Times: Homes at risk as banks seek more security for credit card debt

Yes, it will be different, i.e. more

We are talking about the rate if interest for unsecured loans which has to take into account those people who have no assets. The fact that, in this case, the customer has assets is largely irrelevant to the overall interest rate being charged.

It *is* however relevant to the wisdom of taking out an unsecured loan and therefore paying higher rates when you could take out a secured loan and pay lower rates,

Cheers,

John

Apparently not.

You seem to enjoy pretending (I hope) to be an idiot but I'm afraid I don't much enjoy interacting with such an idiot, even a pretend one, so goodbye,

John

Why not just admit you are wrong rather than making a fool of yourself by trying to say black is white.

Not a loan saleman by any chance? Or holding banking shares?

So if we do get hyper-inflation is this a bad thing for people with 100% mortgages or a bad thing for people such as yourself who rent.

I have been following these events since 2001 and often read your comments and your previous views on the impending credit crunch, which is now upon us, made me (along with other reasons) take on more debt to move up the housing ladder in 2006. Only history will determine if this was the correct decision.

No. An unsecured loan is a loan which *is not* secured against your assets. A secured loan is a loan which *is* secured against your assets. Simple!

Your assets can still be seized even with an unsecured loan, but only with a court order. With a secured loan, the securing assets can be seized

No, you don't get it. In this last sentence of yours you say "so they could seize your assets". This suggests you think that assets can only be seized if a loan is secured against them. This is not so. If a court orders you to pay, and you don't, then the bailiffs can be ordered in and seize whatever they like. With a secured loan you don't need a court to order anything. You can just seize the assets yourself.

No, you can't challenge a secured seizure. The best you could do, if you were to allege that a seizure was unlawful because the securing document was invalid, is sue back after the event. You could also try to get the polis to prosecute for theft, but unless you can convince them up front that the security is forged, they will treat it as a civil matter and keep out of it.

The only "rubber stamping" necessary with a secured loan is the special case where the securing asset is someone's home, when an eviction order is needed. But a possession order is not required, as the lender already has authority to take, just not to evict.

But he said an unsecured loan is one which is secured on your assets. Correct me of I am wrong. If an unsecured loan goes bad your assets can be seized whereas with a secured loan you assets can be seized if the loan goes bad. There is a subtle difference, the letters 'un'.

So a bank can repossess a house without going to court?

I don't think so sunshine.

Rubbish.

And has there even been a case of a lender securing a loan on anything other than a house? Maybe I will see if they are willing to secure a loan on my underpants?

Both.

Can't argue with that.

FoFP

Probably, but they will not get 'vacant possession'.

In message , John Anderton writes

And yet with a secured loan I am not expected to join the dots as they are legally obliged to spell out the potential loss of my home as being a consequence. You don't think this causes people to view the two very differently?

In message , John Anderton writes

A few quid, not enough to even come close to justifying the additional charges.

Consider yourself corrected. No I did not say that. And why are you calling me "he"? Or did you mean someone else?

You seem to think (and here lies your mistake) that if an asset can be seized in order to repay a debt, this means the debt is (or was or must have been) secured on that asset. This is incorrect. If you don't pay your council tax, the council can (after due process) send in the bailiffs and take your telly. Your council tax debt was never, however, secured on your telly.

There is a much more subtle difference. The procedure for going about doing the seizing is different. With a secured loan, the borrower gives the lender permission *in advance* of receiving the money, that he can seize the specific asset(s) against which the loan is secured, if the borrower should break the terms of the agreement. With an unsecured loan, the lender needs to get that permission from a court after default has occurred.

There is a difference between seizing and repossessing. They can sell the house from under you without going to court. For example in theory they could sell it to a BTL investor who might be happy to take on the property with yourself as a pre-installed tenant. But that is not the type of arrangement likely to attract a purchaser, and so realistically they would have to be able to offer the house with vacant possession.

So they need to kick you out first, and in order to do that they have to go to court to get an eviction order. But they don't need a court order to then sell the house. They already have that authority (and indeed it's on the strength of that authority that the eviction order would be granted).

Yes, plenty. Loans are secured on cars. You can get a marine mortgage for your yacht. You can secure loans against savings (for example if they are tied up in a long term bond but you want the money now) or investments or your gold watch. But you're right about one thing: you can probably not secure a loan against your underpants.

Yes it was, thats why they took it. Otherwise I would bave the b*stards up in the courts (which my council tax pays for incidently).

As he does with a loan secured on your house.

But is is all immaterial, you are talking about differences in procedure, not end result. It's like going to prison via Luton, or via Bedford, you are still going to prision

It's like the misleading government warnings,

"THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT."

It's a lie, it implies your home is not at risk if there is no loan secured on on when in reality it is.

Last year a colleague was getting married and wanted to buy a house. He had a long chat to me about the advantages of buying then, or waiting out the end of the credit bubble. The thing is that he had no deposit and so even if the credit bubble was about to burst right then and he wouldn't have to wait ages (as it turned out it was, but even I didn't know that in March) he'd have been in no position to take advantage of house price falls because with them would come a requirement for sizeable deposits as credit grew scarce. For him, it was a case of now or never. Only those with cash can wait to take advantage.

Which I suppose reconfirms that what's best depends more on personal circumstances than the pertaining financial environment.

FoFP

Glad I'm not in his shoes, he might not have timed the market very well yet if he can fund his mortgage he should be ok, however he may have problems climbing the ladder in future.

My reasons for climbing the housing ladder like many others were driven by growing family. My first house cost about 40k in 1999, at the time the type of house I moved to would have cost about 80k. In 2006 I sold my house for about 100k and bought the new one for 160k. So in 7 years the cost to change had increased by 20k. Admittedly we did get it a little cheaper than you would expect as it was a little worn.

What I can remember at the time is you predicting how difficult it will be to obtain credit and someone says during the crash of the 90's that he couldn't sell his house for half he had paid for it. I could have gambled and got a better cost to change deal during a downturn but I didn't want the mega hassle and then I still would have had the credit issue.

Although the house has risen a bit in value, the fact that we are facing a possible housing crash doesn't matter to me. What matters to me is having a decent amount of liquid assets to continue to fund the mortgage in any hard times. I have got to live somewhere and as I see it my paper loss at any time will be the difference between what my new and old house are valued. If all houses crash by 50% then my paper loss at the time will be 10k and this is not factoring in any increase in house and mortgage set up costs.

On the issue of deflation, I think your Austrian need for a proper solution is hindering your judgement. Although I think we have reached the top as regards to the banks irresponsible lending, I have a very bad feeling about the irresponsible lending of the BoE.

Whats your opinion on the possibility of this credit bubble being managed by the central banks for a considerable time, gradually deflating the problem as opposed to the big pop that you so desire.

It isn't a lie. It just states than your house may be reposessed if your fail to pay your mortgage. It makes no statement that your house is safe if you don't have any debts secured on it.

However it is an easy assumption to make.

M.

His eventual calculation was that the banks cannot come for those who keep paying their mortgage and so if he just concentrated on that, he'd be OK. I reassured him that even in the depths of the US's Great Depression (actually their second of that nomenclature) those folks who kept their jobs and kept up their payments actually did OK. It's the folks who are, or who will fall, outside of that envelope who will do most of the suffering.

The trick with debt-deflations is to get through them with as much intact wealth as possible. Folks who manage that OK should do pretty well. One thing to note is that the Magic Money Token is usually different in the next bubble,so "The housing ladder" is more than likely a feature of this bubble and it may well not exists once we're through this. Certainly it'd be a far more sane country if we simply expected houses to depreciate in the same way cars do and used investment money for something more productive.

We run our lives according to personalrequirements, not the whims of the markets. You seem to have your head on straight. I'm sure you'll get through it all OK.

Certainly I'm always on the lookout for that. It'san easy thing to fall into.

I do believe they're the source of future inflation and possibly hyperinflation if they lete their interfering run away from them. I realise the odds of modern central banks submitting to, and alleviating the effects of, debt-deflation are somehwat minimal. My worry is that if they merely delay it, it could be all the worse for that.

History says that many try and pretty much all fail.

Think about it: even normal markets are unable to be managed by soviet-style committees (The USSR ended up so at odds with reality that they'd have got poorer more slowly if they'd all stayd in bed all day). What ae the chances that such a committee would be able to garner information,make correct predictions and pull the right levers a precise amount during the chaos that's going to come out of a credit crash?

Northern Rock was their first turn at bat. Feel confident?

FoFP

"M Holmes" wrote

Cars halve in value over a period of a few years; over what sort of time period would you expect a house to halve in value?

It depends on how well it's looked after I guess. I'd imagine that after a few years of neglect, houses could halve in value quite quickly.

It might also depend where it is. It seems that in Cleveland and Chicago, many foreclosed houses are more than halving in value within a week after the occupants depart. Apparently you could have a four-bedroom house in Chicago for four thousand Pounds if you didn't mind too much who your neighbours were.

FoFP

I take it you mean Ohio, not Teesside.

I imagine the recurrent cost of keeping a private militia to guard it would make the proposition untenable.