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.

ND

Osborne's Housing Bubble and the New Mortgage Rules

Who could reasonably object to mortgage lenders stress-testing their potential customers' ability to withstand an interest-rate hike ?  The amazing thing is that this wasn't required back in 2008, after the last bubble burst.

The answer, of course, might be "the Coalition", who seem to have fallen back on a housing boom to boost their chances in 2015.  Because it seems to me there is a good chance that almost any tightening of the current set-up will bring mortgage lending to a near-standstill.

A younger family member has recently (and sucessfully) been through the 'old' system - but only just, and a chaotic process it was, too.   Objectively speaking, the 'complexities' in her case were minor, but the bank's in-house 'mortgage adviser' was deeply unprofessional and betrayed a striking ignorance of the bank's own rules.  (And it wasn't some kid-out-of-college either: he claimed years of experience.) 

Stew in the kind of additional hurdles being introduced, and it looks like a very messy few months ahead.  At very least, the approval process will stretch out significantly: but of course it is nigh-on guaranteed to result in fewer and lower mortgage offers, too.  Cash buyers will correspondingly benefit; but the bubble could be peaking in summer 2014 rather than summer 2015.  Which isn't quite what 'Genius' Osborne has in mind.

ND

Brown's Mortgage Giveaway

The media are generally in favour of this new wheeze, as are the usual suspects like Vince Cable. My gut reaction says it is a bad thing when all people such as these agree,

The for margaret beckett to say it will only help 9,000 families at best is akin to a huge backtrack; classic New Labour spin; big announcement, no follow-through.

However, once again King Gordon is helping everyone but the diligent. The idea is for the Government to gaurantee loans of up to £400k for people who lose jobs and can't make repayments.

But who says they could ever make the repayments? The law of unintended consequences looms large.

The buyer of a Northern Wreck 'Together' 125% whopper can see some nice chinks of light here. Already badly in negative equity, he now gets 2 years to live in his house. At the end he owes even more and the value of the house is lower, perhaps under 50% equity by then. So the bank forecloses and he is turfed out to bankruptcy; but he has had 2 more years of living beyond his means and the government has further subsidised the banks, lost even more money and allowed their books to be cooked further for longer. Finally, as any fule know the market cannot adjust to lower prices as the market is being artificially supported.

Which banks will sign up - well the ones Gordon already owns for sure. Sociaism is pervasive in these dark times.

No doubt people want an alternative; we had a tried and tested one, mortgage interest tax relief...no chance of that from a socialist government...a tax cut! pah!

Stopping mortgage fraud

See here for a very elusively worded change to RICS rules announced today. Effectively surveyors have been worried by the growth of non-financial incentives for new builds (ie stamp duty paid etc).

Why? Becuase the real price has bourne no relation to the advertised price once all incentives are included. As surveyors work really hard to price property by via google, Rightmove and asking the propsective mortgagee his/her opinion this has left them open to being sued later when the propery is subsquently valued at a much lower price than advertised/sold for.

As we have pointed our before, non-financial incentives are also a form of mortgage fraud and surveors don't want to carry the can for developer's desperation too far into the future.

And so the world changes, now even new homes are going to be harder to get mortgages for. Anyone want to call a bottom to the falling housing market yet?

Insanity Alert: Government recommended to help Banks by Banker

The title is the summary of the treasury report into the housing market today.

James Crosby, ex-CEO of HBOS (presumably owner of lots of shares in the company) has done what was entirely predictable.

He has said that the failed Fannie Mae, Freddie Mac scheme (the failed US mortgage scheme that has likely just cost US taxpayers a sum not unadjacent to our entire national debt) would not suit the UK - Well done Dr. S. Holmes!

Then the report has gone on to say it is important that the UK government assist the banking industry in avoiding a property meltdown that will further affect their shareholders (i.e. Jim and his money) - only they said it was to protect first-time buyers, poor put upon dears of course.

What tosh - potential first-time buyers are in the purple at the moment, house prices falling, more choice of property, more rentals coming onto the market. Who wants to buy a house in this market mess?

Only the banks are really against a steep correction in house prices as to protect their wasting portfolios; And which bank is the most exposed to the UK mortgage market? Yup you guessed it, HBOS- yet 'the plan' is for our Government to step in and securitise the loans for them that the market will not do.

Utter stupidity - the market saying is 'trying to catch falling knives.' The idea is so bad that it is likely the Treasury team whom I fisked yesterday will run with it.