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redwing

Home Buyers Still Can't Get A Mortgage

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Mortgages: How just one bad debt can send your loan chances into freefall

Pamela Allen earns more than £50,000 a year, but the only mortgage she can get is at 12.75%. Rupert Jones reveals how home buyers with minor blots in their credit history are struggling to find loans.

Source: Guardian 23 May 09

some snippets:

Pamela Allen is one such would-be homebuyer. She earns more than £50,000 a year and has been in the black for the past three years, but has a default on her credit file relating to some missed credit card payments back in 2004. However, the £4,500 was subsequently repaid, and the default is due to be removed in October 2010.

and

Allen has the opportunity to buy a share of a flat through a London housing association. She turned to a mortgage broker who specialises in shared ownership, but the only deal they could find for someone in her circumstances was one with a standard variable rate of 12.75%, discounted by 2% for the first 12 months – giving an initial pay rate of 10.75%. Not only is the rate high; there are hefty early redemption penalties, too. In Allen's case, they would amount to around £7,600 for the first three years, reducing to £1,200 by year eight.

She adds that if she took this loan, it would cost her around £2,000 a year more than if she was able to take out a standard shared-ownership mortgage.

The housing market is absolutely bonkers.

This woman is earning £50,000 a year, around twice the average wage. And yet the only thing she can buy into is a shared ownership house.

Surely shared ownership is designed for people on less than average wages.

Two years ago, she'd have no difficulty getting a mortgage. Just goes to show how times have changed; how little demand* there is in the market.

*where demand = "the ability and willingness to buy"

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The housing market is absolutely bonkers.

This woman is earning £50,000 a year, around twice the average wage. And yet the only thing she can buy into is a shared ownership house.

Surely shared ownership is designed for people on less than average wages.

Two years ago, she'd have no difficulty getting a mortgage. Just goes to show how times have changed; how little demand* there is in the market.

*where demand = "the ability and willingness to buy"

Two years ago -- along with everyone else, she would have been urged - and FORCED - to take out a LIAR LOAN by the lenders - and thus paid an over-inflated "price" in an over-inflated "market" with an over-inflated

LIAR LOAN.....

THAT is the ONLY way people could "buy" --- and STILL the only way people can "AFFORD" property....

LIAR LOANS have completely and utterly skewed the "market"..... We are now living with the consequences......

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Two years ago -- along with everyone else, she would have been urged - and FORCED - to take out a LIAR LOAN by the lenders - and thus paid an over-inflated "price" in an over-inflated "market" with an over-inflated

LIAR LOAN.....

THAT is the ONLY way people could "buy" --- and STILL the only way people can "AFFORD" property....

LIAR LOANS have completely and utterly skewed the "market"..... We are now living with the consequences......

Eric, you're a little obsessed on this one. Even though you're right.

If she really does earn £50,000 she wouldn't need a LIAR LOAN to borrow, say, £250,000 at 5 times salary.

The LIAR LOANs have disappeared. But now we have the TELLING THE TRUTH LOANs disappearing too.

[edit font]

Edited by redwing

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Eric, you're a little obsessed on this one. Even though you're right.

If she really does earn £50,000 she wouldn't need a LIAR LOAN to borrow, say, £250,000 at 5 times salary.

The LIAR LOANs have disappeared. But now we have the TELLING THE TRUTH LOANs disappearing too.

[edit font]

Im sorry, but a 5 times salary loan is just not viable, in the current market and its likely playout.

Add to that she wants a shared ownership. The mortgage companies have to have this kind of risk on their own books now, so we have here a high loan to earnings ratio, probably earning in a high risk occupation, like banking or finance, on a newbuild with a share.

lots of risk there I beleive.

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Good.

This will only bring the market down further.

Wait for the big consumer financial crash next year, as in credit cards and unsecured loans, which will be piggy backing the already exposed ARM and teaser rate mortgage resets.

We are going to party like it's 1929.

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Im sorry, but a 5 times salary loan is just not viable, in the current market and its likely playout.

Add to that she wants a shared ownership. The mortgage companies have to have this kind of risk on their own books now, so we have here a high loan to earnings ratio, probably earning in a high risk occupation, like banking or finance, on a newbuild with a share.

lots of risk there I beleive.

Sorry, I was talking about THEN rather than NOW. She could have got 5times in 2007 fairly easily iifc. Bit trickier now, heh, heh!

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It's going to start getting a lot easier to borrow money soon.

Once it's back on the streets house prices will rise. Disregard the rubbish on the market now. Once prices start rising you will see the good places come back.

No homeowner would dream of selling now.

Sibley,

Upon what principles of economics and/or historical precedence are basing your argument?

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No homeowner would dream of selling now.

Sadly most aren't in a position to chose. Unemployment and financial circumstances will force a sale.

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It's going to start getting a lot easier to borrow money soon.

Once it's back on the streets house prices will rise. Disregard the rubbish on the market now. Once prices start rising you will see the good places come back.

No homeowner would dream of selling now.

Utterly hair raising

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Lalaland....

I typed Lalaland into google images and got this...

La-La-Land.jpg

Looks like we've found either Sibley or McTavish's house, or at least the source of the crazy rhetoric which is spewed by their collective bull(sh1t) mouthpiece; not unlike the green pea soup out of a younger Linda Blair.

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It's going to start getting a lot easier to borrow money soon.

Once it's back on the streets house prices will rise. Disregard the rubbish on the market now. Once prices start rising you will see the good places come back.

Man, I'd sure like some of what you're smoking.

Many specialist lenders are still offering "near prime" mortgages. These are sub prime-lite: people with minor blots - late payments, small CCJ, etc - are offered near prime deals, which, as you'd expect, attract a higher interest rate (often double figures from the start). If you are offered a near prime with an 11% SVR now, can you imagine what the lender's rate would be once IR or LIBOR starts rising.

No homeowner would dream of selling now.

I agree with that bit. Unless you were forced to sell due to death or divorce, it would be madness to put your house on the market at the moment.

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Sorry, I was talking about THEN rather than NOW. She could have got 5times in 2007 fairly easily iifc. Bit trickier now, heh, heh!

sorry too, I didnt make it clear my post was not only directed at you, but to make the more general point of 5 times salary mortgages.

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Over 600,000 people die in the Uk every year, according to a kwik Google.

lets say 20% are leaving a property.

thats 120,000 houses, over 3 months supply.

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It's quite instructive to note that someone on over 50k a year (that's inside the top 10% of salaries earned in the UK) can only afford a flat on shared ownership at 5 times salary.

This is obviously crazy, yet some will still try to tell you that prices are "affordable" and have no further to fall.

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Halifax recently offered to lend me 5 times my salary - I have an excellent credit rating, decent salary, 20% deposit.

Trouble is, I don't want to borrow it (I just went in to see what they are prepared to lend).

I know of at least 4 other FTBs with good salaries and large deposits and none of them are buying. Does make me wonder who is??

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It's quite instructive to note that someone on over 50k a year (that's inside the top 10% of salaries earned in the UK) can only afford a flat on shared ownership at 5 times salary.

This is obviously crazy, yet some will still try to tell you that prices are "affordable" and have no further to fall.

Yep, I have used this argument with people I know.

I even use myself as an example, decent salary (above average) and a bit of a deposit yet all I can afford are the very smallest and crappiest one bedroom flats (not that I am expecting a 5 bedroom townhouse, but a flat that does not have a kitchen in the sitting room would be nice) - and that is with IR's at record lows, when they go back up I would be screwed.

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It's going to start getting a lot easier to borrow money soon.

Once it's back on the streets house prices will rise. Disregard the rubbish on the market now. Once prices start rising you will see the good places come back.

No homeowner would dream of selling now.

That'll explain the recent increase in sales then?

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It's going to start getting a lot easier to borrow money soon.

Once it's back on the streets house prices will rise...

au contraire.

Let's have a look at the cycle we're going to be in for a few months, perhaps a year or two.

1. Lenders are wary, they aren't lending at anything like the rate they were in 2005 - 2007. Which means...

2. Fewer buyers with the finance available to purchase. Which means....

3. Fewer house sales. Fewer buyers and fewer sales means....

4. Prices continue to fall for the foreseeable future. Which means...

5. Lenders will be very cautious about lending large amounts of money to anyone who doesn't meet their strict criteria. Which means..... Oh, Look! We're actually back at point 1. again.

In other words, this crash won't be over until it's over.

At current lending levels, the crash is not over now. It will be over one day. But not any day soon afaics.

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au contraire.

Let's have a look at the cycle we're going to be in for a few months, perhaps a year or two.

1. Lenders are wary, they aren't lending at anything like the rate they were in 2005 - 2007. Which means...

2. Fewer buyers with the finance available to purchase. Which means....

3. Fewer house sales. Fewer buyers and fewer sales means....

4. Prices continue to fall for the foreseeable future. Which means...

5. Lenders will be very cautious about lending large amounts of money to anyone who doesn't meet their strict criteria. Which means..... Oh, Look! We're actually back at point 1. again.

In other words, this crash won't be over until it's over.

At current lending levels, the crash is not over now. It will be over one day. But not any day soon afaics.

B.... b.... b.... bu..... but Sibley said it will be easier to borrow money soon.

And anyway, house prices will go up soon, because they just will. OK ?

Edited by Prof

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And anyway, house prices will go up soon, because they just will. OK ?

Prices only ever go upwards on Planet Sibley.

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