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vman7

Momentum Mortgages

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Just wondering what peoples take on momentum mortgages are?

I find it disturbing that a bank which is 75% owned by the tax payer would offer something like this. I read that if the value of the house falls 10% Ulster Bank take the hit

Thoughts?

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the developer takes the hit

Does it matter really who takes the hit? Well it does I suppose and these things were prompted in an attempt to get the market moving and instill some confidence. I can see the arguement but I always come down to the phrase "You cant buck the Market". Cut the frills and talk common sense. If someone else is taking the risk you are paying for it somewhere.

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Does it matter really who takes the hit? Well it does I suppose and these things were prompted in an attempt to get the market moving and instill some confidence. I can see the arguement but I always come down to the phrase "You cant buck the Market". Cut the frills and talk common sense. If someone else is taking the risk you are paying for it somewhere.

No, the developer is taking the risk of the prices falling 15% over the next 5 years. If they fall, up to that amount he has to offset the mortgage. Effectively giving the money back to the purchaser. This cant be factored in as the houses must sell at the same price as non Momentum Mortgaged Houses.

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No, the developer is taking the risk of the prices falling 15% over the next 5 years. If they fall, up to that amount he has to offset the mortgage. Effectively giving the money back to the purchaser. This cant be factored in as the houses must sell at the same price as non Momentum Mortgaged Houses.

of course for the purchaser to be able to get his money back

the developer must still be solvent

who is taking the risk?

rock on!

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of course for the purchaser to be able to get his money back

the developer must still be solvent

who is taking the risk?

rock on!

The bank holds it out of the original proceeds.

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The bank holds it out of the original proceeds.

Here's a parlour game - who on the Momentum list is in diffs?

http://www.ulsterbank.co.uk/ni/personal/borrowing/mortgages/first-time/momentum/development.ashx

For starters:

ADH Ireland which had a scheme on North Queen Street in Belfast has gone into liquidation with debts of £1.6m.

Lavelle and McAlinden is finished.

Micwall, a Ballygowan based firm has entered a creditors voluntary arrangement. That means it is insolvent but has reached agreement with it creditors to find a way forward and pay it debts.

Micwall's biggest creditor is Ulster Bank which is owed £25m, however the value of the landbank on which most of those borrowings are secured has plunged in value in recent years and is now worth as little as £13m. Ulster is working with the firm to make sure it can complete its developments.

Cargan Developments which was offering a small development of town houses in Carrowdore has applied to be struck off the companies register though another party is objecting to that move.

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Taken from Ulster Bank website. It is tinkering with value and debt level.

If the house MUST sell at a certain price then that takes away your ability to negotiate. Seems the whole point behind it is to make you pay more for the house, the bank get a bit more money from you for a few years until the game is up, then they take the developers money (which is also imaginary and based on overvalued assets).

Its just another clever way to build the house of cards a little taller for a little longer.

Its also financially dodgy if you think of it from the value-increasing possibility, you owe money to the developer. Just because your house value has increased does not mean you are in any better position to afford to pay it, so the affordability equation (if one really exists) is distorted. On the other hand the developer is lending you money, are they financially regulated?

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Here's a parlour game - who on the Momentum list is in diffs?

http://www.ulsterbank.co.uk/ni/personal/borrowing/mortgages/first-time/momentum/development.ashx

For starters:

ADH Ireland which had a scheme on North Queen Street in Belfast has gone into liquidation with debts of £1.6m.

Lavelle and McAlinden is finished.

Micwall, a Ballygowan based firm has entered a creditors voluntary arrangement. That means it is insolvent but has reached agreement with it creditors to find a way forward and pay it debts.

Micwall's biggest creditor is Ulster Bank which is owed £25m, however the value of the landbank on which most of those borrowings are secured has plunged in value in recent years and is now worth as little as £13m. Ulster is working with the firm to make sure it can complete its developments.

Cargan Developments which was offering a small development of town houses in Carrowdore has applied to be struck off the companies register though another party is objecting to that move.

the few that i know on this list are all rumoured to be b*ggered

though they are still trading!

heard recently of a small bible belt builder been very busy putting in founds on country sites

no surprise a lot of sites up against it timewise

the surprise was he was working directly for our favourite bank

rock on!

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If the house MUST sell at a certain price then that takes away your ability to negotiate. Seems the whole point behind it is to make you pay more for the house, the bank get a bit more money from you for a few years until the game is up, then they take the developers money (which is also imaginary and based on overvalued assets).

Its just another clever way to build the house of cards a little taller for a little longer.

Its also financially dodgy if you think of it from the value-increasing possibility, you owe money to the developer. Just because your house value has increased does not mean you are in any better position to afford to pay it, so the affordability equation (if one really exists) is distorted. On the other hand the developer is lending you money, are they financially regulated?

Exactly. If I have a hundred thou to spend on a house and the developer can pay 5% then I can buy a house at £105k with that house not really being worth it and without me really being able to afford a £105k house.

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If the house MUST sell at a certain price then that takes away your ability to negotiate. Seems the whole point behind it is to make you pay more for the house, the bank get a bit more money from you for a few years until the game is up, then they take the developers money (which is also imaginary and based on overvalued assets).

Its just another clever way to build the house of cards a little taller for a little longer.

Its also financially dodgy if you think of it from the value-increasing possibility, you owe money to the developer. Just because your house value has increased does not mean you are in any better position to afford to pay it, so the affordability equation (if one really exists) is distorted. On the other hand the developer is lending you money, are they financially regulated?

Just to clarify- the house cant be sold at a higher price than other, similar houses on the site, which are sold to purchasers via a different mortgage product.

The bank only charge interest on the 85% although vet the purchaser for the ability to pay interest on the whole amount.

The developers money is real

The developer is deferring the 5% deposit. This is not lending and he is not charging interest on it.

It is a way for the bank to lend 100% whilst still having the comport of 15% comeback against the seller if prices drop.

If I was a FTBer I would certainty use this product. As a developer I dislike it, and try to discourage it as it ties up working capital. But it done its job.

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Here's a parlour game - who on the Momentum list is in diffs?

http://www.ulsterbank.co.uk/ni/personal/borrowing/mortgages/first-time/momentum/development.ashx

For starters:

ADH Ireland which had a scheme on North Queen Street in Belfast has gone into liquidation with debts of £1.6m.

Lavelle and McAlinden is finished.

Micwall, a Ballygowan based firm has entered a creditors voluntary arrangement. That means it is insolvent but has reached agreement with it creditors to find a way forward and pay it debts.

Micwall's biggest creditor is Ulster Bank which is owed £25m, however the value of the landbank on which most of those borrowings are secured has plunged in value in recent years and is now worth as little as £13m. Ulster is working with the firm to make sure it can complete its developments.

Cargan Developments which was offering a small development of town houses in Carrowdore has applied to be struck off the companies register though another party is objecting to that move.

I imagine all developers are struggling at the moment - name one that's not

The Ulster Bank offer this product on all the active sites that they have funded the site purchase.

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Just to clarify- the house cant be sold at a higher price than other, similar houses on the site, which are sold to purchasers via a different mortgage product.

The bank only charge interest on the 85% although vet the purchaser for the ability to pay interest on the whole amount.

The developers money is real

The developer is deferring the 5% deposit. This is not lending and he is not charging interest on it.

It is a way for the bank to lend 100% whilst still having the comport of 15% comeback against the seller if prices drop.

If I was a FTBer I would certainty use this product. As a developer I dislike it, and try to discourage it as it ties up working capital. But it done its job.

I do not disagree with you. It is propping up demand and therefore prices. The 15% retention (called it what you like) is in someways, potentially, a self fulfilling prophecy of doom. At the heart of it is 100% lending prudent? I think not.

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Exactly. If I have a hundred thou to spend on a house and the developer can pay 5% then I can buy a house at £105k with that house not really being worth it and without me really being able to afford a £105k house.

If you had £100k I presume you would not need a mortgage to buy the house in question.

This product is to assist FTBers who can afford the re-payments but perhaps cannot come up with the 20% deposits that are required by alot of the lenders today. I like many of you question the logic in offering them the 5% deposit as well as I believe people should be commuting in some way. If the house falls in value, by up to 10% the money is clawed back from the builder and knocked off the mortgage. There is no other product out there that allows for that.

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I do not disagree with you. It is propping up demand and therefore prices. The 15% retention (called it what you like) is in someways, potentially, a self fulfilling prophecy of doom. At the heart of it is 100% lending prudent? I think not.

Our posts crossed.

I agree this should only be 95% at most. But taking my developer hat off I like the fact that the purchaser, via the bank can claw back a further 10% off the seller if the prices drop in the future. I wish we could do that on some of the land we purchased. It is there to give comport and if I was buying a house I would certainly consider it. There is no risk for the bank.

Is it propping up demand? Now there is a question. From where I stand there is, and always will be demand for housing. Increased pop, more single people, people living longer, bla bla - are all true. There will always be demand for housing just as there will be increased demand for food, energy etc. If food becomes terribly expensive, it will not lessen demand for it. May certainly lessen the amount purchased.

Back to housing. - with all I have said above and the fact that people who 'should' have been purchasing 2006, onwards are still there. One could argue that the demand still exists and has increased. These people are not living in the street they are remaining with parents, renting etc. Some may well choose to remain in that way, in one form or another and never become a home owner or at least delay that until the dust settles.

However, in general people still wish to own their own home. what turns this demand into effective demand is the availability of credit. First Time Cash Buyers are in short supply. So you could equally argue that the, at one time, retreat to 35% deposits was removing the availability of credit and was therefore reducing effective demand and deflating the values.

At the moment the supply of credit, whilst still poor, is not as bad as it once was. Therefore the main thing holding back the demand, I mentioned becoming effective demand is not so much the supply of credit but the lack of confidence that the coming cuts has generated.

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Our posts crossed.

I agree this should only be 95% at most. But taking my developer hat off I like the fact that the purchaser, via the bank can claw back a further 10% off the seller if the prices drop in the future. I wish we could do that on some of the land we purchased. It is there to give comport and if I was buying a house I would certainly consider it. There is no risk for the bank.

Is it propping up demand? Now there is a question. From where I stand there is, and always will be demand for housing. Increased pop, more single people, people living longer, bla bla - are all true. There will always be demand for housing just as there will be increased demand for food, energy etc. If food becomes terribly expensive, it will not lessen demand for it. May certainly lessen the amount purchased.

Back to housing. - with all I have said above and the fact that people who 'should' have been purchasing 2006, onwards are still there. One could argue that the demand still exists and has increased. These people are not living in the street they are remaining with parents, renting etc. Some may well choose to remain in that way, in one form or another and never become a home owner or at least delay that until the dust settles.

However, in general people still wish to own their own home. what turns this demand into effective demand is the availability of credit. First Time Cash Buyers are in short supply. So you could equally argue that the, at one time, retreat to 35% deposits was removing the availability of credit and was therefore reducing effective demand and deflating the values.

At the moment the supply of credit, whilst still poor, is not as bad as it once was. Therefore the main thing holding back the demand, I mentioned becoming effective demand is not so much the supply of credit but the lack of confidence that the coming cuts has generated.

A few known unkowns in there BVI :lol:

Couple of points , demand for any asset is unlimited the ability to pay for it or in the case of housing borrow sets the price.

At present the lenders are obviously pricing in further drops by demanding decent deposits.

Agreed that confidence is the main issue and this is why governments will go to almost any lengths to avoid deflation, with even RICS admitting that prices have dropped every month for 3 years I can't see any rush to buy.

On the subject of all inducements to buy eg the momentum mortgage, free coffee makers etc. I can't see why anyone would be swayed by marketing fluff. Bottom line price is the only thing that matters.

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the few that i know on this list are all rumoured to be b*ggered

though they are still trading

I suspect there's more than a grain of truth to that. I just wonder how many are already in breach of their covenants with the banks or not far off. I wouldn't be at all surprised to see the **** hit the fan big time when some of them have to try and restructure their loans. And the banks won't be too keen to call some of the loans in because it will crystallise yet more losses on their books.

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If you had £100k I presume you would not need a mortgage to buy the house in question.

My hypothetical 100k was a mix of hypothetical cash and ability to service a loan. It was a simple model but no less valid.

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I doubt that this scheme is still up and running.

If so - remember that the Developer pays your 5% deposit.

Now think about this for a second - what is the easiest way to give someone 5% off the price of something???

Answer: Increase it by 5%.*

This Momentum Mortgage idea is not too bad - except it's designed not to help the FTBer - it's only for the developer.

Forget the "if prices drop by 10% you'll be protected" - you'll be screwed anyway.

I'm sure that the "free" 5% deposit is included in this 10% - so prices only need to drop 5% and your sunk.

As an experiment - could someone ask a developer how much a house costs - and then go and ask about the Momentum Mortgage and see how much the cost is.

*not exactly 5% - but let's not argue over 95%/100% and 100%/95%.

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I doubt that this scheme is still up and running.

If so - remember that the Developer pays your 5% deposit.

Now think about this for a second - what is the easiest way to give someone 5% off the price of something???

Answer: Increase it by 5%.*

This Momentum Mortgage idea is not too bad - except it's designed not to help the FTBer - it's only for the developer.

Forget the "if prices drop by 10% you'll be protected" - you'll be screwed anyway.

I'm sure that the "free" 5% deposit is included in this 10% - so prices only need to drop 5% and your sunk.

As an experiment - could someone ask a developer how much a house costs - and then go and ask about the Momentum Mortgage and see how much the cost is.

*not exactly 5% - but let's not argue over 95%/100% and 100%/95%.

the 5% is on top of the 10%.

The bank is very insissant on the valuation. Exactly for the reason you have highlighted - ie the developer adds on the deposit to the price of the House.

UB will only do a % of the mortgages, on any site, under the Mom mortgage, therefore it will see exactly what the other houses sell for.

Yes the scheme is still available.

It helps the FTB'er as firstly it saves them the deposit (which I think is a step too far) and secondly, it offers them a certain claw back if the price has fallen in 5 years.

It dosnt really help the developer as he is, nodoubt selling at cost or below cost in the first place and on top of that he is being robbed of a further 15% from his cash flow. Ok its not on all his houses but it will hurt.

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  • 195 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • Even
      • up 2.5%
      • up 5%



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