Tag Archives: Mortgage

September 29, 2022 · 00:17

Simplification anyone?

The BBC alerted me to something an hour ago. This happens and I initially read the article with a shrug like ‘who cares?’ But  few moments later the coin dropped and I was all about the WTF setting. You see, the article ‘Mortgage deals withdrawn in record numbers over rate rise fears’ (at https://www.bbc.co.uk/news/business-63061534), as said, I initially shrugged when I saw “Lenders withdrew a record number of mortgage products overnight, according to analysts, as they grappled with the prospect of rising interest rates”, it was always going to happen, but the awakening happened shortly thereafter when I saw “Moneyfacts, a financial information service, said that 935 mortgage products, around a quarter of the total, were taken off the shelf.” Are you effing kidding me? 935 mortgage products? How can anyone get a clear view on that many products? How can anyone see the forest through the trees in that setting? And with “lenders are withdrawing mortgage deals in order to re-price them” chaos gets a free rein. Is anyone clearly investigating these products? And that is before we get to the repricing issue. Now, I get it, things get repriced, events make that essential, but when was a mortgage holder EVER contacted because his product has been lowered in price, and there would be a windfall that would be shown in a lower monthly rate, when did that EVER happen? My guess is never. And we haven’t even touched on the crazy part. This is seen with “A total of 2,661 mortgage products are still available – but that is half the number that were on sale at the start of December last year when interest rates started to rise” this means that the people are confronted with 3600 mortgage products, this sounds way too fishy to me and no one is asking questions. I get that there are elements that make it essential to have a few products, but this is enabling a wild west of mortgage consultants and that ain’t right. So when I see “Brokers are reassuring those who already have a mortgage, or an agreement for a new mortgage, that they will be unaffected for the time being. However, when they come to remortgage, they are likely to find monthly repayments have become a lot more expensive” There is a clear setting here, mortgages are frozen for a time and this time tends to be 3-5 years, so after that time remortgage will have an impact and with the housing market reducing in price by a speculated 10% that will be a very costly event for a lot of people. And that setting is made with “When the family bought their house in Manchester in 2018, they fixed the mortgage at 2.05% for five years with monthly payments of £927, Mr Ahmad said.

Usman, a 33-year-old self-employed courier, said if he took out a fixed rate mortgage today he would be facing monthly payments of more than £1,250 a month” Yes there are a few sides here and that is not all on the people. The first is what property did they buy? Did they leave space for situations that they could not foresee? The second part is the 2.05%, that is below currency valuation, a larger setting that influences everything and that is before you realise that all these events are setting their mortgage at almost 30% higher and optionally even more in 2023 and 2024. That whilst they lose 10% of their value makes it a rather large issue. And in this I have little faith in the ‘calming’ voice of Rachel Springall from Moneyfacts. We might be given “Various lenders have been very vocal that their decision to withdraw products is a temporary measure, amid the uncertainty over interest rates” but one persons temporary setting is speculation, we just do not know what will happen and the fact that there were over 3500 mortgage products was a idiotic setting to say the least. Yes, it is personal ad there might be all kind of reasons but go to ANY bank, how many mortgage products do they have? They will not give you that 3500 list, will they and banks are still the centre piece in any mortgage and that is now becoming a much larger play. Andrew Wishart, senior property economist at Capital Economics gives us “The rise in market interest rates that has already happened will push up mortgage rates to at least 6% and reduce the size of loans that lenders can offer” if that is true, Usman Ahmad’s house is a cooked setting, from 2.05% to 6% implies a cost rise of almost 300%, he might want to get out whilst he has a chance because this is about to get really ugly in the UK. And whatever short term someone hands them is a loaded cannon, it’s like walking backwards in a minefield thinking that you are more safe that way, I never saw that reality and you should neither. I reckon that a larger investigation is needed the fact that the BBC does not think this to be important is their loss, but here do you see the stage where there are over 3500 game consoles, no business can set that stage and survive, the fact that mortgages got away with it makes me wonder if any of them had the welfare of house buyers in mind. I have my doubts here.

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January 2, 2016 · 11:30

Costing in the key of life

Over the last decade, political parties have squandered the needs of their constituents. Liberals, conservatives and Labour alike in both the UK and Australia. I have seen the pressure as housing is no longer an options for many. It is a skewed approach to a solution that fit only the truly wealthy. It is a system that has been ignored, shovelled all over the place and no one has done anything serious to address it. How much longer can this go on?

Yesterday’s article in the Guardian by Robert Booth is only the tip of the iceberg that sank the good ship lollipop (at http://www.theguardian.com/money/2016/jan/01/london-flats-costing-up-to-1m-outsell-more-affordable-homes). The title ‘London flats costing up to £1m outsell more affordable homes‘ is on one side deceptive on the other side it is illustrative of several administrations that have not considered any solution, just a propagation of the Status Quo. The quote ‘sold more than twice as many two-bedroom apartments costing between £650,000 and £1m as cheaper homes priced at about £300,000‘ is partially deceptive. You see when you see the data ‘Sales of London homes banded by asking price per square foot’, we see the numbers, but what is missing is not ‘what is sold‘ but the metric ‘available places that people can afford‘, Even higher educated barristers admitted to the bar will not be able to show an annual income of £200,000, which means that even the highest educated are not in line for anything decent any day soon. In Australia the Commonwealth Bank of Australia is now marketing the alternative in the trend of ‘Use your spare room to help pay off your mortgage!‘, they voice it like ‘my new business‘, but in the end, it is a risky approach to either a mortgage that is higher than you bargained for or one that was outside your reach an they are voicing the ‘entrepreneurial’ edge to hide the risk. What if that person suddenly gets into a financial wash? What if the Granny involved dies? All elements that take weeks if not months to resolve and the mortgage is still due. In addition permits might be needed. Nothing of that is clearly shown. The entire housing market is in a dangerous place because the political parties have ‘conveniently’ ignored the lower branches of income and in all that the rent is also still rising whilst incomes are not moving forward. So we are in a place where London, Sydney, Melbourne and Perth are pricing their cities into non-sustainable situations and it has been going on for the better part of two decades. All these places have been trailing demand for over a decade by a decadent amount, whilst they should have been ahead of the curve for at least a decade.

When we look at the following quote in the Guardian “Campbell Robb, the chief executive of homelessness charity Shelter. “It is promising to see the government finally focusing on building more homes. But the only way to truly solve this housing crisis is for both the mayor and central government to finally prioritise building homes that Londoners on ordinary incomes can afford to rent or buy, instead of just higher earners.”“, question marks should be clearly placed, because ‘finally focusing on building more homes’ should have started in 2003 in both London and Sydney. Now, we have to accept that the city is no longer an option for many, yet when we look 4 minutes away from there we see the same trend of shortage. We are face with either not enough, or not affordable. A increasingly larger population in Sydney is now confronted that their income will at best support the rent of a mere studio apartment, meaning that the bulk must rely on 2 incomes to get anything above a one bedroom apartment, more than that, the current growth of rent means that any year that an annual increase of 3% is not met or exceeded, the living standard goes down on a quarterly base. These numbers might sound scary, but compared to London it is nowhere near as bad as it gets. The political parties have abandoned its population all for the need and premise of inviting wealth into the UK and Australia, whilst there is no evidence that these people are spending a great deal in those places, other than supporting and funding new unaffordable buildings. This goes far beyond these mere borders, we see a similar evolution in the Netherlands, where the issue is even more interesting as larger proportions of the Netherlands are facing a similar issue we see in London and Sydney. There is no ignoring the act that the Netherlands is only a fraction of the size of the UK (and an even more diminishable part of Australia), which of course drives prices up even faster. The Guardian article shows the most dangerous part at the very end with the quote “Since 2009, the fastest growing locations for new housing have been Barnet, Brent, Croydon, Newham and Wandsworth. In Croydon, the price of dozens of flats in the Coombe Cross development have increased by around a quarter, with one-bedroom flats rising £63,000 to £287,950“, now implying that the outer doughnut is no longer affordable, moreover, the fact that not more alerts are ringing all over Whitehall with an increase of 25% is even more unsettling. The average UK salary might be set at £26,500, but that implies that well over 50% of the UK is faced with a house price well over 1,000% of their income, making it never an option. That same trend is seen in Australia, where the median house price is now set at one million, setting the house price on average between 1,500% and 2,000% of their income, an issue that could have been avoided if the parties a decade ago had set clear paths in motion to battle this dangerous trend. Whilst both places are steering towards the New York unaffordability we are also faced with a situation that our values of life are in equal decrease, because as we move from nations that are no longer ‘working to live’, but nations that moved to ‘live to work’, our values will diminish faster and faster and it is all due to a path of greed and a path of flaccid and unreliable politicians. Labour UK 1997 – 2010, Labour AUS 2007 – 2013, in Australia partial fault is also with the Liberals as John Howard was sailing the good Ship Wallaby from 1996 – 2007. All parties that seemed to forget that not everyone can afford to live on a $100K+ income and we will be paying for their shortcomings for a long time to come.

I wonder if it ever gets properly solved without having to resort to ‘culling’ the population at large.

 

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June 29, 2013 · 20:10

About that house you wanted!

It seems the Dutch are ready to take on the advice the Wijfels commission is giving. Even though not direct, it will end up that you have to pay 20% cash up front for any house or apartment you desire. And indeed, there was the subtle ‘line’ that if you do not have that kind of cash, you should address your pension funds. Interesting on how they are willing to open up pension funds to fund that.

Am I against it? There are two sides to this. On the one hand investing into your own future is perfectly sane. If only there was some level of certainty. You see, the fact that banks leave its taxpayers with their risky investments is one thing, the issue on your house is another.

How does this differ? Actually, it should not. A good house is a good house. However, consider some of the housing. How these houses are currently so much over any normal affordable income. It is nice to see a newscast in comparison with Germany; however, when we look at the quality and square meter price, then these prices are far from average. Of course, when seeking apartments in places like Munich, then yes, the prices might seem comparable. Yet, where we see average Munich prices, that is pretty an average price for living anywhere in the Netherlands. I agree that it is not fair that those factors are accountable to the banks, yet, they were at the centre of events when the prices were artificially pushed upwards.

As they sold mortgages no one cared too much about prices as the interest was tax deductable. When that 7%-9% is no longer part of tax deductibility, then we have a situation where the consumer now pays for it all. Add to that coming up with 20% (in due time) and someone slyly mentions the need to access ones retirement funds, we see another political play to get pensions into the banking equation. There is supporting evidence from all kind of sources. An interesting read was how on average house prices went down in US/UK and other places by well over 20%, whilst in the Netherlands the prices lowered less than 8%. It is unfair to just name one factor, as several economic factors had been in place in other nations too. The US crash never hit the European sides that hard, Europe might still fighting the backwash from those days, but on average Europe never had too much of the hardship the US faced. Another reason is the fact that the Netherlands is pretty much ‘full’. Whilst many nations have plenty of housing space outside of the great cities, the Netherlands has become a connection of large cities, with next to nothing to separate them.

Still this play as such to push people towards their retirement finds is slightly less than acceptable. There is however the other side that must be highlighted too. According to Ernst & Young, between 1996 and 2012, the outstanding mortgage has gone from 138 to 650 billion Euros, That means that outstanding mortgages currently have risen half a trillion Euro’s in just 15 years. Some might think that this is not a lot, yet, consider that that the Dutch population is under 17 million, which seems like the banks remain dealing with 100% of unpaid mortgages. If these numbers are correct, then it bears reason that these numbers should be looked at. Is that actually true? You see, feeling it is wrong, and knowing it is wrong (even with supporting evidence) seems nice from the writers point of view, however what about the reader?

There we get the issue that gives us the crux. When comparing apartments in the Netherlands and comparing them To Sweden and Germany, I noticed something. I lived in two of these locations, so I know what to look for. I compared the Dutch http://www.huizenzoeker.nl, Swedish http://www.bovision.se and German http://en.immostreet.com/germany. When comparing an apartment in Rotterdam and Kista (outskirts of Stockholm) we see a comparable raise of prices, yet overall we get a lot more apartment in Stockholm then in Rotterdam, for comparable prices (30%-40% more living space). This comparison takes an astute dive when we look at Germany, especially Bavaria; where all over the place we can buy 5 bedroom villa’s for a lot less than a two bedroom crinkly monkey apartment in Rotterdam. As such we get a first inkling; if we need 40K to buy a 5-bedroom villa is one thing, needing the same for a 2-bedroom apartment becomes a whole other matter. Interesting how this was not mentioned.

So why so much issues about the mortgage changes? We see a political engine too eagerly bowing to the needs of banks, bowing to a group that has visibly forsaken a population, a group that have left many billions in debts and we still bow to their ‘needs’? Now with the additional need to open up retirement finances that had remained relatively safe until now.

Yet, with the massive outstanding mortgages, what is left?
In addition, knowing that level of outstanding debts, are their demands out of proportions? That question becomes a whole lot more interesting when we consider the following from Bloomberg (source: http://www.bloomberg.com/news/2013-04-23/dutch-mortgage-bond-market-threatened-by-capital-rules-dsa-says.html).

This part throws a whole new hole in these issues. Banks are pushed to outside influences, and even though the government pretend to be fighting the good fight to protect this market, it is interesting that this part was not that visible on the news. It might be that the Wijfels report shows this, but I have not read it, so I cannot tell.

My issue is now with this part of the Bloomberg article “Dutch banks are the second-largest issuers of RMBS in Europe, relying on sales of the securities to help fill a 452 billion-euro funding gap between deposits and loans, Dutch central bank data show.” Excuse me?

Looking at some quick 2011 population numbers:
Germany 81.8 million , France 65.43 million, United Kingdom 62.74 million, Netherlands  16.69 million.

EXCUSE ME?

How (or better why) exactly are the Dutch banks the second largest in Residential mortgage-backed securities (RMBS)? Even if 100% of the Dutch population is now under mortgage (which is statistically impossible), those numbers are showing an enormous gap. What are we not told? Even if we consider the 25% difference in mortgage funding there are a few questions that should be asked out there. What have the banks been up to, and exactly what questions are not being asked, or better, what part are people and perhaps even politicians not getting information on? Half a trillion Euro funding gap reads like that there is a deficit of half a trillion Euro. That could never be covered by 6 billion in cut backs. Before you think that this has nothing to do with governments then think again, if that shortage is not addressed then that money will have to come from somewhere else. What are the odds that this needs to come from taxation in one way or another next?  More important is the news that people saw over the last year. What buffers do banks have, and if so, how come the Bloomberg (a respectable bringer of news) information was not part of the newscast?

Is this an orchestrate play? It seems to me that a clear yes is in play, however, there are sides to this that do not make sense and they are outside of government controlled sources, sources that currently seemed to remain largely unmentioned. To me it seems that both banks and politicians might need to publicly answer some questions in regards to some of these issues and it would be nice that this is done before banks are given any more leeway or options to shift certain finance issues around.

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June 28, 2013 · 13:02

Exploitation fears for tax-payers

The Dutch NOS reported another go with banks in the view of business. Bernhard Wientjes has been voicing the opinion that some of the banks (ABN/AMRO and SNS Reaal) should be sold. It was brought in the air of ‘when you have no more money you start selling the silver cutlery’ would be the next step. As the Dutch government needs to cut 6 billion, the cutting spree could be a lot less. Well, in this matter I personally stand with Finance minister Jeroen Dijsselbloem who is not that eager to do that. There is logic for not doing this, as this relief would be for one year only and after that the cuttings would still need to be found next year. I am worried that certain business men are now in a state to strong hand certain political decisions. I leave it up to the reader whether those decisions are purely for the need of greed.

If business is linked to greed (often called ‘enterprising solutions’) then that would clearly fit in the views of Bernhard Wientjes. As chairman of the VNO-NCW it would be an enterprising solution that is right up his alley. The VNO-NCW is a fusion of the VNO (League of Dutch Commercial Enterprises) and the NCW (Dutch Christian Business Society). Their mission is to support and further the needs of Dutch corporations both on a National and international level. In this he is doing exactly what he is expected to do.

Yet, in this light, at a point where two banks would be sold far below value and at the expense of the tax-payers, one should clearly ask and look at the possible windfall for Bernhard Wientjes and his friends should this work out in that way.

There is a clear valid question whether the Dutch Silver cutlery is currently in a safe position. The reality of 6 billion of cutbacks will start to show a strangling result, yet, this was the danger all along when previous political alliances (2006-2010) were clearly pushing the outstanding invoice forward. Now that there are no more options, the consequences are likely to be dire, and as such in his position Bernhard Wientjes is clearly trying to look forward for Dutch corporations. I see this specific step as a dangerous one and until Dutch banks are clearly on a minimum set standard nothing should change. In addition, I am all in favour at present to keep these institutions nationalised to prevent their boards to just seek additional high risk gains at anyone’s expense to meet personal commission goals, whilst ignoring local needs (mortgages and such).

Even seeing these banks as possible training steps for younger jobseekers on the dole, to give them short term jobs whilst staying on the dole, would give them additional food for job experience. The answers that some view that this is not how it is supposed to be, I would counter, with ‘what solutions do you have?’. We need to change the way we think and operate. Instead of trying to balance which pocket the money is coming from, we should accept that the money is coming from the suit the government wears and see how far we can walk with this suit. Instead of staying on principle of keeping tabs what pocket it comes from, use the principle of it comes from us anyway and focus on instilling knowledge and experience. That will strengthen the young to get a good shot in getting something better with a decent chance. If you have any doubt, then consider that the Netherlands is only one of 3 countries where youth unemployment rates are below 10%. Many of the Southern European countries are way over 40%. If the future of youth employment is about experience, then make sure that the youth are getting a running start now is going to be important down the line. If their future could be a decent job in Germany, then giving them an edge as they compete with desperate youthful jobseekers from Spain, Italy or Greece is essential. Do not think that those kids are any less. Those who graduated from Universidad Complutense de Madrid are more than top Notch. 7 of their graduates ended up with a Nobel price and graduates from there ended up with 2 dozen of other internationally acclaimed awards. So, if we are looking at future events, getting the youth ready NOW will be an essential step.

Yet, this week has even more issues involving banks. A report that is due to be released tomorrow on advised banking changes. The ‘advice’ is to change the mortgage market. In the Netherlands it is currently possible to get a 105% mortgage so that the house and the notary costs and change of owner registration can all be covered. The commission chaired by Herman Wijfels is now advocating that the mortgage cannot be any higher than 80%. This is to prevent that the debt of selling a house at loss would end up hitting the banks. It seems that the banks are all over their need for ‘securing’ for the little man (read the average consumer). Taking into account that the average house in the Netherlands is around $350,000 the question, especially in this era of lack of funds is where on earth will a person get $70,000 in savings when the Dutch taxation system makes it almost impossible to get that kind of money saved up. They also mentioned that this should not be done until the housing market is stronger and prices are on the rise. Like that will help people to get the money. It is interesting that there is no mention of the much more reliable and fair Swedish system. Perhaps the report due out tomorrow will mention it, but I have not been privy to the full report. In the Swedish system a house often has a two tiered mortgage. You have the bottom part which envisions the gross off it (let’s say 80% for argument sake) at a low base percentage. The rest goes into the top part. Now that part (in my case) was almost 2.5% interest higher, but the mortgage was 105% covered. So instead of the unaffordable savings needs, we have a slightly higher mortgage. So, even if we have to accept a slightly cheaper house, we at least can get a house and not be looking at houses, never being able to afford any of it. The question becomes on what it was about. The fact that a report leaks is no news, but that the report leaks just around the same time Bernhard Wientjes is making a play to sell banks is a rather convenient coincidence.

These events are important to consider. This is because the same issues are playing in the UK. Consider that Lloyds is in need of an extension as they are selling 631 branches. This and the issues around the Royal Bank of Scotland do have links, as the UK government needs to cut cost by a lot more than 6 billion (having a Trillion in deficit makes that an awkward necessity). So will we see the same play as some are now seeing if they can sell banking interests at no more than tuppence on the pound? There is absolutely no known plans at present (in case you got scared or overly enthusiastic), but the issues remain, and the solution as such would be there in equal measure. To allow the young unemployed to become part of the bank on internships and training places, so that we can offer a solution where those seeking jobs will have actual work experience in their CV. These measures might seem small, yet the confidence boost that the younger jobseekers gain, could be the winning factor. In addition, extra hands, helping to boost the value of these banks would mean that when sold, they will go for a much better and more realistic value then they are currently set at. All this in a combined effort to strengthen commonwealth economy and their assets, for the simple reason that the European Economic outlook remains grim at best and relying on overly confident reports of economic prospects, that get downgraded quarter after quarter is not doing anyone any good.

 

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