Thursday, May 07, 2009
The return of the madness?
BBC News: Mortgage lenders relax loan terms
Mortgage lenders have started to relax slightly the requirements they need for granting a home loan, figures indicate.
Two-thirds of mortgage deals still require borrowers to put down a deposit of at least 25%.
But figures from the financial information service Moneyfacts show a recent rise in the number of deals demanding smaller down-payments.
The total number of mortgage deals has risen by 7% in the past month, with more needing only a 15% or 20% deposit.
Posted by flintster1994 @ 11:35 AM (834 views) Add Comment
8 Comments
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1. paul said...
Mortgage rationing has driven down house sales and prices
The BBC is still in cheerful denial then.
2. growler said...
... this reduction in the advertised deposit moves them up the table on Moneyfacts. But the mortgage valuation reductions are impossible to see, so when the chips are down - the lenders undervalue the house and hey presto, the deposit % rises again.
3. timmy t said...
I can't believe there are still 100% mortgages out there. Whether you're lending 100% in a falling market or 125% in a rising market, the borrower is straight into negative equity either way so the loan is at risk. Madness.
4. mark wadsworth said...
Ho hum. This may or may not be a return to madness, depending on ...
1. How much banks value down properties before lending (as Growler says) - a 90% mortgage on a £80,000 house valued conservatively is the same as a 72% mortgage on the same house valued recklessly at £100,000. And somebody who took out a loan at 75% a year or two go is probably close to Nequity by now anyway.
2. What's the marginal interest cost of going from 75% to 90%? If you can get a 75% loan on a £100k house at 4%, that costs you £3,000 a year. If the rate on a 90% loan is 5%, that costs you £4,500, i.e. the extra £15k loan costs you £1,500 or a marginal interest rate of 10%.
3. What sort of income multiples are involved. If somebody earning £40,000 asked me for a loan of £45,000 on a £50,000 flat, I'd be more favourably inclined that giving him or her a £90,000 loan on a £100,000 flat.
4. "Rise in number of products" is pure guff, a lot of these are just bait to get people throught the door and no loans ever get granted on those terms.
I'm sure Jack C has answers to all this.
5. mark said...
whilst i agree in the early days lack or mortgages have driven some prices down, it is a very different picture now..
Tighter lending criteria (less risky 4 times salary)
Recession
Unemployment
etc
yet sellers still think they can hold their prices at stupid levels and hope they will sell in the end..
they forgot the future is now very very different and will remain so for some years to come!
6. it_is_going_with_a_bang said...
Headlines like that don't really tell the real story.
The rates for higher LTVs are much much higer - infact you would hardly notice that IR were not still 5%!
The few exceptions require you be banking with them and them added to that some of them you need to be a premier customer of sorts. So the vast majority of people reading that article can just plain forget a high LTV mortgage as an 'option' at least for the time being. Not to mention the no doubt rubbish ties and fees that come with the products.
7. jack c said...
Whilst it is fair to say there has been a SLIGHT softening in requirements the market is a million miles away from returning to the heady days of when a prospective borrower only need have a pulse to get a mortgage from Kensington and to a lesser extent GMAC. The other thing to bear in mind is that many lenders are now dual pricing (direct offering vs those via intermediary market) and IMO are attemting to squeeze brokers from the market.
How about painting the headline the other way "a 12 month comparison paints a bleak picture, showing a drop of 73% from this time last year"
This from todays mortgagesolutions:-
The number of live mortgage schemes has increased for the second month in a row, according to Mortgage Brain’s Monthly Product Analysis. The total number of live mortgage schemes listed on its sourcing system increased by 8% in the last month to 3322 mortgage products, up from 3091 on 30 March.
Though a 12 month comparison paints a bleak picture, showing a drop of 73% from this time last year, the past two months have seen a total increase of 22%.
Mark Lofthouse, chief executive of Mortgage Brain, commented: “It is encouraging to see the total number of live mortgage schemes increase for the second month in a row and whilst some of these changes might be small, they do represent positive indicators of market stabilisation and slight upward movement.”
8. Mariner said...
"Only" requiring a 15% deposit from the least risky borrowers is hardly "a return to madness".