Mortgage accounts: the time to follow the UK?

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We had already discussed the beginnings erratic mortgages rechargeable. It is this time to have a reserve of money at a rate mortgage, this seems far-fetched, especially today. Yet it is already possible for some ten years on the other side of the bag! At a time when we are seeing here timidly paid on current accounts, current accounts mortgages represent nearly 10% of outstanding loans in the United Kingdom.

Behind the name hides a relatively simple product that aims to consolidate the savings and crédit.Supposons a customer into a loan for the purchase of his home and he has other cash into an account current pay. The current account includes both mortgage contracts, the customer has to pay interest on the balance of the two accounts. This has the effect of shortening the loan and interest défiscalisation current account (which do not exist, and therefore can not be taxed). Even easier, the bank may propose a single account debtor of the loan amount that the client reimburses at its own pace, while being able to withdraw some of the money refunded! Daily Finance and Investment Tips / Make Money by Learning

These products and their derivatives have a success increasingly important. But what is the value for banks, given that such practice leads to a slight decline in the performance of credit to the financier? With a current account mortgage of this type, all income of a household, any existing savings are good to take to grow outstanding and reduce the amounts of interest to be repaid. And that is where the product makes sense for the bank because it allows him to capture all incomes and savings of a household. That goal makes the market for mortgage accounts ( "offset mortgages or current account mortgages) extremely competitive in Great Britain. Many analysts predict that these products represent 30% of loans in the near future.

In the current context, with a major credit crisis and a U.S. housing market oriented clear downward trend, selling mortgage accounts may seem a risky because the loan guarantee associated with decreases in time, and potentially faster than capital outstanding. But a measured and selective distribution of these products will be very interesting for banks. For a quick view of the risks of these products, start with the classified into two categories:

1. The consolidation of accounts before payment of interest
2. The current account mortgage

In the first case, the additional risk compared to a conventional credit is finally a repayment, and therefore a risk of poorly controlled rate. Indeed, usually the bank will model separately disposing of its fixed-rate loans (taking into account the anticipated refunds) and current accounts (possibly paid). But if the current account is paid, it is usually with a variable rate. Takes the risk that the bank is to offer credit to a fixed rate but also a current fixed rate (within the limits of the outstanding credit).
The second category of products is much more difficult. The customer has a reserve of money very important guarantee by making the mortgage of his property. It only pays interest on the balance of its reserve money and repay at its own pace. This reservation is guaranteed by mortgage. In addition to interest rate risk earlier, the bank is exposed to the decline in the value of the collateral, the property, whose value is oriented downward.

However, apart from the interest rate risk, risks fade significantly when selecting clients on criteria solvency fairly strong. The ideal client is one who has acquired his residence covering a significant portion of the transaction with its assets. On the one hand, the present value of the property (and thus the guarantee) is significantly higher than the amount of the loan and on the other hand, the client has revenues allowing it to be a savings.
The current need is a refocusing of banks to retail and the conquest of savings. In this context it is to win customers the best possible one that has a liquid savings the most important!
Without necessarily open wide the valves credits, these products can attract the most profitable!