Depositing pain
Fraser Nelson 1:54pm
The decision by Lloyds TSB to stop offering mortgages to anyone who has a deposit of less the 10% opens up what could be a striking divergence in fortunes.
Those with enough equity will not really notice the impact of the credit crunch. First Direct, for example, was recently offering a 4.75% fix to those with more than 25% equity. It is to the poorer that loan rates will shoot skywards.
So Middle England may not notice the crunch, or any slide in its property prices. The pain will be felt, and repossessions visited, on those without a parental nest egg to deposit. And this pain may well not be picked up in national trends.
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Comments
dexey
February 29th, 2008 4:46pmSurely this a sensible move. If you cannot afford the repayments you should not have a mortgage, or a loan of any kind.
Poor people shouldn't be borrowing.
Faceless Bureaucrat
February 29th, 2008 6:18pmBut that's the whole point - it was giving loans to people who were in no position to service a mortgage that precipitated this mess in the first place - these people are higher-risk borrowers, so should be charged more to reflect the risk the mortgage company is taking. Shouldn't they?...
Fergus Pickering
February 29th, 2008 6:43pmYeah that's the way it is with banks. You can only get a loan if you don't need it. Poor people borrow all the time. If they weren't poor they wouldn't have to, would they?
Herbert Thornton
February 29th, 2008 10:47pmI think Fergus misunderstands it. The "needs" of the borrower have nothing to do with it and banks are not charitable institutions.
Banks don't discriminate against the poor from any bad motivation. Banks need to assess how good the prospects are of the borrower paying it back: if a Bank doesn't do that it will soon be in the soup.
And the other side of the coin is that everybody who borrows - rich, middling, or poor - needs to understand that if they borrow, they need to borrow within their means - otherwise they too are likely to end up in the soup.
Unfortunately, both banks and borrowers sometimes make misjudgments - but that is no reason to rescue either category from the consequences.
Fergus Pickering
March 1st, 2008 7:16amYes, of course bankers are hard-faced men (and women too doubtless). But my grandfather was a bank manager is Walsall in the 1930s, and he tried not to be, hard-faced I mean. People liked him and trusted him. He liked golf and betting on horses.
Ah-so
March 1st, 2008 10:59amExcessive lending has been the worst thing to have happened to our economy. Only the Irish have higher average personal debt levels. The ease with which people have been able to borrow has helped create a house price bubble that has pretty much excluded a generation from ownership while making another generation rich (in paper terms). As the typical first time buyer does not have a £50,000 deposit and banks are increasing unwilling to lend the £200,000 at 5x earnings to fund a purchase, the property will freeze. Eventually prices will have to become "affordable" again and through a process of sensible lending and falling house prices.
Diana W
March 2nd, 2008 3:19pmDoes the same forecast hold for London too where the housing market has been buoyant because of international buyers?