Borrowers with less-than-perfect credit ratings are muscling in on the buy-to-let market as lenders become more willing to accommodate those who have previously defaulted on loans.
Traditionally investors with blemished credit scores have struggled to secure buy-to-let mortgages ? the rationale being that if someone cannot keep up the payments on their main residence or their personal debt, they would be unlikely to make the repayments on a second or investment property their top priority if they ever ran into difficulty.
But the increased popularity and low arrears rates of buy-to-let loans, coupled with the growing number of borrowers with flawed ratings, means some lenders are becoming more relaxed.
Lenders are increasingly taking the attitude that if someone has encountered difficulties ? possibly through illness or redundancy ? the potential borrower should not be automatically excluded from this investment opportunity.
Jonathan Cornell, technical director at Hamptons Mortgages, says: ?Just because someone has had problems in the past does not necessarily mean they should be denied access to buy-to-let forever.?
Typically those investors taking out ?sub-prime? or ?adverse? buy-to-let loans have had fairly minor credit indiscretions ? maybe a month or two of mortgage arrears or historic county court judgments for around ?1,000. But people with more severe black marks ? even those who have entered into individual voluntary arrangements (IVAs) ? could still be approved for buy-to-let loans.
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Vortex wrote:China needs us, we need China .... it's all a big closed system.
Why would any of the players want to smash the system?
China certainly can't stand alone - and why would they want to anyway?
More likely each player will try to optimise their position come times of trouble.
Some countries may suffer, some may benefit ... but the system itself will run and run.
Cheeky or greedy players however might sulk a bit when they find that they can't get all they want!
Local problems such as inflation and house price collapse will simply have to be lived with.
Only so long as we continue to have access to cheap and plentiful amounts of energy. Once this goes it is highly doubtful that the status quo will survive the onslaught of converging catastrophes, many already at a crisis point, that abundantly cheap energy has been able to keep at bay.
"The human species may be seen as having evolved in the service of entropy" - David Price.
The telling comment for me is "While, yes, it is possible we can get a recession in the latter months of 2007, most forecasters are not making that judgment and indeed are projecting forward into 2008 ... with some slowdown,"
If he thought there wasn't going to be a recession he'd say so - not point to what most other people are saying just so there's something vaguely positive sounding - he's used to his comments being picked to pieces so I'm sure he's thought it all out.
From a laypersons point of view, there is evidence that the banks have lent recklessly but faced with this huge amount of personal debt that has been spent on ?tat? the banks are being forced to ?wipe off? substantial amounts of debt with the introduction of IVA?s.
The banks will probably agree with the treasury to a similar scheme which will keep people in there houses which have been purchased by ridiculous loan to salary ratios. In whose interest will it be to see a 1990 type crash?
All these economic pundits seem to ignore what a market distorting scenario these IVA?s are, if you are insulated to some degree from your own financial ignorance, with the same principles applied to the housing market in times of slowdown, the usual rules of the economic game do not apply as much.
The only losers in this crazy new personal finance world are the prudent people whom have not borrowed and are trying to save for a deposit on their first house.
If you watch the "Money is Debt" video you will see that the banks have to lend recklessly now to keep the whole cycle going. We're all on an ever quickening treadmill of working to service a debt that can't be payed off because if it is the system breaks down.
Sooner or later the whole thing will just implode anyway because growth is ultimately unsustainable.
I couldn't agree with you more. I have long wondered what was in it for the government to allow such easy IVAs. However, I don't think that the government will neccessarily react quickly enough if the tide does turn. Especially if we are transitioning leaders at the time
Late mortgage payments and home repossessions in the US have hit their highest level since records began, official figures showed.
The figures gave urgency to the sell-off of shares in sub-prime lenders who are particularly vulnerable.
The Dow Jones and Nasdaq both lost about 2% in Tuesday trading.
... And lenders launched repossession actions against more than one in every 200 mortgage borrowers in the period.
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"Unfortunately, it appears delinquency rates will likely worsen before they improve," said Gina Martin analyst at Wachovia Securities.
Asian shares have plunged, as stock markets across the region were hit by heavy overnight losses on Wall Street.
The sell-off, sparked by fears over the strength of the US economy, mirrored sharp losses late last month which saw global stock markets tumble.
Concern about sub-prime lending and weak retail sales in the US saw the key Dow Jones and Nasdaq indexes close down 2% on Tuesday.
Japan's benchmark Nikkei 225 index fell 2.9% to close at 16,676.89 points.
China's Shanghai Composite index - which sparked last month's initial global sell-off, was down 1.85%, while Hong Kong's Hang Seng index was down 2.7%.
Although analysts said that Asia's leading economies remained fundamentally strong, markets across the region are particularly sensitive to signs of possible economic slowdown in the US.
The American economy, by far the world's biggest, is a key export market for Asian companies.
Stock markets in Europe - which were also heavily hit by the recent global sell-off - were expected to open lower, tracking the slide in the US and Asia.
It's in full swing down again...can't see anything specific, I wonder if there are more rumours about a hedge fund going pop. Apparently that was one of the things that got everything going yesterday...FTSE down 140!
