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Posted 07 August 2013 - 08:42 AM

So, if you have a black mark on your credit history you should never be able to get credit/mortgages/etc in the future?

 

Well, it's a policy that ended really well the last time, let's just repeat the mistake, huh.


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#4 archibald

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Posted 07 August 2013 - 08:48 AM

Well, it's a policy that ended really well the last time, let's just repeat the mistake, huh.

Ah, so that's how we do things from now on. It went #### up before so we must never, ever do it again.



#5 gingerjon

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Posted 07 August 2013 - 08:51 AM

Ah, so that's how we do things from now on. It went #### up before so we must never, ever do it again.


It would be foolish to deliberately create another housing bubble given that we know bubbles burst.
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#6 John Drake

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Posted 07 August 2013 - 08:52 AM

Ah, so that's how we do things from now on. It went #### up before so we must never, ever do it again.

 

Clearly not, if this is any example.

 

Still, never mind eh, Johnny Taxpayer will be around to pick up the tab.


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#7 getdownmonkeyman

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Posted 07 August 2013 - 09:13 AM

It would be foolish to deliberately create another housing bubble given that we know bubbles burst.

 

The housing market being the key driver for the UK economy. The Government and Financial Institutions wouldn't like, would they.....



#8 archibald

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Posted 07 August 2013 - 09:21 AM

It would be foolish to deliberately create another housing bubble given that we know bubbles burst.

And people also have a responsibility to only take on what they can afford. Just because someone's willing to lend you money doesn't mean you're obliged to snap their hand off.



#9 getdownmonkeyman

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Posted 07 August 2013 - 09:45 AM

And people also have a responsibility to only take on what they can afford. Just because someone's willing to lend you money doesn't mean you're obliged to snap their hand off.

 

Very true. However, the facility to borrow in excess of 100% was farcical, to say the least.



#10 gingerjon

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Posted 07 August 2013 - 09:47 AM

And people also have a responsibility to only take on what they can afford. Just because someone's willing to lend you money doesn't mean you're obliged to snap their hand off.


An interest only mortgage for more than 100% of the value of a house is usually cheaper than rent.
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#11 archibald

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Posted 07 August 2013 - 09:50 AM

Depends. First time

 

An interest only mortgage for more than 100% of the value of a house is usually cheaper than rent.

Indeed it is. The problem is those who take out the interest only mortgage always have a plan to repay the principal, but they'll sort it tomorrow.



#12 getdownmonkeyman

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Posted 07 August 2013 - 10:11 AM

Depends. First time

 

Indeed it is. The problem is those who take out the interest only mortgage always have a plan to repay the principal, but they'll sort it tomorrow.

 

Knowing a couple of people who took interest only mortgages, tomorrow was 25 years off. Their plan was to get to the end of the term, sell up, then repay the capital. 



#13 ckn

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Posted 07 August 2013 - 10:20 AM

Knowing a couple of people who took interest only mortgages, tomorrow was 25 years off. Their plan was to get to the end of the term, sell up, then repay the capital. 

If they'd paid as repayment then they'd get to keep the capital or they'd have somewhere to live rent-free for the rest of their lives if their health or financial situation deteriorated.

 

It was someone on this board a few years ago that said that interest-only mortgages were like gambles that you always lose.  Even if you sell up at the end of 25 years at a massive profit, it's profit minus the price of the house you have to pay back meaning you'll have to either hope you have enough other savings to pay the difference for a new house, take out a new mortgage for a similar size house, downsize or rent.


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#14 gingerjon

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Posted 07 August 2013 - 10:32 AM

If they'd paid as repayment then they'd get to keep the capital or they'd have somewhere to live rent-free for the rest of their lives if their health or financial situation deteriorated.

 

It was someone on this board a few years ago that said that interest-only mortgages were like gambles that you always lose.  Even if you sell up at the end of 25 years at a massive profit, it's profit minus the price of the house you have to pay back meaning you'll have to either hope you have enough other savings to pay the difference for a new house, take out a new mortgage for a similar size house, downsize or rent.

I said similar. I'm not advocating interest only mortgages by the way. But if you're struggling with rent and don't own your house anyway ...


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#15 Tiny Tim

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Posted 07 August 2013 - 10:36 AM

Astonishing...

 

Sub-prime mortgages re-emerge in wake of Funding for Lending scheme
Loans designed for borrowers who have 'experienced one-off event resulting in adverse credit record', says lender

http://www.theguardi...ages-re-remerge

 

....and so the cycle begins once again.



#16 Ackroman

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Posted 07 August 2013 - 10:48 AM

While ever we live by capitalistic values we shouldn't be surprised.

Re interest only mortgages. They were designed for people with opportunities to raise capital through other means such as shares, pensions and similar products, by their ability to increase in value.

If people don't have any vehicle in place then that is foolish, however even a modest investment in ban k shares would have yielded a fantastic return over a repayment mortgage.

Therefore I don't know how you can castigate interest only mortgages when most consumers at the time they were developed, were relying on the straight jacket option pushed onto them by their bank. We also know what effect "bank-only" options had on peoples finances.

#17 JohnM

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Posted 07 August 2013 - 10:50 AM

...and as the encouraged greed ( at the expense of the less fortunate) of many in this  property owning democracy knows no bounds, it will all end in tears yet again and the gap between renters and owner will continue to increase

 

Darling, he's said his first words! "I  must get on the property ladder....I  must get on the property ladder....I  must get on the property ladder....I  must get on the property ladder....I  must get on the property ladder....I  must get on the property ladder....I  must get on the property ladder....I  must get on the property ladder....I  must get on the property ladder....I  must get on the property ladder....I  must get on the property ladder....I  must get on the property ladder...."



#18 Bob8

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Posted 07 August 2013 - 11:13 AM

And people also have a responsibility to only take on what they can afford. Just because someone's willing to lend you money doesn't mean you're obliged to snap their hand off.

No, but people are obliged to live somewhere.  

 

I had a fairly posh job in England, and spent 40% of my income on renting a room in a flat.  Clearly, that is a foolhardy amount, but there was little option and many people spent more as house prices were out of kilter with wages.  

 

If I took a mortgage, then my expenditure would go down to about 30%.  Of course, the mortgage would have been huge, but would it have been clear cut recklessness on my part?


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#19 John Drake

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Posted 07 August 2013 - 12:07 PM

And people also have a responsibility to only take on what they can afford. Just because someone's willing to lend you money doesn't mean you're obliged to snap their hand off.

 

Yes, all well and good in theory, but in the real world it doesn't work like that as recent history has painfully proven: when lenders offer people money even when they know they probably can't afford to repay it or have a history of bad debt that the lender chooses to ignore in order to close the deal (and no doubt bag a hefty bonus), enough suckers will find a reason to take on that debt regardless of the risk, and sooner or later the whole enterprise will come crashing down around everyone's ears, not just those who offered the loan or those who stupidly took the risk of accepting it.

 

For all the political rhetoric since the banking crash, this proves that absolutely nothing has been learned from it.


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#20 getdownmonkeyman

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Posted 07 August 2013 - 12:51 PM

Yes, all well and good in theory, but in the real world it doesn't work like that as recent history has painfully proven: when lenders offer people money even when they know they probably can't afford to repay it or have a history of bad debt that the lender chooses to ignore in order to close the deal (and no doubt bag a hefty bonus), enough suckers will find a reason to take on that debt regardless of the risk, and sooner or later the whole enterprise will come crashing down around everyone's ears, not just those who offered the loan or those who stupidly took the risk of accepting it.

 

For all the political rhetoric since the banking crash, this proves that absolutely nothing has been learned from it.

 

Governments don't bite the hand that feeds them...






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