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Extent of Scottish subprime home loans revealed

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Published Date: 02 October 2008
By HAMISH MACDONELL
Scottish Political Editor
MORE than 21,000 householders in Scotland have been given subprime mortgages in the past three years, according to figures released yesterday.
North and South Lanarkshire and North and South Ayrshire had the highest levels of subprime mortgages in Scotland, with Shetland, Orkney and the Western Isles having the lowest levels.

The subprime market in the United States – which has seen lend
ers authorise mortgages to people on low incomes or with poor credit ratings – has been blamed for playing a large part in the credit crunch.

The subprime market in Britain – loans given to those with impaired credit ratings – has always been smaller than in the US, but yesterday's figures show it represents 3.4 per cent of the total.

Those with impaired credit ratings have either defaulted on a loan for three months in a row in the previous two years or been declared bankrupt.

A spokeswoman for the Financial Services Authority said the industry regulator was not opposed to subprime mortgages, as long as the lenders adopted a sensitive and flexible approach to chasing down arrears.

Stewart Maxwell, Scotland's housing minister, said: "The Scottish Government would discourage borrowers from taking on unsustainable mortgage commitments and to seek help from their lender if they are having trouble repaying their mortgage."





The full article contains 218 words and appears in The Scotsman newspaper.
Page 1 of 1

  • Last Updated: 01 October 2008 10:02 PM
  • Source: The Scotsman
  • Location: Edinburgh
 
1

Guga II,

Rockall 02/10/2008 03:11:47
#1.

Apart from the fact that the control of such matters is vested with the English government, you really should take your medication.
2

Bejjy,

02/10/2008 04:48:03
#2 Gaga 11'

You have obviously made a mistake and mean the British Government don't you old fellow?
3

somerferg,

perth 02/10/2008 05:22:17

#1/3

As usual a comment full of insightful analysis - yes lets all blame Alex Salmond for the sub prime mortgage scandal. While we are at it why not also blame him for the bad weather and other phenomena that clearly were in his power to solve.
4

Evan Owen,

Snowdonia 02/10/2008 07:13:37
Sub-prime has been around for decades, one of the first banks to turn a blind eye to income and credit history was the biggest Scottish bank, blame Scotland!

Let's get real here, lenders took a gambe which didn't pay off, the borrowers lost their shirts and any equity (deposits and the like) they threw in the pot are now gone.

I reckon riskier lending was more like 25% of the market, maybe more, how about ALL of it, everything has an element of risk.

Some lenders, particularly the Scottish variety got heavily involved in very high risk commercial lending, things like resorts (read timeshare) in the leisure industry, wonder how that one is going right now.

If you dig deep enough you will uncover all sorts of toxic loans to all sorts of borrowers, not all were sub-prime.

Like all politicians Alex Salmond didn't have a clue what was going on so you can only accuse them of being ignorant of the facts. I hope they will now listen to people who can offer an alternative to regulation which is now, without doubt, bust, not fit for purpose. Perhaps Scotland can show the rest of the world how it can be done quite differently? If Wales had the ability to pass legislation allowing a different regulatory regime to 'England' we would be talking to the WAG too!
5

Ugly George,

Edinburgh 02/10/2008 08:02:54
7 bring them on
Alex Salmond worked as an economist with RBS for a few years in his twenties before becoming an MP in 1987. Did RBS make such a young man with little experience their chief economist?
6

A.FAN,

Hamilton 02/10/2008 08:10:56
Can we get this in perspective. 3.4% of the total market was/is sub-prime lending. Only a portion of that 3.4 % will become totally bad. If that is 50% of the sub-prime market being bad are we loking at less than 2% of the total Market and when a Bank feels it is forced to sell (which is the last resort) they do not lose the total amount of the loan? Maybe they lose 30% of THAT at this time. Most other commercial concerns would say such a risk level was acceptable. How many decent young folk have been able to get mortgages and ARE coping despite being given 'generous' mortgages? Most will try their damndest to meet their commitments and recoup in time the present shortfall in the value of their homes. The vast bulk of debt on the books of our lenders is sound. It is time all of the 'Banks' fully admitted the amount of debt they consider at risk compared to their total assets - and it is the debt on their books which is their prime asset - it will be a large sum but small in comparison to their total mortgage book. If they cannot lend they cannot PAY interest to depositors.
7

puskas,

East kilbride 02/10/2008 08:11:18
Subprime mortgages in the last 3 years.
8

Marian,

02/10/2008 08:11:26
This news totally exposes one of the many lies that Gordon Brown has been trying to force-feed us, namely that this economic crisis was imported from the USA and nothing to do with the way the UK economy was run by him. The truth is that it was the inaction and incompetence of the UK government in controlling the worst excesses of Northern Rock and the like that got us into this mess in the first place.
9

Duncan in Edinburgh,

02/10/2008 08:26:14
#12 It exposes quite the opposite, in fact. It demonstrates that the UK market was nowhere near as exposed to the source of this credit risk as the US market was. 3.4% is a tiny proportion, a perfectly healthy one for the market when you consider that this isn't a count of mortgages likely to default, just those offered to people with bad credit histories. The default rate will be far lower - and the default rate in the primary mortgage market would have a much larger effect anyway.

So in fact you have it utterly about face: this shows Brown was right in that assessment.
10

Beergut,

Embra 02/10/2008 08:38:42
It seems like only yesterday that the media and politicians were berating the banks for excluding vulnerable, less well-off members of society by not giving them access to forms of credit enjoyed by the rest. They even blamed them for forcing people into the hands of moneylenders charging exorbitant rates of interest! Now we are seeing what happens when banks listen to that advice instead of following their better judgement. The only good thing, I suppose, is that the banks aren't likely to use the services of baseball carrying debt collectors.
11

Ugly George,

Edinburgh 02/10/2008 08:45:52
14 Beergut
Good point. The only part I might disagree with is the part where you said they acted against their "better judgement". I think their judgement was faulty.
12

Geo_1875,

Edinburgh 02/10/2008 08:49:01
#3 BTO

"You couldnae make it up..."

Yet you continue to do so!!!

The Unionist Scottish Labour Party were in control for 50% of the last 3 years which this article refers to. Yet they, and their masters at Westminster, are blameless in your eyes. Lets all blame the SNP for everything. Last man frees all?
13

Duncan in Edinburgh,

02/10/2008 09:01:23
#16 That was the logic espoused by Nats on yesterday's story about schools building!

http://thescotsman.scotsman.com/latestnews/School-buildings-improving--but.4544149.jp

All building projects completed in the last year, despite having been funded and started during the previous administration, were claimed as SNP achievements. Apparently you want to have your cake and eat it?
14

Beergut,

Embra 02/10/2008 09:07:00
#15 Ugly George - You are right of course. "Better judgement" went out the window when the banks, led by Fred the shred's Royal got rid of everybody over 50, regardless of ability. Look where all these young, thrusting executives have got us now.
15

Jacqueline Hyde ,

On the shelf 02/10/2008 09:16:36
Sub-prime lending/borrowing in itself has not caused the credit crunch - it simply requires a greater degree of preliminary investigation by the lender and an a full understanding by the borrower of the commitment. The problems have occurred because the lenders have either mis-sold the loans or have failed to ensure a satisfactory way of dealing with defaulters. The practice od simply turfing families on to the street and then flogging off the property at any price however small shows a level of crass stupidity and insensitivity that beggars belief.

If all the bankers in Britain and the US had half a normal brain cell between them, they would have set up a reasonable safety net which would have protected their asset base, property values and those families that they have made homeless. For example, leasing back the properties after foreclosure - even at relatively low rents where existing occupants are the new tenants - would have kept these properties off the market and provided lenders, borrowers and shareholders with breathing space and avoided the current downward spiral.
16

Jonesy,

faroffski 02/10/2008 10:17:41
It is well known fact that to get a mortgage the maximum you ought to borrow is 3 times your annual salary. Should a couple borrow at twice that amount and one stops for family reasons expect trouble. Theose in problems now are just "simple simons"
17

Geo_1875,

Edinburgh 02/10/2008 10:19:16
#17 Drunk in Edinburgh

I agree that SNP can't take credit for the previous administration's successes, but surely they can't be blamed for all the ticking time-bombs planted by them.
18

TommyKaye,

UK 02/10/2008 10:22:03
Hey bring it on here are some facts for you.

There was a little union sponsored demo in Birmingham against "Cameron's cronies cashing in on the credit crunch" organised by Charlie Wheelan.

Unfortunately they seem to have missed out on the biggest short seller of Bradford and Bingley. None other than his old crony Paul Myners' GLG Partners. Brown's favourite financier, donor and deputy chairman of the Smith Institute, as well as Gordon's personal financial backer during the leadership campaign.

GLG partners declared to the FSA the largest short position in the market, the massive hedge fund profited the most from being short Bradford and Bingley before it went under. If Charlie's dozen strong rent-a-crowd don't fancy demonstrating outside GLG's City offices they could try demonstrating outside the Guardian's offices. Myners is also chairman of the Guardian's holding company.

Labour has also taken £1 million from Jon Aisbitt, non-executive chairman of Man Group, Britain's biggest quoted hedge fund group. Derek Tullet, who made his money providing derivatives broking services to hedge funds, also sent £400,000 into Labour's coffers.

It gets even better, the FT has discovered that MPs own pensions are invested in a hedge fund manager, Quellos. Not only that, in addition the MPs pension fund also makes money lending stocks out to hedge funds to allow them to short shares.

The hypocrisy is huge here, they condemn short sellers publicly and yet they roll up the profits of short selling in their pension plans.

Westminster snouts in the trough
19

Duncan in Edinburgh,

02/10/2008 11:16:45
#22 Please don't c&p and cross post this guff, it's bad enough having to scroll past it once.
20

Saoghal Beag,

02/10/2008 11:21:36
Beergut, you are wrong. there is a difference between making sure no one is excluded from the banking system and in addition provided them credit levels.
21

Resolutions,

02/10/2008 11:52:41
Geographically speaking are not the 'worst subprime' areas in Labour controlled areas?

Just a passing thought!
22

westview,

back from International Astronautics Conference ,G 02/10/2008 11:53:25
Some points----We here in Scotland should have access to all our statistics not just the doctored ones that Westminster feeds us, and we should have our own " lifeboat fund" to help us through rough times ,like the Norwegians and other sensible prudently run people. Ditch Gordon Browns " maxed out credit card" economics now.
23

yockel,

02/10/2008 12:04:10
I would be more than happy with a "sub prime mortage" if that's was what I needed.
What Hamish meant to write is that some people took on mortages they couldn't service. But hey poor folk shouldn't be allowed to own property that's not the socialist way.
24

The Federalist (the poster formerly know as NAUON),

02/10/2008 12:16:01
This is not bad news.

Compared to the US mortgage market, where it is estimated that 30%+ of mortgages are sub-prime, the Scottish mortgage market is positively healthy.
25

A Friend of Fernando Poo,

02/10/2008 12:21:58
Somewhat behind the times this one. In the US, there are more prime loans in trouble than there are subprime. Soon commercial property loans, car loans and credit card loans will be in trouble too.

The problem wasn't subprime loans. The problem was too many loans of all kinds. That's why they call it a "credit bubble".

When a tyre has no tread, do you blame only the small part where the puncture appears?
26

Scimitar,

Alba 02/10/2008 12:44:56
Surely the blame lies with the individual, many of whom made a nice fortune out of it when the market was growing. They gambled , some won some lost.. The credit crunch is the best thing to happen to the British economy, as they'll need to revert to fundamentals, and live within their means. People need to view housing as place to live and not a "market" as the Finance industry / Government do. Commonn sense really.
27

wattie>x 1,

PLYMOUTH 02/10/2008 12:50:57
#2 " It's much easier to suggest solutions when you have SCANT knowledge of the real problem".

The dis-united UK government has as much chance of assisting in solving this problem as the man on the moon has. The problem originated within the confines off the Neo-Con controlled USA who only see their stooge friends in the UK as an extremely insignificant minor player.
28

Urban Guerrilla,

Edinburgh 02/10/2008 12:54:56
I didn't know there was any private housing in North and South Lanarkshire and North and South Ayrshire.
29

57vintage,

Keith, Banffshire 02/10/2008 13:03:14
#4bejjy

You have obviously made a mistake and mean the UK Government don't you old fellow?

The British Isles is the full archipelago, Great Britain is the big bit that includes Wales, England and Scotland (and possibly Skye now that the Robbie The Pict Bridge is in situ) and the UK is the political collective encompassing most of it apart from Eire, the Isle of Man and the non-UK Channel Islands more or less.

That's why the ridiculous epithet "Team GB" was well erm...ridiculous, in that it effectively said that anyone from N Ireland, Lewis etc wasn't part of it.

That would be the slippery slope to independence that would.
30

James.com,

02/10/2008 14:44:00
Do we really expect the First Minister to check all loans personally?
31

Saoghal Beag,

02/10/2008 15:07:43
32 Urban, there wasn't until right to buy came into being. But even some of them are in negative equity despite the massive discounts.
32

Mcsnagpile,

02/10/2008 15:54:08
21000 sub prime single ends and haimes in the heelans ---how Bush would love that problem.
33

Huntly loon,

Aberdeenshire 02/10/2008 16:16:14
As regards the defaulters on sub-prime (indeed even prime) mortgages, would it not be better for the public purse to acquire the properties being repossessed, take them into the public housing stock and relet them back at an appropriate affordable rent. After all local authorities are obliged to accomodate the homeless. Instead of propping up failed banks and bankers the money would be better spent acquiring these properties cheap.
34

mcbogtrotter,

mccalifornia 02/10/2008 19:47:23
Quite a few of you are making reasonable comments today, I for one believe the number of loans called subprime is false. I believe there are many more out there that are close and are not yet in trouble.
This is also not caused by the U.S. this was caused by business people who had too much money available to them, and could not give it away fast enough.
The causes are many governments wanted to help people own a home but did not watch the process or did not care because they were filling their own pockets, these were individuals in goverment and out.
This is also what happens when we tie our economys together instead of just trading like reasonable people with one another. The facts illustrate that human nature has not and will not change some people want it all.
This current crisis could end today by forcing the mortgage lenders to reset payments to 1/3 to 1/4 of the persons income like it should have been in the first place, and no one will lose money they just wont make as much as they wanted and we wont need to give these people a trillion dollars in the U.S. to bail out the system.
Everybody gained from this over the years the cheap money made many things available and we all gained something wheather we want to admit it or not, so we need to all share in the cost. But mainly we should have learned that we need to watch our government more and to through a few people out of office, and if the ones we do put in office do not get the job done get rid of them with out waiting for their term to be up.
35

Udith Fonseka,

Colombo, Sri Lanka 02/10/2008 23:02:04
Get a Grip.
That is nothing.
The Media should be responsible and point that out.
HBOS and RBOS should be strong enough to buy out nearly the whole American banking sector.

 

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