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ScaredEitherWay

The Real Price Of A Mortgage: 6.49%

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http://www.guardian.co.uk/money/blog/2009/...ices?CMP=AFCYAH

What's the most popular mortgage in the market at the moment? Perhaps you've read about HSBC's 1.99% deal? Or you know of people on tracker loans who are paying virtually nothing for their home loans? Well, the truth is out. Countrywide, Britain's biggest estate agency, revealed this morning the most popular mortgage taken out by buyers at its near-1,000 strong chain of branches.

No, it's not down at 1.99%, indeed it's nowhere near that level. "The most popular mortgage product applied for by nearly 800 Countrywide consultants across the UK required a deposit of 10% with an interest rate of 6.49%," said the company.

This fact stands out in huge contradiction to the guff put out by high house price promoters keen to convince us that the market is "recovering". Only last week, Halifax was talking about affordability falling below its 25-year average. Really? Not when the true rate paid by buyers is this high. This recovery, such as it is, will hit the buffers of affordability constraints almost immediately.

Interestingly, a separate report this morning from Knight Frank found affordability has barely improved from the peak levels of 2007 despite headline falls in house prices and interest rates. Liam Bailey, head of residential research at the estate agents, said: "Despite house prices falling by 15% or 20% on average, the proportion of a buyer's income required to secure a mortgage has only come down 1%. 24% of a buyer's income was required to secure a mortgage at the peak in 2007 ... down to 23% by mid 2009, despite the fact they need to secure larger deposits than in the past. So the situation for first-time buyers is pretty tough."

Not only are real interest rates, if anything, higher than the rates on offer in 2007, but the deposit required is huge. Very few people in the first quarter of 2007 were putting down a deposit at all - that was the period when Northern Rock grabbed a 25% market share of all mortgages with its insane 125% loan offering. That lending was financed through the wholesale markets. Everyone's talking about the "normalisation" of Libor (the London interbank offered rate) in recent weeks, but there are few signs of life in the securitisation market (thank goodness).

So, we still have high house prices, high interest rates, high deposits, and no wholesale funding. Just what sort of base do the "optimists" think that this forms for a "recovery"? I'm still in the other camp of optimists - those who feel optimistic that prices will stagnate or fall for years to come.

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Where were all these oh so important ftb's during the boom? Methinks their importance has been overdone. The boom was characterised by ageing and diminishing numbers of ftbs. Why do people insist on belivieng that recovery will be be heralded by FTBs returning?

It may not. It was a speculative boom driven by investors. If it booms again it will probably involve the same investors.

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Where were all these oh so important ftb's during the boom? Methinks their importance has been overdone. The boom was characterised by ageing and diminishing numbers of ftbs. Why do people insist on belivieng that recovery will be be heralded by FTBs returning?

It may not. It was a speculative boom driven by investors. If it booms again it will probably involve the same investors.

How you seen new BTL mortgage rates recently? They are just as bad. And deposits required are higher.

The problem is with all new entrants into the market. The proce movements are not coming from BTL or FTBs.

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How you seen new BTL mortgage rates recently? They are just as bad. And deposits required are higher.

The problem is with all new entrants into the market. The proce movements are not coming from BTL or FTBs.

Right so it follows that prices are rsisng and neither FTB's or BTL are driving the market at these relatively low volumes? Does it therefore follow that ftbs are required to drive a "recovery"?

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