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

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

Tyler Durden’s pictureSubmitted by Tyler Durden on 05/04/2016 14:41 -0400
http://www.zerohedge.com/news/2016-05-04/uk-housing-bubble-bursts-barclays-unleashes-100-ltv-mortgages-again

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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