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

[winkie]

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.

Look you made a decision to buy, live with it, it is not the end of the world, life is a learning curve we only truly learn from the actions we take...many good things come out from things we thought of as bad.

The friends and people we have and hold in our life are far more important than money and bricks.

[impatient_mug]

Look you made a decision to buy, live with it, it is not the end of the world, life is a learning curve we only truly learn from the actions we take...many good things come out from things we thought of as bad.

The friends and people we have and hold in our life are far more important than money and bricks.

You mis-understand - I am happy to live with it - my initial response if you look up the page a bit was that despite the fact I've lost the equivelent of a shiny new sports car I'd still rather rent from the bank than a landlord. Of course I'm annoyed with my timing, but I'm a firm believer in personal responsibility - you make your choices and you live with them - don't expect anyone else to help you ever - it's wrong to scrounge.

This little 'argument' if you can call it that came after you assumed I'd be able to invest smart enough to pay rent when I'm too old to work :-)

[puppee]

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 but your parents like me were paying 12-15% on 60,000-70,000 not on the amounts that people need to borrow at the moment so 6% on what you need to borrow at the moment is worse than 12-15% on what you needed to borrow in the 90's

[winkie]

You mis-understand - I am happy to live with it - my initial response if you look up the page a bit was that despite the fact I've lost the equivelent of a shiny new sports car I'd still rather rent from the bank than a landlord. Of course I'm annoyed with my timing, but I'm a firm believer in personal responsibility - you make your choices and you live with them - don't expect anyone else to help you ever - it's wrong to scrounge.

This little 'argument' if you can call it that came after you assumed I'd be able to invest smart enough to pay rent when I'm too old to work :-)

Many people I know are retired and renting...many in the future will still be renting from the bank if they have not been forced to downsize or sell and rent.

[Number79]

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.

horsesh1t!

you can get a 90% mortgage at a higher rate but banks want to offer 60% or 75% ltv not because they can spread their money around further but because it limits their risk. If they wanted to spread their money around then getting 60% or 75% mortgages would be far easier than it is, instead all lenders have greatly tightened lending criterea.

If banks knew that prices were not going to fall anymore than 8% then there would be a lot more 80% and 90% ltv products available.

providing a mortgage at 60% of asset value does nothing for a banks balance sheet as they do not own the asset, whatever the value, and are only owed the outstanding loan ammount.

[HAMISH_MCTAVISH]

yes but your parents like me were paying 12-15% on 60,000-70,000 not on the amounts that people need to borrow at the moment so 6% on what you need to borrow at the moment is worse than 12-15% on what you needed to borrow in the 90's

But incomes are also much higher..... Not as much higher as prices, but still higher. So it's not worse at all. 5% rates on todays prices are more affordable than 15% on 1990 prices, given the income differential as well.

In the early 90's we were paying 12% to 15% on a 80K mortgage on our first property, and our income was around 25K joint. It sucked for a short while, but got easier and easier over time.

Today we're paying 1% (and assuming it'll go to 5% to 8% soon enough) on a 180K mortgage on our second property, and our income is north of 100K joint. If it went to 15% again, that'd be manageble. We have no other debt, and a substantial savings cushion. Oh, and the first house thats paid for as well.....

House prices today may be higher than they were, but the key to personal financial security is still (other than perhaps for a couple of crash years at the end of every 18 year cycle) to buy as young as possible and pay it off as early as possible.

[HAMISH_MCTAVISH]

horsesh1t!

you can get a 90% mortgage at a higher rate but banks want to offer 60% or 75% ltv not because they can spread their money around further but because it limits their risk. If they wanted to spread their money around then getting 60% or 75% mortgages would be far easier than it is, instead all lenders have greatly tightened lending criterea.

If banks knew that prices were not going to fall anymore than 8% then there would be a lot more 80% and 90% ltv products available.

providing a mortgage at 60% of asset value does nothing for a banks balance sheet as they do not own the asset, whatever the value, and are only owed the outstanding loan ammount.

horsesh1t yourself.

Banks are rationing mortgages as they have very limited funding. Low LTV's helps their average balance sheet position and lets them increase their fee generation by 25%.

Profiteering, plain and simple.

[ccc]

call margin advance in

Please re-arrange the above words.

[Gideon Gono]

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!

So what about the 90 and 100% mortgages that have started to come back onto the market? You live in dreamland. This is the bottom.

[Number79]

horsesh1t yourself.

Banks are rationing mortgages as they have very limited funding. Low LTV's helps their average balance sheet position and lets them increase their fee generation by 25%.

Profiteering, plain and simple.

http://www.telegraph.co.uk/finance/finance...land-warns.html

"Britain's banks remain over-indebted, highly vulnerable and harbour growing funding gaps which leave them susceptible to future shocks, the Bank of England has said.

In a warning to bankers and consumers after months that have seen large jumps in share prices and hopes that the banking system is recovering, the Bank used its Financial Stability Report to emphasise that the UK remains highly vulnerable to potential shocks.

With the Government poised to deliver its White Paper on financial regulation next week, the Bank also cautioned that life for financial institutions was about to change forever, with big banks facing a whole spectrum of new restraints on their size, structure, business plans and lending.

The report, published today, said: "While pressures on the major global banks have stabilised over the past few months, their balance sheets remain impaired. Banks' leverage remains high, with the possibility of further impairment of assets placing continued pressure on profitability and capital ratios. Future revenue generation will need to balance the desire to deleverage with the need to generate new business at profitable spreads.

"At the same time, the major UK banks maintain a high and rising customer funding gap. The withdrawal of overseas funding and competition for domestic deposits has added to these funding pressures."

The report revealed that the funding gap – the shortfall between what banks have in deposits and what they lend out to customers – has further widened in the past year to more than £800bn. The increase underlines the scale of adjustment that they will have to undergo before life returns to relative normality. The report also pointed out that the amount banks have in liquid assets remains low, while the leverage ratios remain high, saying: "As long as these balance sheet vulnerabilities persist, there is a risk to the banking system from further adverse economic or financial sector developments, which could in turn affect lending and economic recovery."

In a sign of the strain facing nations' public finances – including the UK's – the report also revealed that the threat of a sovereign debt default has become one of the biggest concerns for investors. A survey put together for the report identified sovereign risk as a financial stability concern for the first time.

The report also laid out a number of key criteria banks will have to fulfil in the future – reforms which could transform the structure of the financial system. Among its recommendations were that in future banks should "face a credible threat of closure or wind down", should have a "risk-based, pre-funded deposit insurance system", should increase their levels of capital and liquidity, depending on their size, and should provide a "will" which explains how to dismantle them in the event of insolvency.

Banks must also provide the authorities with more information about their interlinkages, to ensure that the collapse of one will not bring down a whole series of institutions, the Bank said."

yes mate, profeteering plain and simple

Edited June 28, 2009 by richyc

[Number79]

horsesh1t yourself.

Banks are rationing mortgages as they have very limited funding. Low LTV's helps their average balance sheet position and lets them increase their fee generation by 25%.

Profiteering, plain and simple.

"Two of Britain's biggest mortgage lenders have changed their lending criteria to make it even harder for customers to secure a home loan.

Royal Bank of Scotland (RBS), which is 70 per cent owned by the taxpayer, has tightened the rules on what new applicants can consider as their annual income.

From now on it will only consider 25 per cent of annual performance-related bonus payments, which has to be an average over two years.

Bonus payments made up of shares rather than cash will also be excluded. The crackdown on bonuses payments follows similar moves by other lenders, including Nationwide Building Society and First Direct.

Meanwhile, Abbey, the second largest lender in UK which is owned by Santander, is clamping down on erroneous applications which have come via mortgages brokers. It has ruled out reviewing any applications from customers who were rejected for a new loan because of errors or spaces on the form.A spokeswoman for Abbey said: "We are getting a high volume of applications through mortgage brokers which are incomplete or contain incorrect information. Consumers should work closely with their financial adviser to ensure that all relevant details and information required to submit a complete application are available to their broker."

Melanie Bien, director of Savills Private Finance, the broker, said: "Despite talk of 'green shoots' of recovery, lenders continue to demonstrate a reluctance to lend by tightening criteria further still.

"When it is some of the bigger lenders who are adopting this approach, borrowers may wonder where they are supposed to go to get accepted for a mortgage.

"While market conditions may be improving and the bottom of the market seems to be in sight, lenders still haven't regained their appetite for lending. If this situation does not change, it will hamper recovery."

Yesterday, Halifax, Britain's biggest lender, pushed up the cost of mortgage deals for existing customers by up to 0.75 percentage points, following a similar move affecting loans for new customers last week.

A five-year fixed-rate deal for homeowners borrowing up to 90 per cent of a property's value was raised from 5.24 per cent to 5.99 per cent, although the fee was cut from £1,249 to £999.

An RBS spokeswoman said: "We continue to consider bonus payments in the assessment of income. We constantly review our internal guidelines to ensure the amount of previous discretionary bonuses eligible for consideration is appropriate to the current economic outlook, recognising our duty as a responsible lender and our customers needs."

Doesn't sound much like banks are spreading around that extra 25% to increase fee generation does it?

[eric pebble]

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.

Also-known-as

F*CKING LIAR LOANS!!!

:angry:

Edited June 28, 2009 by eric pebble

[singlemalt]

http://www.telegraph.co.uk/finance/finance...land-warns.html

"Britain's banks remain over-indebted, highly vulnerable and harbour growing funding gaps which leave them susceptible to future shocks, the Bank of England has said.

In a warning to bankers and consumers after months that have seen large jumps in share prices and hopes that the banking system is recovering, the Bank used its Financial Stability Report to emphasise that the UK remains highly vulnerable to potential shocks.

With the Government poised to deliver its White Paper on financial regulation next week, the Bank also cautioned that life for financial institutions was about to change forever, with big banks facing a whole spectrum of new restraints on their size, structure, business plans and lending.

The report, published today, said: "While pressures on the major global banks have stabilised over the past few months, their balance sheets remain impaired. Banks' leverage remains high, with the possibility of further impairment of assets placing continued pressure on profitability and capital ratios. Future revenue generation will need to balance the desire to deleverage with the need to generate new business at profitable spreads.

"At the same time, the major UK banks maintain a high and rising customer funding gap. The withdrawal of overseas funding and competition for domestic deposits has added to these funding pressures."

The report revealed that the funding gap – the shortfall between what banks have in deposits and what they lend out to customers – has further widened in the past year to more than £800bn. The increase underlines the scale of adjustment that they will have to undergo before life returns to relative normality. The report also pointed out that the amount banks have in liquid assets remains low, while the leverage ratios remain high, saying: "As long as these balance sheet vulnerabilities persist, there is a risk to the banking system from further adverse economic or financial sector developments, which could in turn affect lending and economic recovery."

In a sign of the strain facing nations' public finances – including the UK's – the report also revealed that the threat of a sovereign debt default has become one of the biggest concerns for investors. A survey put together for the report identified sovereign risk as a financial stability concern for the first time.

The report also laid out a number of key criteria banks will have to fulfil in the future – reforms which could transform the structure of the financial system. Among its recommendations were that in future banks should "face a credible threat of closure or wind down", should have a "risk-based, pre-funded deposit insurance system", should increase their levels of capital and liquidity, depending on their size, and should provide a "will" which explains how to dismantle them in the event of insolvency.

Banks must also provide the authorities with more information about their interlinkages, to ensure that the collapse of one will not bring down a whole series of institutions, the Bank said."

yes mate, profeteering plain and simple

richyc - 1

Hamish - 0

[singlemalt]

"Two of Britain's biggest mortgage lenders have changed their lending criteria to make it even harder for customers to secure a home loan.

Royal Bank of Scotland (RBS), which is 70 per cent owned by the taxpayer, has tightened the rules on what new applicants can consider as their annual income.

From now on it will only consider 25 per cent of annual performance-related bonus payments, which has to be an average over two years.

Bonus payments made up of shares rather than cash will also be excluded. The crackdown on bonuses payments follows similar moves by other lenders, including Nationwide Building Society and First Direct.

Meanwhile, Abbey, the second largest lender in UK which is owned by Santander, is clamping down on erroneous applications which have come via mortgages brokers. It has ruled out reviewing any applications from customers who were rejected for a new loan because of errors or spaces on the form.A spokeswoman for Abbey said: "We are getting a high volume of applications through mortgage brokers which are incomplete or contain incorrect information. Consumers should work closely with their financial adviser to ensure that all relevant details and information required to submit a complete application are available to their broker."

Melanie Bien, director of Savills Private Finance, the broker, said: "Despite talk of 'green shoots' of recovery, lenders continue to demonstrate a reluctance to lend by tightening criteria further still.

"When it is some of the bigger lenders who are adopting this approach, borrowers may wonder where they are supposed to go to get accepted for a mortgage.

"While market conditions may be improving and the bottom of the market seems to be in sight, lenders still haven't regained their appetite for lending. If this situation does not change, it will hamper recovery."

Yesterday, Halifax, Britain's biggest lender, pushed up the cost of mortgage deals for existing customers by up to 0.75 percentage points, following a similar move affecting loans for new customers last week.

A five-year fixed-rate deal for homeowners borrowing up to 90 per cent of a property's value was raised from 5.24 per cent to 5.99 per cent, although the fee was cut from £1,249 to £999.

An RBS spokeswoman said: "We continue to consider bonus payments in the assessment of income. We constantly review our internal guidelines to ensure the amount of previous discretionary bonuses eligible for consideration is appropriate to the current economic outlook, recognising our duty as a responsible lender and our customers needs."

Doesn't sound much like banks are spreading around that extra 25% to increase fee generation does it?

richyc - 2

Hamish - 0

It's like watching Brazil!

[Patfig]

So what about the 90 and 100% mortgages that have started to come back onto the market? You live in dreamland. This is the bottom.

God bless the bottom , and all who sail in her!!

[Mikhail Liebenstein]

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

This is the interesting thing.

A while ago there was some discussion about the nominal versus the real bottom. It is an important distinction!!!!

If you look at past crashes, the nominal bottom, ie the lowest actual value occurred well before the real (ie inflation adjusted bottom).

So if average nominal prices in an area fell to £50k in 1991 and then ticked up to £52k by 1995. The nominal price is lower in 1991 than in 1995, but say we had 4% inflation, then roughly speak the real price of £52k in 1997 is actually 17% lower (as wages have risen 1.04^4). So in effect 1995's £52k, is only really worth £44k in 1991 money.

The reason I have been so hyper-interested in the bond market is that it is basically an inflation early warning system. If I see the bond market signalling inflation (BTW there is a truck load of evidence for this gradually building) then I may want to start looking at divesting myself of cash.

However, there is a question I'd still need to answer and this is whether this will be a fairly typical inflation, where things including house prices shoot up, in which case I might as well buy a house, or whether it is a special kind of inflation that is intended to clean out the system of the mess left by HPI.

The more benign version, will involve the current increase in the Money supply getting locked in, with a gradual return of the velocity of circulation of money. So basically with more money in the system and with this money moving through transactions at the speed it did prior to the credit crunch we would certainly get inflation. Such inflation could start to lift wages as well and so the debt of the over borrowed gets eroded, basically this is a recovery led by economic growth.

The malign scenario goes the other way. One could argue that wages will continue to be held down globally until China/India converge with the rest of the world. In this scenario, the UK, US and Europe continue to deflate and wages don't rise in either nominal or currency indexed terms, in fact they fall sharply in currency terms. In this scenario, the price of all the imported stuff we buy just keeps on rising and so people have less and less money to spend on houses, this UK land and property values totally collapse until they reach a point where our lower cost of living and setting up due to much lower rents and property values makes us competitive, at which point we might see a return to substantial growth for UK manufacturing. In this scenario, I'd want to be holding foreign assets.

So in my judgement, we are coming to another possible fork in the road.

1) Route 1, I look at buying a house in the next 18 months.

2) Route 2, I buy China/India investment trusts, Oil stocks and more yellow metal

The really bizarre thing about this is that this effectively my conclusion is general inflation or asset deflation coupled with necessities inflation. Still haven't solved that damn issue.

[REP013]

This is the interesting thing.

/SNIP/

So in my judgement, we are coming to another possible fork in the road.

1) Route 1, I look at buying a house in the next 18 months.

2) Route 2, I buy China/India investment trusts, Oil stocks and more yellow metal

The really bizarre thing about this is that this effectively my conclusion is general inflation or asset deflation coupled with necessities inflation. Still haven't solved that damn issue.

So Inflation or Stagflation ...

[Abstra]

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?

You need an exemplary credit history for a 10% deposit mortgage and no other debt. I believe. You can get a good interest rate with HSBC if you have a 40% deposit.

[bomberbrown]

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.

Holy Moses!!!! Only one BS offering a fix greater than 5 years.

[bomberbrown]

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.

Hooray! Someone else 'gets' it. I've been banging this drum for years now. The absence of any fixes greater than 5 years speaks volumes!!

Edited June 28, 2009 by bomberbrown

[HAMISH_MCTAVISH]

Hooray! Someone else 'gets' it. I've been banging this drum for years now. The absence of any fixes greater than 5 years speaks volumes!!

I found three 25 year fixes, and many more 10 years.......

This was the best.

3.25% Fixed for 1 year, followed by a rate of 5.49% for the remaining term of the 25 year mortgage.

If you think inflation is coming, fill yer boots, that's a cracking deal.

[Number79]

I found three 25 year fixes, and many more 10 years.......

This was the best.

3.25% Fixed for 1 year, followed by a rate of 5.49% for the remaining term of the 25 year mortgage.

If you think inflation is coming, fill yer boots, that's a cracking deal.

limk? ltv? chances of the lender actually providing this rather than it being advertising?

even if you found this, how many deals like this are there? how many were there in comparisson 5 years ago or even 2 or just 1?

the fact that they are few and far between is the relevant factor, not that you have managed to find one still available ( at god knows what terms).

you list yourself as neither bear or bull, we all know that is not accurate, but try standing back impartially and examining the products/rates/periods of products available or lack thereof and tell me that nothing has fundamentally changed.

Edited June 28, 2009 by richyc

[Number79]

This is the interesting thing.

A while ago there was some discussion about the nominal versus the real bottom. It is an important distinction!!!!

If you look at past crashes, the nominal bottom, ie the lowest actual value occurred well before the real (ie inflation adjusted bottom).

So if average nominal prices in an area fell to £50k in 1991 and then ticked up to £52k by 1995. The nominal price is lower in 1991 than in 1995, but say we had 4% inflation, then roughly speak the real price of £52k in 1997 is actually 17% lower (as wages have risen 1.04^4). So in effect 1995's £52k, is only really worth £44k in 1991 money.

The reason I have been so hyper-interested in the bond market is that it is basically an inflation early warning system. If I see the bond market signalling inflation (BTW there is a truck load of evidence for this gradually building) then I may want to start looking at divesting myself of cash.

However, there is a question I'd still need to answer and this is whether this will be a fairly typical inflation, where things including house prices shoot up, in which case I might as well buy a house, or whether it is a special kind of inflation that is intended to clean out the system of the mess left by HPI.

The more benign version, will involve the current increase in the Money supply getting locked in, with a gradual return of the velocity of circulation of money. So basically with more money in the system and with this money moving through transactions at the speed it did prior to the credit crunch we would certainly get inflation. Such inflation could start to lift wages as well and so the debt of the over borrowed gets eroded, basically this is a recovery led by economic growth.

The malign scenario goes the other way. One could argue that wages will continue to be held down globally until China/India converge with the rest of the world. In this scenario, the UK, US and Europe continue to deflate and wages don't rise in either nominal or currency indexed terms, in fact they fall sharply in currency terms. In this scenario, the price of all the imported stuff we buy just keeps on rising and so people have less and less money to spend on houses, this UK land and property values totally collapse until they reach a point where our lower cost of living and setting up due to much lower rents and property values makes us competitive, at which point we might see a return to substantial growth for UK manufacturing. In this scenario, I'd want to be holding foreign assets.

So in my judgement, we are coming to another possible fork in the road.

1) Route 1, I look at buying a house in the next 18 months.

2) Route 2, I buy China/India investment trusts, Oil stocks and more yellow metal

The really bizarre thing about this is that this effectively my conclusion is general inflation or asset deflation coupled with necessities inflation. Still haven't solved that damn issue.

you mention imported inflation but I think that the currency markets have to be watched just as closely as the bond market. Currency relationships are widely ignored yet vital for understanding the bigger picture.

ofcourse, seeing the bigger picture means a lot of research - understanding foreign markets/stocks, gold, currency pairs, bonds, market relationships etc etc. I have now measured out the canvass for the bigger picture but it is only half painted. It is beyond most people and even if they actually get to understand everything there is no accounting for the big boys/central banks/governments dodgy dealings or manipulation. House prices - a drop in the ocean - we have more to worry about for those that aren't in ignorant bliss.

[Number79]

Hooray! Someone else 'gets' it. I've been banging this drum for years now. The absence of any fixes greater than 5 years speaks volumes!!

seems so obvious, am sure many have realised but why is this not being discussed more? surely many here understand the implications or is it just that those who do are spending more energy preparing rather than talking houses?

[twatmangle]

limk? ltv? chances of the lender actually providing this rather than it being advertising?

http://www.fsa.gov.uk/tables/bespoke/Mortgages

Plenty of >5 year mortgages.

As for getting them, that all depends upon people matching the bank's criteria. That's out of the bank's hands and is down to them.

People can't bitch and moan if the bank won't lend them money because they've got other outstanding debts, or a few missed credit card payments.

Bears appear to be wishing for lending multiples to be returned to 3x, as was the case before Gordon's miracle years. The sensible lending practices of these former times also included the requirement for an unblemished credit history, a proven ability to save and budget, and quite possible a grilling by a bank manager, where you had to prove you could afford the loan.

If you want historic lending multiples, accept the criteria that come with them.