Mortgage debt market showing signs of life
Over the last few days it has become apparent that transaction numbers in the UK mortgage debt market have increased significantly. Indeed a number of investors who have acquired large mortgage debt portfolios, often for well below their face value, have now stepped forward with discount offers if customers remortgage their homes with new lenders. So how does this work?
If you for example you purchased a mortgage debt portfolio with a face value of £200 million but only paid £150 million there is the potential to lock in a profit if you can persuade underlying customers to remortgage elsewhere by offering a 20% discount. Effectively the portfolio of mortgage debt was acquired for a 25% discount to face value so if customers move after accepting a 20% discount then the investor is locking in a profit of 5% on the transaction. This is just one of a number of opportunities available in the mortgage debt markets for those willing to take the risk that the UK property market is over the worst.
In some ways this can be classed as a win-win situation with investors able to lock in profits while underlying mortgage customers are able to re-mortgage their homes elsewhere after pocketing a 20% discount on their outstanding debt.
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