As UK Housing Bubble Bursts, Barclays Unleashes 100% LTV Mortgages Again

Tyler Durden's picture

Just a month after the UK's luxury housing bubble burst, it appears the nice friendly bankers at Barclays are looking for some scapegoats to flip their condos to.

In London, as Bloomberg reported, demand has slumped so badly that developers are offering discounts of up to 20% for their newly constructed homes. And just as the case was in Manhattan, it’s a result of the UK putting in a speed bump. The UK recently increased taxes on those deemed to be purchasing a second home, specifically designed to slow the pace of overseas investment. 

According to Bloomberg, the U.K. government’s plan to increase sales taxes on second homes in Britain will also apply to people who live abroad.

From April, buyers of second homes and buy-to-let properties in the U.K. will be subject to stamp-duty sales tax that’s 3 percentage points higher than those who are buying a home to live in, U.K. Chancellor of the Exchequer George Osborne announced in November. In deciding whether an individual is purchasing an additional home, the government will also consider assets outside the U.K., according to a consultation document published on Monday.

 

“This means that if someone is purchasing their first or only property in England, Wales or Northern Ireland, they may pay the higher rates if they own property outside these areas,” the document shows.

 

Demand from overseas buyers has contributed to a jump in London house prices, and off-plan sales abroad helped developers finance projects including Battersea Power Station. House prices in the city rose 7.7 percent in the year through October, according to the Office for National Statistics.

The takeaway then is that the housing recovery has been driven primarily by a steady flow of foreign investment, and not necessarily the underlying economic fundamentals improving...

And so bankers are looking to kep the ponzi dream alive by any means possible.

In what appears like a desperate act of rearranging deck chairs on the titanic (or dancing while the music is playing like in 2007/9), The Daily Mail reports, Barclays has brought back the 100 per cent mortgage - the first major bank to do so since the last financial crisis...

Its decision will give hope to first time buyers, who can get a three-year fixed rate deal at 2.99 per cent without putting up their own cash.

 

Until now buyers would need to give the bank at least a five per cent cash deposit based on the purchase price.

 

Such 100 per cent mortgages were axed after lenders were criticised for making irresponsible loans - and Barclays itself narrowly avoided a bail-out after the financial crash in 2008.

 

Rachel Springall, a spokesman for website Moneyfacts.co.uk, said that Barclays' large high street presence is likely to make it particularly attractive to those struggling to raise a deposit.

 

She said: 'At 2.99% the three-year fixed mortgage is reasonably priced, but buyers must be aware that their parents or guardians must deposit the full 10% of the property price and they will not have access to this money for three years.

 

'Guarantor mortgages spread the risk among both the buyer and the depositors so they should not be taken on lightly.'

 

The lender has also increased the maximum amount homebuyers can borrow as a multiple of their income.

 

Those earning more than £50,000 a year will be able to borrow up to 5.5 times their annual income, up from 4.4 per cent at present. And a buyer with no deposit could get a three-year fixed rate mortgage at just 2.99 per cent.

Zero per cent deposit mortgages have not been offered since the financial crisis. These risky home loans used to be widely sold by lenders, but were withdrawn after the collapse of Northern Rock in September 2007. What could go wrong?

Mortgages which let people borrow more than the value of their home were dramatically scrapped in 2008.

 

Before Christmas in 2007, a third of lenders offered mortgages of 100 per cent or more.

 

Some including failed bank Northern Rock offered 125 per cent deals.

 

Experts said there were two reasons for the retreat - lenders themselves were struggling to raise money for loans, and they were also worried about handing it over to the highest-risk borrowers.

 

Brokers London & Country said that before the financial crisis the number taking out 100 per cent mortgages 'more than doubled' in the last year of deals.

 

Before the crash there were a record 155 such mortgages on offer.

 

They let people escape the cycle of trying to save while paying for rented accommodation.

 

But if prices begin to fall, or they lose their jobs, they would face disaster.

But hey, the bank will have flipped its mortgages into the securitization market by then.. and besides, Denmark is paying people to take out mortgages. Welcome to the new abnormal.

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Dr. Engali's picture

Need..., moar..., immigrants. 

I am more equal than others's picture

 

 

USA is way ahead of the Brits.  We've had USDA Rural Development Loans that are 100% LTV.  Entry level housing in lots of markets are purchased with that type of loan. 

zippedydoodah's picture

In the UK, if the house is repossessed by the lender and there is a shorfall between the bank fire sale price and the outstanding loan then the borrower is liable for the difference, potentially forever.

I believe this is a key difference between the US and the UK.

Or put another way, the UK borrower cannot simply hand the keys back to the lender and forget about it.

Direct quote from Barclays website: "And if we need to repossess the property, the helper could lose money if there’s a shortfall between the money we’re owed and the amount we sell the property for."

http://www.barclays.co.uk/mortgages/family-springboard-mortgage 

philipat's picture

Somewhat over-dramatised? If there is a requirement for a Guarantor to deposit 10% of the value for the full duration of the loan, the Bank is not really taking any risk? It has the asset AND the 10% as collateral on the loan.

mtndds's picture

when is the housing market going to burst in the USA?  The west coast, like california, housing prices are sky high!!  Higher then it was in the last housing bubble.  Crazy times for sure.

Id fight Gandhi's picture

It's not like they need money in the vault. Money is loaned into existence.

N0TaREALmerican's picture
N0TaREALmerican (not verified) mtndds May 4, 2016 3:16 PM

We are getting the rich Chinese AND the dot-com bubble.   Plus the "economy" is booming.   

philipat's picture

"when is the housing market going to burst in the USA"

When the Chinese stop buying?

Rainman's picture

NINJA be back, bitchez !!

TradingIsLifeBrah's picture
TradingIsLifeBrah (not verified) Rainman May 4, 2016 3:12 PM

I'd love to see an update about the Treasury's investigation into NY and Miami real estate

http://www.nytimes.com/2016/01/14/us/us-will-track-secret-buyers-of-luxu...

NoDebt's picture

Could we at least have a purposely manufactured crisis that ISN'T an exact copy of the last one?  I mean, have the elites actually run out of new "crisis" ideas or are they just not even trying any more?

Speculative housing bubbles and collapsing internet startup companies?  This is the best you guys can come up with for the next "crisis"??  Fucking lame.  If you don't keep me better entertained than that I might just start wondering if there isn't a bigger plan to all this.  And you DON'T want me going down that path.

Theonewhoknows's picture
Theonewhoknows (not verified) NoDebt May 4, 2016 3:07 PM

It is like many industries look at financial sector in 2009 and felt jealous - they also wanted a bail-out themselves. So in some sort of a steam-achievement way they put this as their paramount goal - now everyone is trying to create a bubble. Student loans, auto loans, shale companies debt, housing vol. 2, dotcom vol.2... It seems like Janet will need to print more http://independenttrader.org/was-the-last-euphoria-the-harbinger-of-rate-cut-and-qe-in-the-us.html

Jagov's picture

The Big Short Part 2, coming December 2019.

bada boom's picture

Do I really have to wait that long?

corporatewhore's picture

Was the down vote from the white house?

skinwalker's picture

Housing, particuarly luxury housing, is a human right. With so many billions living in squalor around the globe, it is our duty as civilized people to provide 5,000 square feet units with all the trimmings to all of them at very favorable loan terms. If it turns out they cannot repay the loan, then us white folks will repay it for them. After all, we can afford it, and it will be an important first step towards repaying our debts after centuries of living well off white privledge. 

 

/sarc. 

 

P.S. I am truly horrified that enough people feel this way that I have to add a sarc tag. 

NoDebt's picture

You didn't need the /sarc tag.  I have a finely calibrated sarcasm detector.

TradingIsLifeBrah's picture
TradingIsLifeBrah (not verified) skinwalker May 4, 2016 3:08 PM

What does sarc mean?  Those are great points - Bernie Sanders

;p

Joebloinvestor's picture

Somewhere someone got suckerd into believing they are going to make book on flipping.

TradingIsLifeBrah's picture
TradingIsLifeBrah (not verified) May 4, 2016 3:07 PM

Call me when its at 110% LTV with a negative mortgage rate

hendrik1730's picture

So, the 2007-2008 madness is back in full force. Einstein was right : the universe might be limited in size, but human stupidity certainly is NOT.

N0TaREALmerican's picture
N0TaREALmerican (not verified) May 4, 2016 3:13 PM

Luckily, here in KaLi, we have Chinese paying with 100% down-payments.   We need more rich immigrants!!! 

wmbz's picture

And the dupes will line up around the block to sign up. Unlimited amount of morons, flippers and just general dumbasses.

No need to come up with new rip offs this shit works over and over.

TradingIsLifeBrah's picture
TradingIsLifeBrah (not verified) wmbz May 4, 2016 3:16 PM

Good luck to the chap making  £50,000 finding a place to buy for  £275,000 (5.5x salary).  Hope that there is no proof of salarly needed so he can add a few zeros to his annual income.

GRDguy's picture

Barclays, founded in 1690, is one of the original agents of The Great Red Dragon (Snakes In Suits). They currently hide behind a BlackRock. 

http://www.businesswire.com/news/home/20091201005930/en/BlackRock-Comple...

Hobbleknee's picture

SOP in Sweden. Plus, you get a tax rebate on the interest and you never have to pay down the principle on the loan. Infinity mortgages!

NuYawkFrankie's picture

"Pop!" goes the weasel?

I dunno so much - there's certainly no shortage of Thick Brits* to take up the slack - "...better get on that housing ladder before it's too late Sunny-Jim!"

(As former PM John Major famously remarked of his countrymen: "Not 'too clever by half' but 'too thick by three-quarters' ")

Stormtrooper's picture

Make it 200% loans and I'll buy at least 10 multi-million pound 2nd homes to keep this sucker going.  Can't take time out from my McDonalds burger flipping job though so we will have to take care of all transactions thru the mail.