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Mick Dundee

Talk Of The Office - 60% Deposit For Ft Buyers

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I am of course refering to this article in the Times.

http://property.timesonline.co.uk/tol/life...icle6812286.ece

The talk is quite simply really. Can you afford to pay 60% deposit on a property, say 3 bedroom semi detached house. Approximate price £200,000.

Take this as being £120,000 deposit required to get the best deals.

The answer in our office is "No", none of us earn enough to be able to afford to do this.

So what is the point wanting a deposit of 60%, you might as well buy a 2 bedroom terrace for £120,000 or less outright and have no mortgage at all. :lol:

Once you have your 2 bed terrace, you save up and exchange up the "so called ladder" until you can afford a 3 bedroomed semi. Up and up you would go.

Which brings us to our chat in the office. Are mortgages yesterdays news ?

We all think so, especially if this is the future. Either rent, live with parents or buy a crummy little flat and keep climbing the property ladder.

Some were even talking about taking our loans and maxing out credit cards and overdrafts if this were to be the case to buy their first place. If your not getting a mortgage, then what incentive is there to keep a good credit record. After all, some loans and credit cards are unsecured borrowings anyway.

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I am of course refering to this article in the Times.

http://property.timesonline.co.uk/tol/life...icle6812286.ece

The talk is quite simply really. Can you afford to pay 60% deposit on a property, say 3 bedroom semi detached house. Approximate price £200,000.

Take this as being £120,000 deposit required to get the best deals.

The answer in our office is "No", none of us earn enough to be able to afford to do this.

So what is the point wanting a deposit of 60%, you might as well buy a 2 bedroom terrace for £120,000 or less outright and have no mortgage at all. :lol:

Once you have your 2 bed terrace, you save up and exchange up the "so called ladder" until you can afford a 3 bedroomed semi. Up and up you would go.

Which brings us to our chat in the office. Are mortgages yesterdays news ?

We all think so, especially if this is the future. Either rent, live with parents or buy a crummy little flat and keep climbing the property ladder.

Some were even talking about taking our loans and maxing out credit cards and overdrafts if this were to be the case to buy their first place. If your not getting a mortgage, then what incentive is there to keep a good credit record. After all, some loans and credit cards are unsecured borrowings anyway.

Hmm lets think my mortgage is 3% and my overdraft is 18% I know which I'd rather use over a 25 year period.

Which office is this ? Hopefully not one that involves any sort of knowledge of maths, it's probably the local college of FE isn't it ???

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Hmm lets think my mortgage is 3% and my overdraft is 18% I know which I'd rather use over a 25 year period.

Which office is this ? Hopefully not one that involves any sort of knowledge of maths, it's probably the local college of FE isn't it ???

. What we were talking about, if you bothered to read the post, is we cant get a mortgage unless we have 60% deposit and so why not use our overdrafts or other unsecured borrowings to purchase a house outright with no mortgage. We can also default on the loans later and offer a pitance in return. As the borrowings are unsecured you home is not at risk.

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Hmm lets think my mortgage is 3% and my overdraft is 18% I know which I'd rather use over a 25 year period.

Which office is this ? Hopefully not one that involves any sort of knowledge of maths, it's probably the local college of FE isn't it ???

you tinker, you KNOW its the HMRC, dont you. :lol:

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On the plus side, no mortgages available means prices will drop to what people can save. Remind me how much savings the average sheeple has... 3 weeks wages I think. :blink:

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What we were talking about, if you bothered to read the post, is we cant get a mortgage unless we have 60% deposit and so why not use our overdrafts or other unsecured borrowings to purchase a house outright with no mortgage. We can also default on the loans later and offer a pitance in return. As the borrowings are unsecured you home is not at risk.

Fúcking Hell Mick - we don't pay you public servants to be typing on HPC all day - isn't there some paper clips that need re-bending in your office or something? Jeezuz, no wonder the government finances are all to c0ck. Get to work you friggin slacker.

BTW if you tried buying a house on unsecured credit and then defaulted, your creditors would just obtain a charging order on your house anyway.

WORK MICK

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The “Basel II†(pronounced “barlâ€), an international finance directive introduced in January last year, is the main reason that buyers with small deposits are being turned down for home loans.

Err, no it isn't. She's getting confused with the French name for the city which is Bâle. It's like writing, "The Bank of England (pronounced 'Angleterre')..." :lol:

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http://property.timesonline.co.uk/tol/life...icle6812286.ece

What has an obscure and complicated European financial directive got to do with first-time buyers trying to get on to the property ladder?

The answer, sadly, is quite a lot. While the relationship between global financial markets and the ability of homebuyers to obtain a mortgage has become more apparent since the run on Northern Rock and the collapse of Lehman Brothers, the impact of one particular rule on the availability of mortgages has so far been widely overlooked.

The “Basel II†(pronounced “barlâ€), an international finance directive introduced in January last year, is the main reason that buyers with small deposits are being turned down for home loans.

“It looks to everyone like the credit crunch is to blame for the lack of deals for first-time buyers. While this has obviously had some impact, Basel II is also very relevant,†says Ray Boulger, of John Charcol, the mortgage broker.

The rule requires banks to set aside more capital to offset the higher lending risks associated with offering higher loan-to-value deals. Loans to first-time buyers tend to fall into this category because they have smaller deposits. Since the downturn began, banks’ capital reserves have been severely depleted, with the result that they have pared down any lending that would mean having to shore up even more funds.

The bad news is that the clampdown is set to get worse. At the moment the best mortgage deals are available to borrowers who have a 40 per cent deposit. A proposed further change to what are collectively called “capital adequacy requirements†could mean that only borrowers with a 60 per cent deposit will be entitled to the cheapest rates.

While this is unlikely to have a direct impact on first-time buyers, it could mean that they are pushed even farther down the pecking order of mortgage borrowers.

The existence of such rules makes a return to better rates for first-time buyers less likely than if it were a simple case of banks responding to market forces. As Boulger puts it: “You can’t do anything if it doesn’t comply with the EU.â€

For the moment, while anyone with a deposit of less than 10 per cent will struggle to find a deal or afford repayments on the high interest rates available to them, those who do have a 10 per cent deposit may find that their mortgage options are not as bad as they had thought.

Graduates and first-time buyers with professional qualifications in accountancy or law, or Armed Forces commissioned officers, can obtain the cheapest rates at a loan-to-value of 90 per cent, as they have a lower risk profile. These are available through “Share to Buy†(www.sharetobuy.com), a scheme jointly run with Britannia, the former building society that is now part of Co-operative Financial Services. These allow up to four friends or family members to buy together. The mortgage, also available to couples, is a discounted variable rate that is 0.2 percentage points below Britannia’s standard variable rate, which is currently 4.24 per cent. This gives a rate of 4.04 per cent, which for a £130,000 mortgage would give repayments of £689 a month.

For those not eligible for Share to Buy, Boulger highlights a lifetime tracker from HSBC, with a loan-to-value limit of 90 per cent. This is pegged at a rate of 4.09 per cent above the Bank of England base rate, giving a current rate of 4.59 per cent. On a £130,000 loan, repayments would come to £729 a month.

Another deal aimed at first-time buyers, Lloyds Banking Group’s “Lend a Hand schemeâ€, has not received much take-up, according to Boulger. The deal offers buyers three-year fixed rate loans at 4.99 per cent for up to 95 per cent of the property value, but only if a “helperâ€, usually a parent or grandparent, puts 20 per cent of the property value in an adjoining Lloyds savings account.

Halifax, another division of Lloyds Banking Group, does not offer rates below 7.49 per cent for loans up to 90 per cent. Abbey has a rate of 7.09 per cent, which comes with a whopping £2,499 fee for the same loan size. RBS’s best deal at 90 per cent is a fixed-rate deal at 7.25 per cent — but this locks you in to the rate for five years. “At these rates it just is not worth it,†says Boulger

Or house prices could fall another 50 - 60% of course.

Sorry mods, didn't see other thread!

Edited by Injin

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S What we were talking about, if you bothered to read the post, is we cant get a mortgage unless we have 60% deposit and so why not use our overdrafts or other unsecured borrowings to purchase a house outright with no mortgage. We can also default on the loans later and offer a pitance in return. As the borrowings are unsecured you home is not at risk.

Given the amount you skim off my salary each month I'm surprised you can't afford £120k deposits.

MOD EDIT : IDENTIFYING DETAILS REMOVED

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...What we were talking about, if you bothered to read the post, is we cant get a mortgage unless we have 60% deposit ....

If you bothered to read the article you would see this is not the case ;)

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From the comments:

"This measure won't affect the demand for a nice place to live, so it won't affect rents. It'll lock most people out of the market, particularly FTBs. However, if rents remain stable, investors will pick up property as yields increase.

Hence houseprices won't change significantly, but more people will rent. The result is a movement of wealth from the poor (renters) to the rich (landlords)."

just wondering how a FTB that can afford a rent will be a worse risk than an investor relying on the same FTB to provide the income?

investors with CASH have always been at an advantage, but most relied on instant equity, huge LTV loans and IO mortgages to get their advantage and price out FTBs.

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Mick - you are playing tomorrows game with todays rules.

If deposits were regulated in this way, the result would be a drop in the price of FTB properties.

Your average 2 bed new build apartment would be no more than £40-45k

2 bed house I guess about £50-55.

An average 3 bed semi would be a step up and would probably be a bit more (£80k ish??)

Perhaps this could mean average house prices to fall in line with earnings with a collar that prevents future HPI.

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Shame the Times article is so wrong.

Go read the comments on the news blog.

Barl :D PMSL

Basil!

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Mick - you are playing tomorrows game with todays rules.

If deposits were regulated in this way, the result would be a drop in the price of FTB properties.

Your average 2 bed new build apartment would be no more than £40-45k

2 bed house I guess about £50-55.

An average 3 bed semi would be a step up and would probably be a bit more (£80k ish??)

Perhaps this could mean average house prices to fall in line with earnings with a collar that prevents future HPI.

I would agree with you on that.

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90% falls thread

I wonder if we will see a huge crash, but I'm sure the jobless recovery will ensure no more house price falls, I mean we have the biggest increase since 2004 currently so the only way is up from here.

I think, that before the end of 2009, we are going to see the Mother of all crashes. OMG it will be a eye opener to all those hoping to retain the value of their overpriced homes. Cant wait, in fact we have all waited years for it to happen.

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What we were talking about, if you bothered to read the post, is we cant get a mortgage unless we have 60% deposit and so why not use our overdrafts or other unsecured borrowings to purchase a house outright with no mortgage. We can also default on the loans later and offer a pitance in return. As the borrowings are unsecured you home is not at risk.

Isn't there something in the staff handbook about being bankrupt.....

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I think, that before the end of 2009, we are going to see the Mother of all crashes. OMG it will be a eye opener to all those hoping to retain the value of their overpriced homes. Cant wait, in fact we have all waited years for it to happen.

I think 4 months is pretty short for the mother of all crashes; end 2010 maybe.

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BTW, I finished work at 4:30PM as I was in at 8:30AM. Everyone deserves to enjoy Bank Holiday. I am Public Servant, not a f4cking slave.

Different tax office to the one on my payslips then - I'll let you off :lol: They used to use the one around the corner, but then changed us to one hundreds of miles away in Manchester - didn't know there was more than one tax office in one city.

As for working hours - what in my post triggered that little outburst? Enjoy your long weekend.

Edited by doccyboy

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so if BoE rates rise, those margins are gonna hurt even more.

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