Friday 12 May 2023

100% Mortgage? In a banking crisis?

Actually, the new Skipton product - 100% mortgage, no deposit, but (they say) stringent borrower qualifications required (primarily, a good prior rental payment record), plus a small interest-rate premium - all seems sound from the lender's risk-management point of view.  One assumes they'll be pretty careful about getting their own valuation done, too.  Structurally this is all good, pragmatic RM - and moderately creative, to boot.  

When Miss D got her first mortgage recently she was in pocket immediately (on a current account basis), the payments being less than she was previously paying in rent.  That's a dynamic the Skipton product arbitrages neatly.  Don't know if that situation prevails everywhere; but it does in her part of London.

Commentators seemed to be fixating on the potential for negative equity.  Well, yes - but both parties ought to be able to take an intelligent view on that.  On the lender's side, one assumes more pragmatic RM, relating to the specifics of the property and the profile of the borrower.  And for the borrower: hey, did you want (a) to get into property, (b) & without putting in equity - or not?

Go for it, Skipton.  Nice structure: hope you've got the details right.



Anonymous said...

If this is about propping up the property market (or the state owned banks) they why not offer a golden visa like Portugal or Malta.

There are a lot of rich people looking for a safe home with a banking system that doesn't (and now doesn't need to) look to hard about where the cash comes from.

Skipton's idea would hardly scratch the surface of a more open free (from Europe) Britain.

... and we need the cash.

dearieme said...

The first Building Society I asked for a mortgage was the Halifax which turned me down in a peremptory fashion. That still rankles.

The second society did give me a mortgage and, do you know, I can't remember its name. There's probably a lesson there.

But I do remember the best BS name I knew in my salad days: the Temperance Permanent. They don't make 'em like that any more.

Sobers said...

"Go for it, Skipton. Nice structure: hope you've got the details right."

Of course if it all goes t*ts up, no-one will ask the CEO to give back the £1m signing on fee he got will they? In fact he'll probably get his contract paid off and walk off into another well paid job somewhere else.

Just the usual situation with financial institutions - all the benefits of risky gambles go to the management, with none of it ever clawed back if they drive the institution into the ground. Heads they win, tails they don't lose, someone else does, probably the taxpayer.

formertory said...

The - sadly - late Mark Wadsworth had some interesting observations on negative equity which he published over the years. This one from ten years ago is typical, pithy, and shows some creative thinking:

Bill Quango MP said...

RIP Mr Wadsworth.
A frequent commentator on these pages.

Nick Drew said...

A very prolific & thoughtful guy, whom I met once.

A striking combination of creativity - including artistic & musical - and analytic enthusiasm. His advocacy and comprehensive defence of Land Value Tax was impressive ... even if it's not something that everyone is turned on by.

RIP indeed. Who's left (/ still independent) of the first generation bloggers?

dearieme said...

They'll some of them be missed; he's one.

I'd tease him by claiming that LVT = Luncheon Voucher Tax. Hey ho.

Dick the Prick said...

Evening All

Soz about not popping round. You are my zeitgeist - whenever someone says 2008 you lands, BurningOuMoney and Stansilav - we all knew. Cheers, haven't even started x

Diogenes said...

Perhaps Skipton's product is based on the belief that

1. Wages have been depressed by the number of immigrants coming in and Brexit has removed this

2. We are heading for a high skilled, high wage economy so that the income/loan ratio will not be as stressed as before

3. The Government (for the public sector) and UK Industry (for the private sector) are fully support the high wage economy but couldn't pay these rates before as immigrants were forcing them to pay low wages.

I think that's the reason but others will know.

Caeser Hēméra said...

Sad to hear about the passing of Mark, used to enjoy reading his comments back in the day.

Caeser Hēméra said...

As to the return of the 100% mortgage, it's another symptom of an unhealthy market, where providers are having to think creatively in order to expand said market.

Creativity is usually a good thing, although when it comes to financials, it's uglier twin, Risk, is usually out playing in traffic, whilst the Green Cross Code man looks on in horror.

Although in this instance I think Risk is pretty safe - house building isn't going to increase by much any time soon, certainly not the affordable flavour, immigration isn't going to reduce much, short of another pandemic, so house prices may wobble, but the general direction is very much upwards.

So, creativity it is, until someone(s) get creative enough to crater the economy again.

And then Lessons Will Be Learned(TM)

Old Git Carlisle said...

Was interesting Cumberland introduced 4 to 5 % ISA 's some weeks ago - well in advance of any other bodies. We only got one ISA on at 4.5% (my wife would not play ball!) See they are back down to same levels as rest. Making sure we keeping inside our £85,000 safe level!!!!

Anonymous said...

Diogenes, you are joking surely. We are headed for a NET million immigrants to June this year, following the 500,000 net from Boris' last year.

Goodbye Poles, hello Francophone Africans?

The Red Wall voters have been utterly betrayed by the last two administrations. They promise tens of thousands then handed out millions of visas.

"Ministers are braced for net migration, the number entering the UK minus those leaving, to hit a record high, surpassing the previous peak of 504,000 set in the year to June 2022. Analysis by migration experts suggest the figure could be as high as 997,000 when the official figures are published in two weeks’ time. The Home Office fears it could hit one million this year. The surge is fuelled by a continued sharp increase in non-EU migrants entering the UK to study, work or escape conflict or oppression."

Sorry to hear about Mark. Another grizzled blogging veteran here.


Anonymous said...

Oh, while we are here, lets say "we" keep sending more long-range missiles to Ukraine.

You're sat in a Russian command bunker. You get warning of a major attack, dozens of maybe hundreds of missiles headed inbound.

You have no idea what kind of warheads they have. Would you trust the UK or US not to sneak in a first nuclear strike from Ukraine?

We are playing a pretty dangerous game here. We can't guarantee that everything arriving in Ukr will be incinerated and blown back on Galicia/Poland, as seems to have happened to DU ammunition at Khmelnitsky.