Miliband promises two challenger banks amid major branch sell off

[bobspud]

Not at all Bobspud.

The example I was using for the self employed is because many banks when assessing the self employed for a mortgage work off an average of the last 3 years net profits (Sole Trader) or Salary and dividend (Ltd Co). However, if you are a PAYE employee, and have just started a job, most lenders are happy to work off the one payslip even if it is your first job and have no experience. By no means am I in support for a return to adverse lending, self cert ect but there are still too many good quality self employed clients being turned away by banks when trying to raise a mortgage.

I think the problem is if you get a job as a permanent employee its fairly hard for things to go wrong. But for a newly starting out one man band, there are plenty of things that can screw them up. So I am not surprised that banks might want to stay out of their way for a few years to prove that they are a safe investment.

[Martin@AS Financial]

I think the problem is if you get a job as a permanent employee its fairly hard for things to go wrong. But for a newly starting out one man band, there are plenty of things that can screw them up. So I am not surprised that banks might want to stay out of their way for a few years to prove that they are a safe investment.

I agree that banks should not lend to just anyone and a good track record should be provided but I also feel that certain banks still discriminate unfairly against self employed clients. A lot of lenders will still take an average as I say of the last 3 years and will not work on the latest years figures. The first year being self employed is not normally that great, the second year tends to pick up and by the 3rd year it should be in full swing. That means from the point of going self employed, you could have to wait upto 5 years before you can buy your home so that you have 3 good sets of accounts to show an underwriter.

How can this be treating clients fairly when you can have a PAYE client apply for a mortgage with one payslip, no experience and be in a probationary period.

[MicrosoftBob]

I agree that banks should not lend to just anyone and a good track record should be provided but I also feel that certain banks still discriminate unfairly against self employed clients. A lot of lenders will still take an average as I say of the last 3 years and will not work on the latest years figures. The first year being self employed is not normally that great, the second year tends to pick up and by the 3rd year it should be in full swing. That means from the point of going self employed, you could have to wait upto 5 years before you can buy your home so that you have 3 good sets of accounts to show an underwriter.

How can this be treating clients fairly when you can have a PAYE client apply for a mortgage with one payslip, no experience and be in a probationary period.

They just haven't moved on from the old job for life image of permiedom, the perceived risk is presumably less for permies still

[TykeMerc]

I'm just a bit sceptical about Mr Miliband's 'ability to deliver'.

I'm not sceptical at all, I know that not only is he incapable of delivering, but that this sort of rhetoric would disappear without a trace in the event they get back into power.

The High Street banks would probably love to get rid of a fairly large number of their branches, to sell off the expensive premises and lose the staff headcount must be very appealing.
Many of their customers never set foot in them and I'd be very surprised if the profit to cost ratio brought in by the branch activities is proportional.

[SpontaneousOrder]

Arguably both parties should have encouraged competition long ago.

There's no need to encourage competition. All that is needed is to not discourage it.

[vetran]

I'm not sceptical at all, I know that not only is he incapable of delivering, but that this sort of rhetoric would disappear without a trace in the event they get back into power.

The High Street banks would probably love to get rid of a fairly large number of their branches, to sell off the expensive premises and lose the staff headcount must be very appealing.
Many of their customers never set foot in them and I'd be very surprised if the profit to cost ratio brought in by the branch activities is proportional.

This is true, they are afraid to sack all their staff for fear of losing customers or bad press. But I suspect they would dump the lot if they believed they could get away with it.


What they need to do is encourage local banks like Germany to build a branch infrastructure that competes. Currently the only time you go to a branch is to undertake 'big' transactions.

MetroBank opened in Slough and its branches are open late. They seem quite popular.

The big thing is to separate stock market gambling from normal bank activities or force the banks to hold the reserves to pay for defaults if they fail.

[vetran]

There's no need to encourage competition. All that is needed is to not discourage it.

The purchase of smaller banks by the big five was part of the problem, it was easier to sell than compete with the big 5.

[VectraMan]

The big thing is to separate stock market gambling from normal bank activities or force the banks to hold the reserves to pay for defaults if they fail.

And the problem with that is it would inevitably lead to higher charges and less lending.

[vetran]

And the problem with that is it would inevitably lead to higher charges and less lending.

instead of randomly lumbering everyone with debt?

Less lending or lending at a higher rate to the less credit worthy? W@nga mortgages at only 3000%.

Of course it would slow the housing bubble.

If we increase competition then are we sure then the result will be significantly higher charges?

There must be a successful model we can copy which didn't go bang because of casino style banking.

[Platypus]

The BBC news today pointed out that there are already 9 challenger banks

EDIT:
and that people don't like changing banks, which is why they don't. Not lack of competition.