Over 25% of Irish Mortgages from Subprime Lenders. UK 12%+

[2Pack]

An article appears on Bloomberg about the 12% of mortgages that issue from lenders who do SOME sub prime. One bit made my eyes hop out .

UK subprime lenders of whom the BIGGEST is Northern Rock according to this article have upped their rates today , as have our lot.

The definition of a sub prime lender is NOT a lender who only does sub prime but ANY lender who knowingly does unsound lending . I have highlighted a few bits. % figures are as a % of the total UK market .

bloomberg.com/apps/news?pid= … realestate

Aug. 30 (Bloomberg) – U.K. lenders responsible for 12 percent of the nation’s mortgages are tightening standards for loans on house purchases, withdrawing offers and raising the cost for borrowers with less than perfect credit.

Merrill Lynch & Co.'s Mortgages Plc unit said yesterday that it raised its interest rates. Northern Rock Plc, the Newcastle upon Tyne building society that had 8.4 percent of the market last year, and Residential Capital Corp.'s GMAC-RFC unit, with a 3.5 percent share, said they stopped some offers and lifted costs for others. Deutsche Bank AG did the same, while Investec Plc’s divisions have stopped subprime lending.

There are some lenders who have pulled their current product range and not announced any new ones,'' said Ray Boulger, senior technical manager at Charcol Ltd., Britain's biggest online mortgage broker. Others have put up rates until they get little or no business.‘’

The changes add to evidence that homeowners are finding it more costly and difficult to borrow in Britain after a collapse in the U.S. mortgage market dried up credit around the world. That may hurt house prices, which tripled in the last decade to an average 198,915 pounds ($404,000) because banks were allowing homebuyers to take on loans of **up to five times their income. **

Now correct ole 2Pack if he is wrong.

Bloomberg consider loans of UP TO 5 TIMES INCOME to be sub prime territory . They are correct because the yanks do not go to 5x and call it prime.

By my reckoning that means that lenders responsible for at least **25% of Home Lending in Ireland are sub prime lenders because they allow 5x Income multiples …or more…in certain cases **

Bank of Ireland, EBS and IIB all allow 5x mortgages to my knowledge, there may be others.

EBS and Bank of Ireland have at least 25% of the home loan market between them.

The EBS alone has 12% of the Irish market and BoI are, as I understand, bigger.

Sub prime lendING is 6% of the Uk market and offically c.1% here but the above are not pure sub prime lenders so I am not sure how much UK sub prime is sub prime from prime lenders and how much from the likes of Start who only do sub prime.

Finally

Northern Rock said on Aug. 23 that it raised some rates and withdrew some of its subprime offers. Ron Stout, a spokesman for the company, said the changes weren’t unusual.

[2Pack]

dupe…

[geckko]

#######WARNING - ANECDOTE AHEAD############

I once went to a prominent high street lender in Ireland, shortly after arriving on these shores in 2005. The lady ran me through her system, and then told me she was sorry, but all they would be able to extend to was 6x gross earnings.

Nearly fell off my chair.

[2Pack]

anecdotally I have heard 10x IO on one income but I cannot finger any lender named above for it.

My sister in law was offered 5-6x on her own in 2004/2005 .

[The_Unwelcome_Guest]

Just because it’s 5x doesn’t make it sub-prime.

Sub-prime is giving a mortgage to people who have had problems repaying in the past and may again in the future.

That’s sub-prime lending and that’s what has brought the US to it’s knees.

That and ninja loans.

[Savvy]

I was offered just over 6 times my income earlier this year.
Whats a ninja loan?

[2Pack]

a ninja is a lie all you want loan

No Income No Job No Assets

I do consider 5x to be sub prime by the way because that borrower cannot survive small shocks by themselves.

3-4x is the max I would consider as prime.

[The_Unwelcome_Guest]

Most stretched borrowers may face hike

Thursday, 30 August 2007 12:35

The Independent Mortgage Advisors Federation has confirmed a number of sub-prime lenders in Ireland have been forced to increase interest rates on home loans.

Nua and Springboard have put up rates and the country’s largest sub-prime lender, Smart, is in discussions about increasing rates.

Sub-prime lenders target people with poor credit histories by offering loans with higher than normal interest rates.

In the US many of their customers have been unable to pay those mortgages.

That has prompted all the banks which fund sub-prime lenders to put up interest rates on their wholesale funding.

The difficulty is sub prime lenders charge an average of 7% to 8% interest already.

But they are now increasing rates by between 0.5% and 0.75%.

And that is an additional burden for the most stretched borrowers in the market.

www.rte.ie

It’s all falling into place really isn’t it.

Unfortunately.

[Duplex]

Funny that in the US home ownership rate is less than that in Ireland, house prices are about half those in Ireland incomes are similar, GDP per capita is similar and US has fewer empty homes. Yet US lenders are the ones with problems, strange.

[TruthSpeaker]

Lending standards were lower in the US.
You could get a loan on “stated” income rather than proven income.
Thats why there are so many foreclosures over there. Thats not going to happen here.

[StoppedClock]

@The Unwelcome Guest

Just because it’s 5x doesn’t make it sub-prime.

While this is technically correct I think it is a bit of sneaky obfuscation by the industry this side of the Atlantic.

Because we have ad hoc piecemeal credit rating system we don’t have a standard credit bureau risk score; since no one has any rating it follows that no one has a low rating and hence sub-prime does not exist.

Credit for the masses is relatively new to Ireland and the lenders have sought out people that have never had the opportunity to default before.

Next time around it will be very different.

[Boston_Irish]

I find it crazy too - I posted a day or two ago that Ireland was full of subprime. Its just a name - pulled from numbers. There are actually many “subprime borrowers” that are in effect prime borrowers. You know the story - young, spent too much on a student loan, defaulted on a small credit card bill. Started working after college got married, two working people with an income of lets say 110,000 dollars. They get a loan for 330000.

Just 3X combined income and they are subprime - - In Ireland they are top of the line lenders due to the 3X income stat - even with nothing down.

Anyone on interest only is Without doubth subprime. That only works as house prices rise.

[Thing_Fish]

@Duplex

Funny that in the US home ownership rate is less than that in Ireland, house prices are about half those in Ireland incomes are similar, GDP per capita is similar and US has fewer empty homes. Yet US lenders are the ones with problems, strange.

but the US lenders scam their costumers big time

[Boston_Irish]

@Savvy

I was offered just over 6 times my income earlier this year.
quote]

THIS IS SUBPRIME _ Without Capital appreciation or an impending massive increase in your wages - HOW ON EARTH can someone assume that this loan will not be defaulted on

[baby_tooth]

Ahhhh…anyone notice…

Freddie Mac exceptional bad debt losses of 320million.

bloomberg.com/apps/news?pid= … refer=home

Thing is that they don’t even touch sub-prime and are govt backed…imagine the pain going on else where when these guys are like the stwalwarts of the industry…

Not only that…lots of jobs getting well shaky on trading floors…alot of guys twiddling thumbs…not allowed to trade

[The_Unwelcome_Guest]

@Boston Irish

@Savvy

I was offered just over 6 times my income earlier this year.
quote]

THIS IS SUBPRIME _ Without Capital appreciation or an impending massive increase in your wages - HOW ON EARTH can someone assume that this loan will not be defaulted on

Very easily.

Take it from the point of view of young professional with a good career path, perhaps even a tinge of public sector in there.

Previously there was zero difficulty because HPs were increasing and in all likelihood they would ladder and move on quickly.

Of course now, it’s so damn sticky that might not be an option.

But for the last five years, it’s been par for the course.

Let’s not be naieve here.

[Who_ll_take_the_rap]

I do not blame the Government for the boom in the property market but, to some extent, those who are lending money recklessly to people who, one day, will be unable to afford to repay that money. All sorts of bogus stress tests are conducted on people. We know these are bogus because the amounts that the banks are prepared to lend to people to get into the property market are now from six to nine times their income. In more prudent days, the amounts were two or three times their income.
shane-ross.ie/house_prices.htm

Note that Ross is aware of nine times income. I must say that I am bemused that he thinks that our legislators appear not to be accountable when the country is held up to ransom.

[Open_Window]

@Who'll take the rap?

I do not blame the Government for the boom in the property market but, to some extent, those who are lending money recklessly to people who, one day, will be unable to afford to repay that money. All sorts of bogus stress tests are conducted on people. We know these are bogus because the amounts that the banks are prepared to lend to people to get into the property market are now from six to nine times their income. In more prudent days, the amounts were two or three times their income.
shane-ross.ie/house_prices.htm

Note that Ross is aware of nine times income. I must say that I am bemused that he thinks that our legislators appear not to be accountable when the country is held up to ransom.

Of course he wouldn’t he is one of them, a politician at the end of the day.