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2buyornot2buy

What Will The Svr Increases (Ni Houses Prices?)

110 posts in this topic

I agree 100% with Tinbin. I think that the VIs have trouble seeing the forest through the tree.

Yes larger deposits are required. I think a 20% deposit for a new build (which will lose value as soon as bought) is a good thing.

I think larger deposit requirements in general are a good thing.

But the bigger picture here is affordability. I've show BVI articles on mortgage interest rates being the lowest in 15 years. We are known SVRs at 4% are not "normal". Households are on life support in the form of cheap trackers and SVR.

The next step down will be cause by rising interest rates.

Dual income households stretched to the max in a falling market, with interest rates at the lowest levels in history is not a rosy picture.

Please just one VI tell me how they expect the market to stop falling let alone stay flat… Please.

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I am not a VI and all the above is very much true but sellers remain dillusional. As long as base rates remain so ridiculously low, owners and sellers are not having their arms twisted. I know rates will go north eventually but there is no sign of it happening anytime soon and I don't know how we can convince the next big drop out of the market until it happens. Even if buyers cannot get mortgages, the masses will simply sit there and refuse to sell because it doesn't cost them anything to wait.

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I am not a VI and all the above is very much true but sellers remain dillusional. As long as base rates remain so ridiculously low, owners and sellers are not having their arms twisted. I know rates will go north eventually but there is no sign of it happening anytime soon and I don't know how we can convince the next big drop out of the market until it happens. Even if buyers cannot get mortgages, the masses will simply sit there and refuse to sell because it doesn't cost them anything to wait.

the masses think it doesnt cost them to wait ... it will end up costing them quite a bit in the end :huh:

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Lenders hike NewBuy rates less than 2 months after launch

Lenders have increased the rates on products they developed for the Government’s indemnity guarantee scheme less than two months after its launch.

Under the NewBuy scheme, which launched in March, lenders offer 95 per cent loan-to-value mortgages on new-build properties against a mortgage indemnity guarantee funded jointly by builders and the government up to 9 per cent of the property value.

At the scheme’s launch, NatWest, Barclays and Nationwide Building Society launched specific products for the scheme. But since then, all three have made changes to these products.

NatWest has increased the rate on its products by 0.5 per cent, meaning it now offers a two-year fixed at 4.79 per cent and five-year fixed at 5.49 per cent.

Nationwide has increased its three and five-year fixes by 0.2 per cent and 0.1 per cent respectively, meaning it now offers a 5.89 per cent three-year fixed and 6.09 per cent five-year fixed.

Barclays has replaced its 4.99 per cent two-year fixed rate and 5.89 per cent four-year fixed with a 6.09 per cent three-year fixed.

NatWest only distributes its NewBuy mortgages direct, Barclays will distribute both through intermediaries and direct while Nationwide only distributes through intermediaries.

Last month, Halifax launched a two-year fix at 5.99 per cent and another at 6.39 per cent which is fee-free.

Your Mortgage Decisions director Dominik Lipnicki says: “It is taking advantage of people who have small deposits. It means fewer people will be able to afford to take out the mortgage, when the point of the scheme was to ensure more could.”

http://www.moneymarketing.co.uk/mortgages/lenders-hike-newbuy-rates-less-than-2-months-after-launch/1050609.article

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more on the SVR hikes ....

SVR hikes set to cost borrowers £300m - Which?

The SVR hikes bought in by Halifax, Co-operative Bank and Yorkshire and Clydesdale banks today could cost borrowers £300m in extra mortgage repayments over the next year, research has found.

According to consumer watchdog Which?, around 70% of borrowers are concerned about an increase in interest rates, while 14% admitted they are already struggling with repayments.

From today, Halifax's SVR rises from 3.49 to 3.99%, affecting 850,000 borrowers. The Co-operative Bank has pushed its SVR up by 0.5% to 4.74%, impacting 54,000 borrowers.

Clydesdale and Yorkshire Bank have increased SVR by 0.36% to 4.95%, affecting 30,000 borrowers.

Other SVR hikes on the way include Bank of Ireland, which is to rise to 4.49% on 1 June, affecting 100,000 borrowers.

Meanwhile, RBS increased interest rates on its offset products by 0.25% on 1 March, while rates on its One Account product range will rise by 0.25% from 1 May. Changes are set to affect around 200,000 customers.

Three quarters of homeowners told Which? they would be affected if their repayments increased by £50 a month, while 41% said they would need to cut back on regular spending.

Around 20% would need to reduce savings and 11% would not have enough for essentials.

Which? said an increase of £100 a month would see 20% of mortgage-holders not having enough for daily essentials like food and 11% being unable to pay their mortgage.

http://www.mortgagesolutions.co.uk/mortgage-solutions/news/2171564/svr-hikes-set-cost-borrowers-gbp300m

Edited by tinbin

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I agree 100% with Tinbin. I think that the VIs have trouble seeing the forest through the tree.

Yes larger deposits are required. I think a 20% deposit for a new build (which will lose value as soon as bought) is a good thing.

I think larger deposit requirements in general are a good thing.

But the bigger picture here is affordability. I've show BVI articles on mortgage interest rates being the lowest in 15 years. We are known SVRs at 4% are not "normal". Households are on life support in the form of cheap trackers and SVR.

Can you explain why you believe there should be a 20% deposit requirement for new build only. New build led the property drops as devlopers had to move with the market or die. Why will new build lose money as soon as it is bought, compared to second hand houses.

Why do you think larger deposits are a good thing and who are they good for?

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Can you explain why you believe there should be a 20% deposit requirement for new build only. New build led the property drops as devlopers had to move with the market or die. Why will new build lose money as soon as it is bought, compared to second hand houses.

Why do you think larger deposits are a good thing and who are they good for?

New builds should require a larger deposit because that shiny new house becomes less shiny and new 2 years down the line when you need to sell because rates have risen 0.5%... Those appliances that you paid a new premium on are now second hand and the shower tray has someone else’s hairs in it.

I think larger deposits are a good think because it a) Shows a level of financial discipline we forgot about during the "boom" years. It shows an ability to save a portion of the biggest purchase in your life.

B) It protects me (and you) as shareholders of the largest state owned banks from inevitable falls and the results of negative equity and the loss form eventual repossession.

There are more.

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New builds should require a larger deposit because that shiny new house becomes less shiny and new 2 years down the line when you need to sell because rates have risen 0.5%... Those appliances that you paid a new premium on are now second hand and the shower tray has someone else's hairs in it.

I think larger deposits are a good think because it a) Shows a level of financial discipline we forgot about during the "boom" years. It shows an ability to save a portion of the biggest purchase in your life.

B) It protects me (and you) as shareholders of the largest state owned banks from inevitable falls and the results of negative equity and the loss form eventual repossession.

There are more.

Your argument about requiring a larger deposit for older appliances and tolerating hairs in the showers would appear to go against second hand houses more than the new ones. But I will not argue with you on that one.

I am interested in your point that larger deposits (which I assume we are referring to 20% and above) protects the banks that we, the state own.

My view, which has hopefully remained constant, is that demand, epically when there is not really a supply issue in NI at the moment, is controlled by the supply of credit and sentiment. Access to credit is controlled by affordability and stress testing [the tests] and the deposit requirement. There are many people who will fail the tests and as long as the tests are fair then I will agree with you that as a shareholder of the bank I would agree credit should not be lent to these people. If we don't believe they can afford repayment along with the current interest rates and future ones then they pose a risk, etc.

However the size of the deposit is a separate issue.

The size of the deposit will limit the amount of people who are able to purchase property as there are very few, particularly FTB'ers who have £20k to £28k in savings. As a shareholder in a large bank I want to ensure that the loans we currently have don't default because of our actions.

If the bank is not happy with the valuation on a property then don't lend against it at all.

If the bank is not happy with the financial standing of the applicant then don't lend to them.

By insisting on high deposits the bank is effectively artificially limiting demand as with a lower deposit much more people could buy. By controlling the number of people who can buy, you are effectively controlling the market and thus prices. If you turn that tap on too much, as happened, the prices gallop. If you close that tap too tight prices fall. This has a knock on effect by creating and increasing negative equity on existing loans and forces the bank to make provisions for further falls, which effects the share price and the banks ability to be sold to recover the funds the Gov invested in it in the first place.

This, in my view is not good for the bank as it causes stress on existing loans and prevents people more moving.

This action helps only cash rich purchasers.

I think everyone here wants to see a housing market that works. Buyers can afford to buy and builders can afford to build. We all agree FTB'ers are key to a healthy market and they should average in age at about 28 and not, as they are now in the mid 30's.

There are still plenty of 28 year old couples who would like to buy and would pass the tests. They however, find it extremely difficult to save, what is perhaps 50% of their gross joint income, on top of their rent in the few years since they have been working. Most have been renting as a couple for a few years and traveling etc and doing what you should do before you settle down and have kids etc. Many have deposits of £10k. In many, but not all cases the rent they are paying will be similar to their mortgage payments.

I am strongly against 100% lending for a number of reasons, however I believe a FTB'er, who passes the tests and has saved £10k should be able to purchase a £130k house. If the banks would allow that the number of purchasers would increase dramatically and, in my view many of the banks problems, whilst not going away would be capped.

So I dont agree that insisting on 20% deposits is healthy for the housing market or for the banks who have lent into it. In fact I believe that insistence of such a policy would be deeply damaging to that or any other bank.

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A second hand house is second hand when I buy it. A new house is new and becomes second hand when someone moves in.

Everything new has a premium which is lost when it becomes second had. Just like your car. The larger deposit required by lenders for new builds is to "cushion" if the house is repossessed.

Why would I buy your second hand house for X when I can buy one in the next phase for the same price which hasn't been lived in for X.

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I'm sorry BVI but your "logic" is lost on me.

You think that by limiting FTB lending on new builds that the banks risk default with existing loans?

You realise the average LTV across the UK is less than 60%. Even counting the fact 28% of people who borrowed post 2005 are in negative equity you think that restricting credit and encouraging prudent lending to FTB will somehow destroy the banks? With all the existing equity even after 50% drops since 2007.

On the whole controlling the market, does this include co-ownership and shared equity schemes such as momentum? Do schemes like this create a healthy market where people who obviously can't afford a house can make up 20+% of the FTB market?

The banks are zombie banks already, what we need isn't a drawn out contraction with yearly write downs and banks hording property. What we need to do is acknowledge things are the way they are and get on with it.

28 is a ridiculous time to have to buy but I will say this isn't only to do with high house prices but includes the mass of debt and uni education now "required" for basic low paid jobs.

Seriously I've said this before but a 130K mortgage with a 10% deposit at 6.5% interest rate is £799 per month BEFORE rates and maintenance. Probably close to £900 a month :o

Now you tell me how many young couples are paying £900 per month for rent????

They must be living in one of the penthouse professional apartments I see filled with people about the city centre.

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I am strongly against 100% lending for a number of reasons, however I believe a FTB'er, who passes the tests and has saved £10k should be able to purchase a £130k house. If the banks would allow that the number of purchasers would increase dramatically and, in my view many of the banks problems, whilst not going away would be capped.

It depends on your definition of 'passing the test'.

It is wrong to keep on stating that FTBers cant get on the market because lenders are insisting on 20% deposits. This is clearly not the case as some of our local banks are offering as high as 95% LTV for FTBers. If these FTBers are as well off as you think then I dont think they would have any issues obtaining a MTG.

I think you are missing the point a bit here ... these FTBers are clearly not passing the tests

Based on your assessment of what should be available - In order to afford a £130k MTG based on income multipliers you would need to be on ... (give or take)

3 X income - approx £43k per annum

3.5 X income - approx £37k per annum

4 X income - approx £32k per annum

So all you are demonstrating to me is that, as a FTBer, to be able to buy a shoebox 3 bed semi in a new development @ £130k you need to be on an abnormally large salary for that age bracket, or on a joint income - which cannot be sustainable long term.

Factor in stress tests, job security, loss of an income, potential childcare costs etc ... all of a sudden it doesnt look so rosy does it??

We are only scratching the surface of affordability at these prices ... the mainstream FTBer cannot afford to buy at current prices.

I am no expert but I dont buy this rubbish that there is no profit margin in new builds, I dont see how it costs £130k odd to build these houses ... absolutely no way. The issues developers have I am sure is down to the price they paid for the land during the peak years, not the cost to build

... but I would welcome the information about the cost to build a 3 bed semi from scratch from an expert ;)

Edited by tinbin

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Just a couple of sideways points - most will know my affordability viewpoint from the average thread.

I would make a point that whatever the deposit now - the age of 28, 35 or whatever are those that have lived with easy and accessible debt and in an era where excess (or out of control) debt has little or no stigma - indeed all is possibly done to allow debtors to write offf and start again and it is seen as normal to use debt not only to buy a house, car or holiday but to pay for education, run a business, buy clothes, put in a kitchen, pay for insurance, buy petrol, right down to buying a sandwich in M&S (GRRRRRRR).

However banks and even (especially) co ownership are now becoming scrupulous about your debt footprint (nevermind deposit) - ie too many credit or store cards, missed mobile payment, overdraft abuse etc. This wasn't the case recently and in earlier years the ability wasn't there to abuse it - encouraged by banks etc. certainly since those days.

Those that save - 7 times debtors - and private pensioners are being wiped out as we speak with low interest rates and QE so mum and dad are not so flush. Education is becoming more costly. Many have gaps in their employment CV through shorter hours, going part time or job loss. Due to pay freezes, pension issues, job losses etc affordability, going forward, is not as clear cut as it once was. And many seem to have the live for today attitude - certainly pitiful IRs dont help instill the saving habit.

And I would suggest there is at least another 20% to come off prices (UUJ average from around £136k to £110k) and thats being conservative before Interest rises are considered. Whether the banks agree remains to be seen but I'm sure, in their more candid moments, they wouldn't (couldn't) put up much of an argument against it.

Fundamentals - a stable marked does not and will not exist when the average house is £140k (UUJ) in NI.

Yes NI, FFS.

My second point is that most new builds may have a 10 yr NHBC warranty but I don't know what premium, if any, a buyer would place on this. Of course in second hand ones, sellers know every penny they spent since purchase and usually want it all back, and more . when selling.

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Double post from average thread. couldn't decide on one or t'other.

One in five 'couldn't afford food' if mortgage payments rose

One in seven home owners struggles to pay the mortgage and 20pc would not have enough for essentials such as food if their repayments rose by £100 a month.

http://www.telegraph.co.uk/finance/personalfinance/9238464/One-in-five-couldnt-afford-food-if-mortgage-payments-rose.html

According to research by Which?, the consumer group, 70pc of mortgage-holders are concerned about an increase in interest rates. More than a million home owners will see the cost of their mortgage payments increase today as several lenders raise standard variable rate (SVR).

Three quarters of mortgage-holders told the group that they would be affected if their repayments increased by £50 a month, with 41pc saying they would need to cut back on regular spending, 20pc reducing savings and 11pc not having enough for essentials.

An increase of £100 a month would see 20pc of mortgage-holders not having enough for daily essentials such as food and 11pc being unable to pay their mortgage. Consumers also highlighted the emotional impact of increases in mortgage repayments, describing them as "devastating" and "a disaster".

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Consumers also highlighted the emotional impact of increases in mortgage repayments, describing them as "devastating" and "a disaster".

"Consumers" will take a reduction without mentioning it but on reversal they cry "disaster". They could afford the payments when the IR was significantly higher 5 years back, shock horror they may have to make an adjustment in spending when one bill rises, maybe even have to reverse the regular spending change they made when the rate was reduced. Think I might slap someone if they spouted that sort of shite in front of me.

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UK

Mortgage approvals down on average

http://www.independent.co.uk/money/mortgages/mortgage-approvals-down-on-average-7706906.html

More evidence of tighter mortgage availability emerged today after figures showed approvals remain well down on their long-term

average. Analysts have also warned that consumers' appetite for borrowing is likely to remain weak in the midst of the recession.

Home owners are expected to have a tougher time obtaining a mortgage in the coming months as lenders exercise caution amid the weak economy.

Lenders have already started making their borrowing criteria more restrictive, triggering a fall in the proportion of mortgages being approved, and have been putting up their mortgage rates.

Lenders and estate agents reported a rush from first-time buyers earlier this year to beat the deadline for a two-year stamp duty concession, which ended in March, but warned that this surge could be followed by a dip.

Paul Diggle, a property economist at Capital Economics, said: "While the post stamp-duty concession slump in approvals for house purchase may have come to an end already, we can't help but think that a genuine recovery in approvals remains a distant prospect.

"After all, news that the UK has re-entered recession can only have dampened consumer confidence, which already looks weak relative to the level of housing market activity."

He warned that mortgage rate rises are "probably not over yet" as problems in the eurozone drive up banks' funding costs.

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These 35yr 5% deposit FTB mortgages must be coming to 5 yrs old. Can we safely assume the bank or developers have kissed goodbye to their 5% deposit gimmick? And that any buyer 'entraped' by this less than subtle 'offer' is in serious negative equity or poor LTV territory.

http://www.ulsterbank.co.uk/ni/personal/borrowing/mortgages/important-information/legal/momentum.ashx

First time buyers only and residents in Northern Ireland. Mortgaged property must be in Northern Ireland, and minimum mortgage amount is £10,000. Available with participating developments only. Lending criteria, terms and conditions apply.

Over 18s only. The maximum term is 35 years. No maximum age. Where a mortgage extends beyond normal retirement age, you should be able to demonstrate continued ability to service the loan by way of pension or alternative means.

This offer is for residential mortgages only. 95% loan to value applies to Momentum mortgage only. An arrangement fee of £295 applies. At the end of the five year term your property will be valued. If the value of your property has increased by 5% or more you are required to pay back the original deposit to the developer through personal savings, a personal loan or by topping up your Ulster Bank mortgage. Personal loans and mortgage top-ups are subject to eligibility. Any increase in borrowing by way of a mortgage top-up will increase your mortgage amount and loan to value

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These 35yr 5% deposit FTB mortgages must be coming to 5 yrs old. Can we safely assume the bank or developers have kissed goodbye to their 5% deposit gimmick? And that any buyer 'entraped' by this less than subtle 'offer' is in serious negative equity or poor LTV territory.

I think you failed to understand the benefit of the Momentum product. If 5 years ago someone purchased a £150k house and that house has fallen 15% then they have lost their deposit and may well be also in negative equity. If however they purchased the house under the Momentum product then their mortgage would be downsized by up to 15% to match the current value of the house.

The bits of their website you overlooked:

  • No deposit needed from you - the developer pays your 5% deposit.
  • You'll only pay your deposit back if the property value grows by 5% or more after five years.
  • Protection against falling house prices – we'll reduce your mortgage by up to 10% of the original property value if your property value has fallen after 5 years
Edited by BelfastVI

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I think he gets it fine. I think what Shoto is asking is has anyone of the momentum "customers" had their mortgage reduced by 15% to reflect the price drops of the past 5 years.

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I think he gets it fine. I think what Shoto is asking is has anyone of the momentum "customers" had their mortgage reduced by 15% to reflect the price drops of the past 5 years.

The point is he only mentioned the 5% deposit that you can keep if prices have not increased. There is another 10%, reduction in the mortgage amount (debt forgiveness) that is on top of that (15% in total) that the purchaser can benefit from.

I dont see how this, from the purchasers point of view can be described as a gimmick.

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Maybe because they see it as an attempt by RBS (Majority state owned bank), who funded all these MOMENTUM developments during the stupid boom years, to pass on this debt to the next fool in the form of naive FTBs.

It's 100% lending by a bank that we own, who nearly destroyed the economy with the same type of lending throughout the 00's.

It is market interference by a state owned bank.

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Maybe because they see it as an attempt by RBS (Majority state owned bank), who funded all these MOMENTUM developments during the stupid boom years, to pass on this debt to the next fool in the form of naive FTBs.

It's 100% lending by a bank that we own, who nearly destroyed the economy with the same type of lending throughout the 00's.

It is market interference by a state owned bank.

its actually 95% lending by the bank. with a 10% handback if prices fall. Other, non state owned banks are offering 95% loans only they have no claw-back.

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its actually 95% lending by the bank. with a 10% handback if prices fall. Other, non state owned banks are offering 95% loans only they have no claw-back.

And where do the developers on the list get the cash for the other 5%?

Looking at the list a few would need to look around the back of the sofa.

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its actually 95% lending by the bank. with a 10% handback if prices fall. Other, non state owned banks are offering 95% loans only they have no claw-back.

Are there others lending 95% on new builds?

I though from your previous threads 20% was what they were looking at for the houses you sell?

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Guys, you credit me with too much intelligence! And I appreciate the further info and thoughts.

I'll try and clarify - I did leave out the 10% handback as I wasnt sure how it activated but it links to my query.

My assumption is that whowever dreamt up this scheme never thought prices would go down this far and they would never have to pay out (certainly not in 5 yrs as the market will have bounced back in that timeframe!!!!). So my view is that someone - developer/bank/insurer has miscalculated and is now left with a headache. My angle was on the sellers consortium, rather than the purchasers.

The scheme, in my view, was to show potential, nervous uncertian buyers that the experts had confidence along the lines of "look, we are so confident, not only will we pay your deposit but if prices go down by 10% we'll give you that back as well".

So the risk may well have paid off for the purchaser, to the tune of the first 10% of a depreciating asset but no more - notwithstanding they probably overpaid for the house in the first place as well (but what is the mechanism for repayment?) Must they sell to get it or do they just get it. And are all participant developers still solvent and able to pay.

I assume there is no argument that anyone buying under Momentum up to 12 months ago at the developers asking price will be more than 10% off, (and falling) and worse going back in time?

Why are the consortium still keen to promote it then if it partially covers further losses for the buyer but not the selling consortium? Are they expecting stability, a bottom and rises or is there so much profit to be made at their prices that a 15% hit is neither here nor there. Who does the valuing and are they constrained from further reductions in developments due to the knock on of earlier momentum customers. How many have taken up the scheme and what losses are the consortium currently nursing?

Conversley, as a serious purchaser, there is bound to be a time that the 15% cushion would have to be seriously looked at if prices are realistic, properties suitable and payout guaranteed. Probably around about the time that they withdraw it!

For earlier buyers a wait of a year or two may have been a better strategy, even with the inducements - but then not everyone can wait.

And as for the gimmick angle - what about this one:

Priced to Sell

The mortgage market can be confusing enough - I'm still not sure I understand this scheme thoroughly - hence the query.

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