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djmuk100

Here's Why Banks Want 25% Deposit From 1st Time Buyers...

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From the inside.... very simply, banks have being doing their risk assessment properly this time.

They estimate house prices are going to drop around another 25%.

So not to be left with debt, they are asking 25% to cover their themselves!

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From the inside.... very simply, banks have being doing their risk assessment properly this time.

They estimate house prices are going to drop around another 25%.

So not to be left with debt, they are asking 25% to cover their themselves!

And I thought it was just because they wanted to be responsible lenders.

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From the inside.... very simply, banks have being doing their risk assessment properly this time.

They estimate house prices are going to drop around another 25%.

So not to be left with debt, they are asking 25% to cover their themselves!

Welcome.

Not sure if this is quite the revelation you think it is.. has been discussed quite a bit I think.

There are several mortgages that only require 10% again now (which if what you say is true, is a bad thing).

Edited by libspero

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From Browns banks?

Sorry I meant taxpayer banks?

HSBC and Brittania seem to be popping up again and again for me. On the plus side though the rates are about 6%

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HSBC and Brittania seem to be popping up again and again for me. On the plus side though the rates are about 6%

So covering the risk with higher interest rates, sounds like they don't want anyone with 10% but are offering just for the headlines.

What type of mortgages are these? Fixed / Trackers?

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I was looking at 5-year fixes

HERE

It really is quite depressing how keen the banks are to get back to sub-prime lending again.

Edited by libspero

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Effectively it's like a lovable old NR 'together' mortgage secured on 75% of the value. The unsecured 15% is charged at credit card rates, and the average rate on both chunks is what's quoted to the customer - and it's unaffordable.

(This is just humorous supposition by the way. I have no idea how they set their prices.)

6% unaffordable?!?

My parents were paying 12 at some points in the early 90s - didn't seem to bother them. I'm paying 6.54% now (renewed on a fix in 2006 when IRs peaked - yup - timing ;-) ) and still overpay by anything between £250 and £700 a month depending on income. By historic standards 6% is quite cheap I think you'll find.

Compared to the discount trackers being offered by taxpayer banks it's very expensive but I would hardly call it unaffordable.

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6% unaffordable?!?

My parents were paying 12 at some points in the early 90s - didn't seem to bother them. I'm paying 6.54% now (renewed on a fix in 2006 when IRs peaked - yup - timing ;-) ) and still overpay by anything between £250 and £700 a month depending on income. By historic standards 6% is quite cheap I think you'll find.

Compared to the discount trackers being offered by taxpayer banks it's very expensive but I would hardly call it unaffordable.

Compare inflation and wage rises before you compare. Look at real interest rates.

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6% unaffordable?!?

6% at todays prices is like 9% at yesterdays prices....if 6% is about affordable anything more could create a major problem together with fuel price and tax increases. :o

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You might well be right. I don't really follow mortgage rates as I don't need a mortgage, but aren't SVRs low, and the base rate at 0.5%? I know all mortgages are cheap compared to the past, but that was then and is not really comparable with now. Isn't 6% on the high side now? Can people afford it? Is it being taken up in great numbers?

(As a bit of sophistry, I think paying out 6% a year and losing your 20% deposit each year is unaffordable.)

It is a lot more expensive than SVRs since the beginning of this year. Not really looked into the current prices of fixes but certainly in 2006/early 2007 5 year fixes ranged from 5% at 60% LTV to 7% if you wanted 90% LTV.

I suspect that as IRs start to rise a 6% five or ten year term will look cheap in future.

As for losing 20% of your deposit every year being unaffordable - never buy a car that's less than 6 years old :-)

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From the inside.... very simply, banks have being doing their risk assessment properly this time.

They estimate house prices are going to drop around another 25%.

So not to be left with debt, they are asking 25% to cover their themselves!

true,

if banks thought house prices were going to rise again then they'd be offering 100% LTV again.

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true,

if banks thought house prices were going to rise again then they'd be offering 100% LTV again.

and if they didn't expect rates to jump they would be offering better rates now and longer fixes.

lots of 2 year fixes, few 5 year and almost no 10 year, all at rates way above base.

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and if they didn't expect rates to jump they would be offering better rates now and longer fixes.

lots of 2 year fixes, few 5 year and almost no 10 year, all at rates way above base.

I sometimes wonder how many would now swap their high indebted mortgage for rent-able freedom? ;)

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I sometimes wonder how many would now swap their high indebted mortgage for rent-able freedom? ;)

I am annoyed at my timing - it's going to cost me a lot more for my flat that it would if I had waited a few years - I would be able to have a shiny new car for a start :-)

Having said that I could never go back to renting. The constant uncertainty, being moved on whenever the landlord decided to sell up, live in it himself, move his kids in etc - I got moved on thru no fault of my own 3 times in 6 years of renting.

There's also the fact that assuming my gamble pays off and I can remain in work for at least 7 of the next 10 years I'll never have to worry about paying rent or a mortgage ever again from the age of 40. The thought of having to find enough money in retirement to pay rent terrifies me especially since any money in pension funds will be gone by then and there will be no state pension.

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I am annoyed at my timing - it's going to cost me a lot more for my flat that it would if I had waited a few years - I would be able to have a shiny new car for a start :-)

Having said that I could never go back to renting. The constant uncertainty, being moved on whenever the landlord decided to sell up, live in it himself, move his kids in etc - I got moved on thru no fault of my own 3 times in 6 years of renting.

There's also the fact that assuming my gamble pays off and I can remain in work for at least 7 of the next 10 years I'll never have to worry about paying rent or a mortgage ever again from the age of 40. The thought of having to find enough money in retirement to pay rent terrifies me especially since any money in pension funds will be gone by then and there will be no state pension.

What you have said is the one big downfall of this countries living conditions AST gives renters no stable and long term stability...it forces people to take on high debt and uncertainty to feel so called secure in their housing situation.

More security and profits for landlords and less for tenants was a major cause of HPI.

Savings and wise investments will see you through your retirement. ;)

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Savings and wise investments will see you through your retirement. ;)

Savings - so long as you're careful where you put it - banks going pop and all of a sudden your savings are gone.

As for wise investments - It's shameful to admit but I'm pretty financially illiterate. The only good investment I've made ever was getting into Barclays at the end of March (tho only £2k as it was basically a guess bet). Every other attempt I've lost, especially during my short expedition into the world of spread betting. I can't rely on my investment ability to save enough to pay rent during retirement.

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6% unaffordable?!?

My parents were paying 12 at some points in the early 90s - didn't seem to bother them. I'm paying 6.54% now (renewed on a fix in 2006 when IRs peaked - yup - timing ;-) ) and still overpay by anything between £250 and £700 a month depending on income. By historic standards 6% is quite cheap I think you'll find.

Compared to the discount trackers being offered by taxpayer banks it's very expensive but I would hardly call it unaffordable.

Yes, unaffordable. The base interest rate implies (albeit imperfectly) the expected rate of increase (?) in prices in labour markets and general speed of economic behaviour. The interest rate a bank charges you does (to some degree or other) imply the bank's view on the probability it is all going to go AWOL for the individual on the mortgage.

The government reckons that they need to try and drive the economy forward by sinking rates through the floor. 6% is 12 times the BOE ('general consensus of how rubbish things are') interest rate. Implying the banks reckon things are going to go (up to!) 12 times worse in terms of pressure for someone with a low deposit mortgage ... that *is* the bank saying: 'You are being very risky here'

When your folks were paying 12% the BOE rate was something approximating at least half of the rate they were paying (I don't have the figures to hand, obviously) ... so the banks were not saying anything near the same thing to you folks as they are saying to high LTV clients today.

So, in a sense, 6% is as unnaffordable (marker of how unwise the transaction is?) as 12 TIMES the BOE rate would have been back then ... and (I am guessing) that would be around 100+% back in the 90s ...

Aidanapword

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Savings - so long as you're careful where you put it - banks going pop and all of a sudden your savings are gone.

As for wise investments - It's shameful to admit but I'm pretty financially illiterate. The only good investment I've made ever was getting into Barclays at the end of March (tho only £2k as it was basically a guess bet). Every other attempt I've lost, especially during my short expedition into the world of spread betting. I can't rely on my investment ability to save enough to pay rent during retirement.

Cash savings cannot go into negative equity, ok inflation can devalue them, but cross that bridge when/if you get to it.

Investments:

a. Yourself, your education, your skills, your employability.

b. Your children their future is your future.

c. Good quality companies you use and see a future for that have low debts and good management.

d. You could drip feed into a ftse tracker isa with low costs...

...no investment is guaranteed including property. ;)

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From the inside.... very simply, banks have being doing their risk assessment properly this time.

They estimate house prices are going to drop around another 25%.

So not to be left with debt, they are asking 25% to cover their themselves!

Very big welcome to you djmuk100. You are quite correct and it is good to have this pointed out so simply. Keep posting and make sure you go down to Bear Stores to get your bear kit.

Suit, Bear, one, bear for the use of.

etc

Oh, good tip: put the bulls on 'ignore' - they're not real, just idiot estate agents out to take you down with them as they drown.

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They estimate house prices are going to drop around another 25%.

So not to be left with debt, they are asking 25% to cover their themselves!

Rubbish. It's blatant profiteering. You can get a 90% mortgage today, but they'll charge higher rates for it. Banks want to do 75% mortgages because it makes their limited funding stretch 25% further. Thus letting them write 25% more loans. And get 25% more mortgage set-up fees for lending on the same amount of money.

And as they know full well that prices are unlikely to drop more than another 6% to 8% (as per Lloyds Group and CEBR), then every mortgage they put on their books today at 60% or 75% of asset value, increases their average balance sheet position by a large amount.

It's balance sheet rebuilding and profiteering, nothing more than that.

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Cash savings cannot go into negative equity, ok inflation can devalue them, but cross that bridge when/if you get to it.

Problem with that way round is by the time you get to it, it's too late to do anything about it. What are you going to do at 65 - 70 if you suddenly find your life savings are worthless? You may say 'you would see it coming before that', but I wouldn't based on past history - not before it's too late. As for kids - don't have any currently, given my recent history with woman if I did have any it would only lead to a CSA bill, and even if I did have any I wouldn't want to burden them with having to look after me.

I'm not trying to gloss over the fact I made a terrible choice from an investment point of view in buying when I did. All I'm saying that given my lack of intelligence it's probably better for me to take the risk in my twenties - if it all goes pop before the mortgage it paid I'll at least have some time to rebuild - rather than leave it until my 60s.

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