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BelfastVI

Government To Back Mortgages

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No in my example a deposit of £26k was required to purchasea house of £130k. The example purchaser, who complied with the other criteriaonly had a deposit of £10k. Dropping the price of the house by £10k to £120konly saved the purchaser £2k on their deposit requirement. They now required adeposit of £26k.

Your example of dropping the price of the house to £100klowered their deposit requirement further, but only to £20k, which is stilltwice as much as they have. Remember the bank was willing to lend them £104 atthe start.

To enable the purchaser to buy, with their £10,000 as a 20%deposit the house would need to drop in value to £50k

mortgages at 10-15% are still widely available, getting one depends on agreed price and what bank value house at, and income.

pooler watsons second newspaper states mortgages still availagle at 5%

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In 2007 you needed no deposit (which was mad). Now as you say we need 20%, which is too high. As discussed above.

I don't follow your logic about 20% being too high. Based on a sensible salary multiple for a FTB in NI, that would indicate the need to have perhaps £20-25k. What is so unrealistic about that? 5 years of saving and that means £300-400 per month... if someone cannot afford that then they don't really have a lot of margin for anything going wrong in their house! If they do have it but have spent it for the last 5 years then it doesn't show a whole lot of dedication to saving for a house.

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Seen this on the main Board

The Telegraph

I have long argued that housing social tenants in privately owned houses was not market interference and funding the construction of social stock by only 50% gov money (Co-ownership) was not propping up the market, but this seems a step too far.

The banks issue the mortgages and charge a margin to cover the risk on top of holding the deeds. Now the Gov is suggesting to underwrite the mortgage and still allow them to take their fees and margin.

I guess you need to spend upward of 400, 000 to appreciate the true extent of the joy.

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I don't follow your logic about 20% being too high. Based on a sensible salary multiple for a FTB in NI, that would indicate the need to have perhaps £20-25k. What is so unrealistic about that? 5 years of saving and that means £300-400 per month... if someone cannot afford that then they don't really have a lot of margin for anything going wrong in their house! If they do have it but have spent it for the last 5 years then it doesn't show a whole lot of dedication to saving for a house.

thats not really fair,

i would have had 25% for a deposit if my wife didnt waste money by paying for her brother to come here and study and paying her familys medical bills (10k or so). We do have enought for 25% of the house im buying but that would leave me with nothing to buy furniture or decorate, so sticking at 15% deposit (house agreed at 81% of RV)

.......plus my wife was paying off another house in her native country over a 2 year period (50% deposit and 2 years to pay remainder with no interest)

Edited by shifty_FTB

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However, I remain of the view that the availability ofcredit at a suitable L2V is the major item holding back sales, not price.Others will differ in their view from that and I accept that.

You just have to see what has/is happening in England whenthe Newbuy cover, which this topic is about was issued this week. Hay prestothe lenders are suddenly issuing, what I refer to as proper mortgages. Youstill need £10k deposit and that’s fine. But that would, in my opinion doublethe amount of buyers. Which I believe we need.

High LTV mortgage numbers on the rise

The number of mortgage products offering maximum loan-to-values (LTV) of 95% has more than doubled over the last 12 months, Moneyfacts.co.uk research has found.

A year ago, there were 27 mortgage products available to buyers with a 5% deposit; today there are 61.

It marks a notable turnaround and compares even more favourably than two years ago, when there were a mere 13 products at 95% LTV.

Deals with a maximum LTV of 90% have also increased to 316 today compared to 228 this time last year, an increase of 43%.

Two years ago, there were 140 mortgages available for buyers looking for a 90% LTV mortgage.

The pricing of high LTV products has also fallen; one year ago, the average rate of a two year fixed rate mortgage at 95% LTV was 6.49%. However, this has fallen by almost a whole percentage point during the period, down to 5.52%.

The cost of 90% mortgages has also fallen in that time, from an average of 6.05% to 5.45%.

"Over the past couple of years we have seen the high LTV mortgage market stage something of a comeback, mainly due to high demand from borrowers with limited deposits," said Louise Holmes, spokesperson for Moneyfacts.co.uk.

"The first-time buyer market is often considered to be the life-blood of the housing market and mortgage lenders recognise this.

"Risk is still a major factor, however, and the majority of mortgages with high LTVs require the financial backing from a third party, such as a guarantor, as well as strict credit checks and lending criteria.

"These latest figures will be good news and a welcome relief to many borrowers who have struggled to find suitable mortgage deals within their financial capabilities."

http://moneyfacts.co.uk/news/mortgages/high-ltv-mortgage-numbers-on-the-rise170412/

Edited by tinbin

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Affordability, put simply as the ability to repay the loan,allowing for increases in interest rates remains a core requirement to anylending. This is not new. It was there for decades and was simply cast asidefor the mad years. It is of course reinstated now and should never be removed again.

They know they are is a catch 22 situation. I discuss thiswith them and they know it. Until they start lending properly the prices wont rise. If the prices don’t rise the risk is still weighted high. If the risk ishigh they want to issue lower prices L2V products. This keeps demand down asvery few have £25k deposits.

I think we all agree that affordability is the game changer. The contradictory point for me is that lending on someones affordability is 'proper lending'. I appreciate that you are perhaps referring to deposits in your point however I think the deposit issue is just one of many. I would predict that there are as many MTG applications being declined for other reasons such as;

no affordability/disposable income (particularly when sensitivity is applied. Ulster Bank are apparantly applying 8% sensitivity on applications)

Lack of job security/ temporary & fixed term contracts/ Recruitment agency contracts

Large balances on credit cards - missed payments/Loan arrears

Bad credit history

No evidence of savings

The list could go on ....

You only have to look at the Mr & Mrs Average thread to see the extent of living conditions at present, nevermind the amount of folk who are up to their necks in debt.

Put it this way ...

If it was you lending the money out of your pocket to a FTBer ... in the current climate ... would you really be so optimistic about affordability and the ability to repay????

Edited by tinbin

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Taken from the main board.

Maybe you can enlighten us BVI. Here's a scheme that allows people to buy your product without a deposit. However people then complain about the rates.

What is it? The rates or the deposit???

Or is it affordability???????

http://www.dailymail.co.uk/money/mortgageshome/article-2134721/Sneaky-mortgage-rate-hike-new-home-plan-time-buyers--just-43-days-launch.html

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No in my example a deposit of £26k was required to purchasea house of £130k. The example purchaser, who complied with the other criteriaonly had a deposit of £10k. Dropping the price of the house by £10k to £120konly saved the purchaser £2k on their deposit requirement. They now required adeposit of £26k.

Your example of dropping the price of the house to £100klowered their deposit requirement further, but only to £20k, which is stilltwice as much as they have. Remember the bank was willing to lend them £104 atthe start.

To enable the purchaser to buy, with their £10,000 as a 20%deposit the house would need to drop in value to £50k

So £50k it is then? Or what else is more likely to happen?

That explanation suggests your prices are still far too high, and if sales at that level result in losses, then site costs, labour etc were also far too high.

If we're in a new world of limited availability of credit, everything associated will have to be adjusted to match, including standards of housing. I'd see the next generation of new builds more as Fiestas than the Jaguars of recent years. Back to 950 sq ft?

Edited by yadayada

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thats not really fair,

i would have had 25% for a deposit if my wife didnt waste money by paying for her brother to come here and study and paying her familys medical bills (10k or so). We do have enought for 25% of the house im buying but that would leave me with nothing to buy furniture or decorate, so sticking at 15% deposit (house agreed at 81% of RV)

.......plus my wife was paying off another house in her native country over a 2 year period (50% deposit and 2 years to pay remainder with no interest)

The particular expenses of your life have nothing to do with the price of a house. Fair play to your wife and her money managing skills - a house in 2 years? Wow.

Edited by yadayada

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So £50k it is then? Or what else is more likely to happen?

That explanation suggests your prices are still far too high, and if sales at that level result in losses, then site costs, labour etc were also far too high.

" the house would need to drop in value to £50k"

or

Asking price needs to be changed to £50k to reflect market fundamentals, reality, and have a chance of selling.

Profit is never guaranteed in any industry - it's not that easy, even if you are good at what you do

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" the house would need to drop in value to £50k"

or

Asking price needs to be changed to £50k to reflect market fundamentals, reality, and have a chance of selling.

Profit is never guaranteed in any industry - it's not that easy, even if you are good at what you do

If these houses were to be auctioned tomorrow I suspect £50k is what they would get. Might be the best plan of action.

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would it also most likely come down to what the agreed price is and what the bank valued at?

say PERSON A agreed at £100k, RV of £115k, and bank value at £115k, 10-15 % deposit

or PERSON B agreed at £125k, RV of £115k and bank value at £115k, 20% deposit

.... Who would you rather lend to, or the bank for that matter?

First of all if the bank valuer values the house at less than the agreed price a sale will not take place.

Secondly if you were to sell ha house at under value you have just set the new value

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I don't follow your logic about 20% being too high. Based on a sensible salary multiple for a FTB in NI, that would indicate the need to have perhaps £20-25k. What is so unrealistic about that? 5 years of saving and that means £300-400 per month... if someone cannot afford that then they don't really have a lot of margin for anything going wrong in their house! If they do have it but have spent it for the last 5 years then it doesn't show a whole lot of dedication to saving for a house.

The mortgage repayments are, quite often less than the rent they are currently paying. It is difficult to pay rent and save a 20% deposit.

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The mortgage repayments are, quite often less than the rent they are currently paying. It is difficult to pay rent and save a 20% deposit.

A £130,000 mortgage with a 10% deposit at 6% is £763 per month. :o

That's before the rates and maintenance. Probably an extra £100 a month.

Come off it BVI who will be paying £863 a month to rent a 3 bed semi. :blink:

Your figures just don't match up.

Edited by 2buyornot2buy

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The mortgage repayments are, quite often less than the rent they are currently paying. It is difficult to pay rent and save a 20% deposit.

That's the nub of the point.

The deposit is the skin in the game, the shared risk, the mitigation against instant negative equity (for the bank). It's not a question of how long it takes you to save it or if you are given it by mum and dad.

And perhaps if you can't save a 20% deposit (or more likely 5% for FTB, co owner etc), that's one of the reasons you are paying rent and will continue to do so (should you rather mortgage).

It says a lot when renting (and mortgaging) for many is so tight, at low interest rates and in a recession, that the act of meaningful saving is made impossible for many.

Of course many whippersnappers subscribe to the instant gratification lifestyle and won't do without the 'necessities'. Saving is just too hard.

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Exactly Shotoflight... why should anyone expect to have access to £100k+, in a time of high unemployment, recession etc when their budget is so tight that they have been unable to afford to save a decent deposit. Sounds a bit of a risky loan to me.

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