Northern Rock mortgages – news

Northern Rock, the news says tonight, is getting back into mortgages.

So, what’s the current score with Northern Rock?

Well, they only have £9bn left to repay of the £30bn or so they borrowed from the taxpayer. That’s good.

They have been lending mortgages all along, gradually getting nearer the ‘going rate’ – so today’s news isn’t really news and £14bn of lending, while it’s good, would get sucked up in a couple of weeks if the rates are competitive.

There are one or two murky points though – while the taxpayer had wanted their money back, the methods and strategies NR has used are not clear and they have not been open with us.

So – they appear to have been the most prolific repossessor of houses. OK, that may just be bad luck, but in a world where they have a chunk of money to pay back, there is a second interpretation that is less edifying.

They seem to have encouraged many of their good borrowers to remortgage away from them – that’s OK, that’s a quick way of getting inflows of money – but then they appear to have set up a secret panel of mortgage brokers to do this – and denyed it, and admitted it and denyed it etc.  If it’s above board, why would you not admit it? In which case, again, it doesn’t seem right.

It’s a puzzling story and for me, for one reason or another could have been handled far better, right from day one.

Texting can b gd 4 ur kids

New Scientist article that shows a study of 10 – 12 year olds that better texters are better readers.

Curb on banks – soundbite economics

Gordon Brown made this speach as reported by the BBC.

The Daily Mail journalist makes some comments at the bottom, and as I’m talking about him, we’ll start with the last paragraphs – where the new Banking Act allows emergency intervention in secret for banks that are struggling. I have an issue with this – we may want to own shares in those banks, but if we don’t know if they are ‘good and solid’ or borderline, how can we make a judgement? I’m not saying help should be unavailable, but, we need to know.

Now, it sounds to me like he has had a tirade against mortgage practice and while I agree, things need tightening, commercial pressures will do that easily, the mortgage world doesn’t need a list of arbitary, soundbite,  rules.

So, looking at that, he has:

Said there should be an end to so called ‘high income multiple mortgages’. No mortgage has ever been called that. Income multiples were available up to 6 x income, yes, and that is pretty generous, but that was a cap, rather than a suggestion, or the norm.

Here’s what I mean.  Many lenders consider mortgage based on affordability. That seems quite a sensible approach rather than a rather generalistic income multiple – someone who earns £30,000 a year with no kids has a different level of outgoings to a person on £30,000 pa with a wife and 3 kids to support, so they could afford a different mortgage.

So, should both get the same borrowing criteria? Let the family man overcommit, or restrict the single person to a very low limit?

If we go on to say that an individual person needs, say £1000pm to live on – food, car etc, then someone who takes home £2000pm has ‘available’ capacity for £1000pm mortgage payment.  If someone earns £4000pm, who’s to say they don’t have £3000pm available for the mortgage payment? You’d factor in greater lifestyle costs and running costs, so maybe make it £2400pm. That could easily be over 6 x income – and at that point the lending would be limited, even though the evidence may suggest that affordability was available.

Now. lets take another scenario:

Single person, 2 children. Works part time and gets £9000pa, wanting a £50,000 mortgage. He/she also gets £850pm from the state in child benefit, family tax credit and childrens tax credit and also gets £600pm maintenance from the ex partner. That’s not unrealistic as a scenario. He he/she will pay next to no tax becuase the salary is so low, so you are looking at a net family income of £2100pm.  Can they afford a £50,000 mortgage that cost say £250pm? We’d all probably say yes.

But, benefits and maintenance are not included in income multiples so we need 5.5 x income for this person to buy a house. That’s using the rule to oblige common sense.

Finally, I will cite my circumstances as an example – I bought my first house when interest rates were 15% – I got a small discount to 14.5% and my mortgage payments we £750pm. I earned £12000, my girlfriend of the time, £9000 and we had a mortgage of £48,000. My current mortgage of £113,000 costs £580 (it’ll drop to £200 when the fixed rate ends LOL) If I could afford £750 in 1990, why can’t a couple on those incomes afford it now (well, factoring in inflation on living costs for the period, and maybe setting the benchmark interest rate at say 6%)?

Most of the lenders that did the truly eye watering lending don’t exist now – the ones who are in the market are the ones that have  good lending books (except what they bought in). So, while I wouldn’t want things back how they were, I don’t think an inflexible set of soundbite rules is what is needs to find the balance between serving homeowners and encouraging market responsibility.

Radio Advert

My first Radio advert

LOL – this is well outside my comfort zone, but, nothing ventured, nothing gained!

Shaving experiment – is cheapest best?

Can Disposable Razors Hack it?

In the interests of my readers I have conducted ‘research’ today.

I was in Sainsbury’s yesterday and remembered that I needed new blades for my Gillette fusion razor – The shopping fairy normally organises for them to arrive with the Tesco delivery, I rarely have to buy them.

Consequently I’ve not had a conscious reminder of their cost for a long time, but £5 raised my eyebrows.

Finn pointed out that I could buy a pack of 5 disposables for 13p and I wondered – surely something with just one function couldn’t be that bad?

So, the question is – are the disposables good enough, or are they a false economy?

Well, I had a three day growth, but even so, I don’t regard this as a challenge – I know people who look like Desperate Dan from the Dandy by mid afternoon and shave twice a day, I’m not like that, I can still get away with it on day 2.

The Gillette (Other brands are available), even though it’s a bit aged, would have breezed through this job.

The disposable – well, ‘hacked’ is the word I need here – actually quite painful and bizarrely it left patches unshaved, with no sense that it was doing the job. I actually returned to the Gillette to ‘just finish off’. My cheeks still feel strange even now.

Conclusion

Well folks – I was going to say ‘gents’, but I guess the research applies to all -  Disposable Razors -  The economy will have to get pretty bad before I use these again.

Recession Tips – in the Viz style

DON’T waste money on expensive iPods. Simply think of your favourite tune and hum it. If you want to “switch tracks”, simply think of another song you like and hum that instead.

HOMEOWNERS: Prevent burglars stealing everything in the house by simply moving everything in the house into your bedroom when you go to bed. In the morning, simply move it all back again.

SAVE a fortune on laundry bills. Donate your dirty shirts to Oxfam, they will wash and iron them and you can buy them back for fifty pence.

DON’T waste money buying expensive binoculars; simply stand closer to the object you wish to view.

SAVE electricity by switching off all the lights in your house and walk around wearing a miner’s hat.

HOUSEWIVES, the best way to get two bottles of washing-up liquid for the price of one is by putting one in your shopping trolley and the other in your coat pocket.

OLD telephone directories make ideal personal address books, simply cross out the names and address of people you don’t know.

SAVE on booze by drinking cold tea instead of whisky. The following morning you can create the effects of a hangover by drinking a thimble full of washing up liquid and banging your head repeatedly on the wall.

OLD people, if you feel cold indoors this winter, simply pop outside for ten minutes without a coat, when you go back inside you will really feel the benefit.

CAN’T afford contact lenses? Simply cut out small circles of cling film and press them into your eyes.

WHY pay the earth for expensive jigsaws? Just take a bag of frozen chips from the freezer and try piecing together potatoes.

SHOPPERS, when buying oranges, get more for your money by peeling them before taking them to the counter to be weighed.

MIX tea with coffee, and leave in the fridge to cool. Hey presto! Toffee!

MAKE your own inexpensive mints by leaving blobs of toothpaste to dry on a window sill. Use striped toothpaste to make humbugs.

85% mortgages

Through the – well, do we call it a boom now? 100% mortgage and higher were commonplace and a ‘good’ deposit was 10% (the threshold where the better rates started appearing).

There were further thresholds at 15% deposit and 25% deposit and occasionally at 40% deposit, but that was unusual.

Since the crunch, 25% deposit has been pretty much essential and 40% good. Mortgages are available for those with smaller deposits, but at a premium.

C & G have been at the mainly 75% end of the scale for a while – but they are releasing products now at 85% range and a further set at the 90% range. They aren’t brilliant rates – above 6%, for the 90% products, but hey, it’s a start.

This is good – this could signal the start of competition for the low deposit end of the business and that is another sign of common sense starting to overcome panic in the mortgage market.

It also seems to be a signal that some people think the worst of the drop in house prices is over, and while it may not be totally bottomed out, it’s close enough for more lenders to take an interest in 90% lending.

100% mortgages – reports of their demise etc…

A couple of weeks ago I arranged a ‘rate swap’ for a client with Halifax – the client was with Halifax already and as their house had fallen in value a remortgage to a new lender was out of the question, so we looked at products the Halifax hasd to offer their existing customers.

I called them up – I needed to know if they revalued the house (it would be handy if they didn’t) but, they do, they have a computer that does it. I asked if they’d be OK with the remortgage as the maximum loan to value was 95% and the lady on the phane said they were OK up to 120% loan to value.

This is good – if a client is unlucky enough to have ended up in negative equity, they don’t need that luck compunding by being unable to get a decent mortgage rate.

Today The Coventry Building Society joined in – their existing borrowers can rate swap up to 100% loan to value.

These are both ‘common sense’ decisions – not risk decisions.

The lenders in question already have the liability, they are reducing risk by making the mortgage more affordable.

It’s good to see ‘proper thinking’ again – the panic of the last 18 months needs to abate and I hope this is a sign…

Stanford arrest

This is a curious story – clearly, it’s just journalism at this stage, but it sounds very strange.

This is the Citywire report on the scandal.

It’s quite improbable in it’s own right, but, click on the link to the Evening Standard article – it makes it all sound even stranger.

Monetary policy Committee meeting – Feb 09

I daresay most people won’t have read the MPC meeting minutes from this months meeting.

As usual, I have, while eating a cake and having a cup of tea. The cake was a Franzipan – kind of like a Bakewell Tart, but ‘for one’. The tea, well, it would have been Earl Grey, but as I’m in the office it was Tetleys, which is fine. I couldn’t do this at home  – cakes are only calorie free if your wife doesn’t know about them.

Oh yes, the minutes…

You can read them above, but, the crucial points for me were paragraphs 8, then 32 – 36.

Paragraph 8 – purely through the staggering drops in productivity in the far eastern economies.

The later paragraphs talk about the reduction in interest rates last month.

They voted 8:1 to reduce rates by 0.5%. that worried me initially, but the 1 who didn’t vote for the 0.5% cut wanted a 1% cut.

So, they are unanimous on rate drops. There is a concern that if rates fall much further the profits from the banks could be squeezed and that could freeze up lending further – exacerbating the problems we have now.

On the other hand, the guy who voted for the 1% drop pointed out that they’d made many more mistakes by being slow to react than too fast and they should just get on with it.

It bodes well for tracker mortgage customers in the short term, there still seems to be room for further drops – it seems to me that while all 9 are voting for drops we’re OK. At some point it will be different – say 6 say yes and 3 no – and that will signal the tide turning for interest rates and start to signal the time to think about fixing your mortgage.

Adrian