HP'ers, the end is near. Everything that ever made sense in the world of lending, banking and finance is no longer valid. The stupid season has reached its apex. Nothing makes sense anymore. The world is upside down.
And it's all going to end badly. So, so badly. Here's my math, then today's announcement by Abbey bank here in the UK:
Homedebtor A:
£50,000 gross income
less 40% UK tax of £20,000
equals £30,000 net take home pay
less £3,000 council tax (=UK property tax)
less £1,500 / month living expenses (ramen noodles every night)
equals £9,000 left for house debt payment
£50,000 x 5 = £250,000 loan.
Monthly payment on loan = £1,600 / month
Annual payment = £19,200
Total annual deficit spending for homedebtor: £10,200
Years it'll take Homedebtor A to go bankrupt: One. Two max.
Commission banker will earn on mortgage: £5,000+
Commission estate agent will earn on home sale: £8,000+
How long will Abbey will hold the loan before selling it off at a profit: 1 month
How long until this whole shell game blows up, hedge funds melt down, China gets the surprise of their life: One year. Two tops.
Home loans on offer at 5 times salary level
Homebuyers are being offered unprecedented borrowing power by banks and building societies, which are now marketing mainstream mortgages of up to five times joint salary levels as they attempt to win first-time buyers.
It followed last week’s decision by Bank of Ireland Mortgages and Bristol and West to increase standard salary multiples from four to 4.5 times. Scottish Widows Bank and Nationwide have also raised their standard borrowing levels in recent months.
Melanie Bien, associate director at independent mortgage broker, Savills Private Finance, said of Abbey’s move: “It is unprecedented for a mortgage lender to offer this much on a joint basis. It seems lenders are going all out to enable first-time buyers to borrow as much as they can.”
The trend towards higher income multiples has led brokers to fear borrowers are overstretching themselves, especially as rate rises are expected imminently. Nick Gardner, director at Chase De Vere Mortgage Management, said: “It is quite possible that if people borrow the maximum they can get away with they will be overstretching themselves. It may then only take one or two rate rises to put such a squeeze on their finances that they can no longer make ends meet.”
In some cases Abbey will now lend couples five times each of their salaries without requiring confirmation of earnings.
November 01, 2006
The desperate hunt for more suckers continues: UK bank now lends up to five times gross income, doesn't require proof
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The UK may not be the best place to hole up when the SHTF, Keith. May I suggest Papua New Guinea?
I'm looking at tents right now and thinking a beach in Thailand has my name on it...
I can't believe what I'm seeing anymore - it's almost surreal
In the UK 40% income tax is paid on only income over 33,000 pounds.
See :
http://www.hmrc.gov.uk/rates/it.htm
The concept described is true even if the math is wrong.
I hear when the dollar tanks it is because everyone will be trading UDS's for Pounds Sterling.
Just an educated guess from a British friend. Says it is already happening. Fed Bank HQ is London, right?
SO, they need a bigger debt bubble.....
In the US you can get 10 time yoru income using an toxic mortgage if you have good credit!
yes, on my 50,000 pounds income example, tax rate would be 29% total. So that's 5000 pounds more.
But... then there's the TV tax, the congestion charge tax, the 400% increase in council tax planned, the 17.5% VAT tax, blah blah blah
I underestimated in the end both taxes as well as monthly expenses. England is a socialist country - nearly communist.
Is it true that in England there is no property tax?
Gosh Keith, finally waking up to the bubble in Europe? And a lot of those mini bubbles in Spain, Italy, France are from British buyers! I'm sure the percentage of Americans owning foreign properties bought with HELOC loans are no where close to those bought by Brits. So, when everything crashes there, which country is hurt the worst? Brits. Oh, and the endless arguments by Brits that their economy is different and that even with home values twice the US they are more immune?
Not to mention the high cost of liviing, taxes, etc. When you coming home to roost?
Kw**f:
You should love that socialist country. They speak your language. You have to pay high taxes, support the Baghdad Broadcasting Center, and you are not even allowed to own guns and you could be convicted of thought crimes! All indicators of a dying country. How is Londonstan?
Keith, In the u.k. do they have a fanny mae equivelant?
"£1,500 / month living expenses"
this is definitely too much. $500 to $1000 is more realistic.
The desperate hunt for more suckers continues: UK bank now lends up to five times gross income, doesn't require proof. HP'ers, the end is near.
Why rob a bank when you can sign a few papers and get them to hand over the money legally?
This trend has spread from the UK to the US, as this quote from today's Charles Hugh Smith blog shows:
"I have firsthand knowledge of just how pervasive low lending standards have become. A friend of ours recently obtained a mortgage from Bank of America--presumably a lender with much higher standards than the subprime lenders we hear so much about. The loan amount was substantial--above $500,000--and my friend is self-employed--a situation which basically begs for tax returns or other verification of income."
"So how much documentation does the cautious, careful Bank of America require for this mega-mortgage from a self-employed borrower? Nada. Zip. Zero. They did obtain a credit report, but that was all. My friend didn't even have to pay a visit to the loan officer. A few emails zipped back and forth and the Bank coughed up well over $500K--and threw in a $150,000 equity line of credit, just for good measure."
"this is definitely too much. $500 to $1000 is more realistic."
Spoken by someone who's never been to England I guess. This ain't Kansas.
London FYI is the most expensive city in the world - up there with Moscow. It's tough to get by in London on less than 2000 GBP / $4000US a month before housing
Tube, taxis, 17.5% VAT, groceries, services, meals, entertainment. To see a movie costs $25US. A hamburger in a pub costs $20US. A pint costs $8US. Dry cleaning a shirt costs $4US.
Yes, London is different than living in say Cardiff
you've got the right idea. phuket plans are in the works
I hear when the dollar tanks it is because everyone will be trading UDS's for Pounds Sterling.
+++++++++
If the UK didn't also have such an hellacious credit bubble, I would believe this--but now I don't. I think the Euro will become the new reserve currency. Europe is just too centrally located not to become the new center of the world after America soon collapses. China is just not ready yet--maybe in 50 years if they can keep their millions of rioting, impoverished never-to-be-married farmers under control.
Can we all just agree that MATT DRUDGE is a nasty faggot who shills for the Republican Party and should be outed and then permanently ignored?
Thanks! When that's done I'll feel a lot better. I'm so angry over these liars and turds like Limbaugh attacking Michael J Fox.
"Rush Limbaugh -- a fat, draft-dodging, drug addict, jacking his maid up, having her buy dope for him -- that fat sunuvab!tch -- I mean, enough bad stuff can't happen to him." — Don Imus, Oct. 25, 2006
"this is definitely too much. $500 to $1000 is more realistic."
Spoken by someone who's never been to England I guess. This ain't Kansas.
Sorry, I ment £, not $.
I lived in London for some time. Few years ago. The prices may be different today, but it's hard to beieve that the expenses (before housing) tripled.
On the other hand, £500/person/month is certainly not enough if you need to be constantly entertained and eat only in pubs.
the last time the UK went through a financial ass kicking like the one they are gearing up presently, punk bands like the sex pistols became huge. resurrgence in punk?
UK.
UK Nooz
UK Banks.
Pounds, not Euros or Ameros?
Am I in some kind of space warp?
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