Lenders 'to Reject 50Pc Of Help To Buy Mortgage Applications’

[Sancho Panza]

Telegraph 16/11/13

'The two lenders offering mortgages under the second phase of the scheme – Lloyds Banking Group and Royal Bank of Scotland – assess borrowers based on whether they could afford to pay interest rates of up to 7pc. The cheapest Help to Buy deal, available through RBS subsidiary NatWest, is a two-year deal fixed at 4.99pc with no fees. Raising the rate by more than 2 percentage points to determine if a borrower could afford the repayments would price out many buyers.

Simon Gammon, managing partner at Knight Frank Finance, said the banks are expecting interest rates to rise and want to make sure borrowers would be able to meet higher repayments.

"There have been a decent number of Help to Buy applications to the state-owned banks, which have been told to say it has been a great success, but I will be very interested to see how many of the total applications are approved," he said.

"If you look at the underwriting process, a very small number will be accepted. The lenders are assessing potential borrowers based on 6pc or 7pc affordability. My gut feeling is at least half of applicants won't be approved."

Last week, David Cameron, the Prime Minister, announced that 2,384 people had been accepted for a mortgage under the second phase. Of these applications, just 10 had completed. The figures did not show how many people had applied for Help to Buy products and had been rejected.

On average, households asked to borrow around £155,000 for houses worth about £163,000, which is below the UK average price of £247,000. Applicants had an annual household income of around £45,000.

More than three quarters of the applicants were first-time buyers and the same proportion were looking to buy property outside London and the South East.

Andrew Montlake, of broker Coreco, said a number of the firm's clients had been rejected for Help to Buy mortgages.

One, who had an annual salary of £100,000 and wanted to borrow £300,000, was rejected even though he didn't have any credit issues. He was, however, accepted for an 85pc mortgage for £500,000. Mr Montlake said this showed the lenders are imposing much tougher credit scoring for 95pc loans, as well as a higher affordability threshold.

Lloyds and RBS were the only lenders that signed up to offer the deal early. HSBC, Barclays, Santander, Virgin Money and Aldermore also signed up to the scheme but are not expected to launch products until the new year.'

[long time lurking]

""More than three quarters of the applicants were first-time buyers"""

The other 25% must be negative/limited equity buyers ?

[slacker]

Lenders to accept 100% of applications from relatives of amateur BTL tycoons who've been coached on how to answer.

[Eddie_George]

Lenders to accept 100% of applications from relatives of amateur BTL tycoons who've been coached on how to answer.

Haha! Just like how the Eton Group get into Oxbridge.

[Executive Sadman]

On average, households asked to borrow around £155,000 for houses worth about £163,000, which is below the UK average price of £247,000. Applicants had an annual household income of around £45,000.

The land registry would tend to disagree.

[winkie]

Lenders to accept 100% of applications from relatives of amateur BTL tycoons who've been coached on how to answer.

Very good......why use your own money when there are systems in place to allow you to use others money and let others take on a chunk of the risks.

[interestrateripoff]

Irony lost on them that if they cant afford 7% its because the price of the house is too high? And this is a scheme to help those priced out of the market into it.

[The Masked Tulip]

EA office windows by me full of posters advertising 95% mortgages and H2B.

[slacker]

EA office windows by me full of posters advertising 95% mortgages and H2B.

One of local EAs has taken all the pictures down in windows - it's more like a boutique jewellers now - where nothing can be seen and a personal consultant will go through the available options.

[“Nasty Piece of work”]

Genuine question: In the past I understand the historical IR to be 4 - 5%, how often has the mortgage rate exceeded 7%?

[thecrashingisles]

Genuine question: In the past I understand the historical IR to be 4 - 5%, how often has the mortgage rate exceeded 7%?

Base rates since 1960 (dates are all first of the month, not when the changes were made).

1-Jan-1960 5 UP

1-Jun-1960 6 UP

1-Oct-1960 5.5 DOWN

1-Dec-1960 5 DOWN

1-Jul-1961 7 UP

1-Oct-1961 6.5 DOWN

1-Nov-1961 6 DOWN

1-Mar-1962 5 DOWN

1-Apr-1962 4.5 DOWN

1-Jan-1963 4 DOWN

1-Feb-1964 5 UP

1-Nov-1964 7 UP

1-Jun-1965 6 DOWN

1-Jul-1966 7 UP

1-Jan-1967 6.5 DOWN

1-Mar-1967 6 DOWN

1-May-1967 5.5 DOWN

1-Oct-1967 6 UP

1-Nov-1967 8 UP

1-Mar-1968 7.5 DOWN

1-Sep-1968 7 DOWN

1-Feb-1969 8 UP

1-Mar-1970 7.5 DOWN

1-Apr-1970 7 DOWN

1-Apr-1971 6 DOWN

1-Sep-1971 5 DOWN

1-Jun-1972 6 UP

1-Oct-1972 7.5 UP

1-Dec-1972 9 UP

1-Jan-1973 8.75 DOWN

1-Mar-1973 8.5 DOWN

1-Apr-1973 8.25 DOWN

1-May-1973 7.75 DOWN

1-Jun-1973 7.5 DOWN

1-Jul-1973 11.5 UP

1-Oct-1973 11.25 DOWN

1-Nov-1973 13 UP

1-Dec-1973 13 SAME

1-Jan-1974 12.75 DOWN

1-Feb-1974 12.5 DOWN

1-Apr-1974 12 DOWN

1-May-1974 11.75 DOWN

1-Sep-1974 11.5 DOWN

1-Jan-1975 11 DOWN

1-Feb-1975 10.5 DOWN

1-Mar-1975 10 DOWN

1-Apr-1975 9.75 DOWN

1-May-1975 10 UP

1-Jul-1975 11 UP

1-Oct-1975 12 UP

1-Nov-1975 11.75 DOWN

1-Dec-1975 11.25 DOWN

1-Jan-1976 10.5 DOWN

1-Feb-1976 9.5 DOWN

1-Mar-1976 9 DOWN

1-Apr-1976 10.5 UP

1-May-1976 11.5 UP

1-Sep-1976 13 UP

1-Oct-1976 15 UP

1-Nov-1976 14.75 DOWN

1-Dec-1976 14.25 DOWN

1-Jan-1977 12.25 DOWN

1-Feb-1977 12 DOWN

1-Mar-1977 9.5 DOWN

1-Apr-1977 8.75 DOWN

1-May-1977 8 DOWN

1-Aug-1977 7 DOWN

1-Sep-1977 6 DOWN

1-Oct-1977 5 DOWN

1-Nov-1977 7 UP

1-Jan-1978 6.5 DOWN

1-Apr-1978 7.5 UP

1-May-1978 9 UP

1-Jun-1978 10 UP

1-Nov-1978 12.5 UP

1-Feb-1979 14 UP

1-Mar-1979 13 DOWN

1-Apr-1979 12 DOWN

1-Jun-1979 14 UP

1-Nov-1979 17 UP

1-Jul-1980 16 DOWN

1-Nov-1980 14 DOWN

1-Mar-1981 12 DOWN

1-Aug-1981 12.69 UP

1-Sep-1981 14 UP

1-Oct-1981 15.13 UP

1-Nov-1981 14.56 DOWN

1-Dec-1981 14.38 DOWN

1-Jan-1982 13.88 DOWN

1-Feb-1982 13.63 DOWN

1-Mar-1982 13.25 DOWN

1-Apr-1982 13.13 DOWN

1-Jun-1982 12.63 DOWN

1-Jul-1982 11.63 DOWN

1-Aug-1982 10.63 DOWN

1-Sep-1982 10.13 DOWN

1-Oct-1982 9.63 DOWN

1-Nov-1982 10 UP

1-Jan-1983 11 UP

1-Mar-1983 10.56 DOWN

1-Apr-1983 10.06 DOWN

1-Jun-1983 9.56 DOWN

1-Oct-1983 9.06 DOWN

1-Mar-1984 8.56 DOWN

1-May-1984 9.06 UP

1-Jun-1984 8.88 DOWN

1-Jul-1984 12 UP

1-Aug-1984 10.5 DOWN

1-Nov-1984 9.5 DOWN

1-Jan-1985 13.88 UP

1-Mar-1985 12.88 DOWN

1-Apr-1985 12.38 DOWN

1-Jul-1985 11.38 DOWN

1-Jan-1986 12.38 UP

1-Mar-1986 11.38 DOWN

1-Apr-1986 10.38 DOWN

1-May-1986 9.79 DOWN

1-Oct-1986 10.88 UP

1-Mar-1987 9.88 DOWN

1-Apr-1987 9.38 DOWN

1-May-1987 8.88 DOWN

1-Aug-1987 9.88 UP

1-Oct-1987 9.38 DOWN

1-Nov-1987 8.88 DOWN

1-Dec-1987 8.38 DOWN

1-Jan-1988 8.38 SAME

1-Feb-1988 8.88 UP

1-Mar-1988 8.38 DOWN

1-Apr-1988 7.88 DOWN

1-May-1988 7.38 DOWN

1-Jun-1988 8.88 UP

1-Jul-1988 10.38 UP

1-Aug-1988 11.88 UP

1-Nov-1988 12.88 UP

1-May-1989 13.75 UP

1-Aug-1989 13.84 UP

1-Sep-1989 13.75 DOWN

1-Oct-1989 14.79 UP

1-Oct-1990 13.88 DOWN

1-Feb-1991 12.88 DOWN

1-Mar-1991 12.38 DOWN

1-Apr-1991 11.88 DOWN

1-May-1991 11.38 DOWN

1-Jul-1991 10.88 DOWN

1-Sep-1991 10.38 DOWN

1-May-1992 9.88 DOWN

1-Sep-1992 8.88 DOWN

1-Oct-1992 7.88 DOWN

1-Nov-1992 6.88 DOWN

1-Jan-1993 5.88 DOWN

1-Nov-1993 5.38 DOWN

1-Feb-1994 5.13 DOWN

1-Sep-1994 5.63 UP

1-Dec-1994 6.13 UP

1-Feb-1995 6.63 UP

1-Dec-1995 6.38 DOWN

1-Jan-1996 6.13 DOWN

1-Mar-1996 5.94 DOWN

1-Jun-1996 5.69 DOWN

1-Oct-1996 5.94 UP

1-May-1997 6.25 UP

1-Jun-1997 6.5 UP

1-Jul-1997 6.75 UP

1-Aug-1997 7 UP

1-Nov-1997 7.25 UP

1-Jun-1998 7.5 UP

1-Oct-1998 7.25 DOWN

1-Nov-1998 6.75 DOWN

1-Dec-1998 6.25 DOWN

1-Jan-1999 6 DOWN

1-Feb-1999 5.5 DOWN

1-Mar-1999 5.5 SAME

1-Apr-1999 5.25 DOWN

1-May-1999 5.25 SAME

1-Jun-1999 5 DOWN

1-Jul-1999 5 SAME

1-Aug-1999 5 SAME

1-Sep-1999 5.25 UP

1-Oct-1999 5.25 SAME

1-Nov-1999 5.5 UP

1-Jan-2000 5.75 UP

1-Feb-2000 6 UP

1-Feb-2001 5.75 DOWN

1-Apr-2001 5.5 DOWN

1-May-2001 5.25 DOWN

1-Aug-2001 5 DOWN

1-Sep-2001 4.75 DOWN

1-Oct-2001 4.5 DOWN

1-Nov-2001 4 DOWN

1-Feb-2003 3.75 DOWN

1-Jul-2003 3.5 DOWN

1-Nov-2003 3.75 UP

1-Feb-2004 4 UP

1-May-2004 4.25 UP

1-Jun-2004 4.5 UP

1-Aug-2004 4.75 UP

1-Aug-2005 4.5 DOWN

1-Aug-2006 4.75 UP

1-Nov-2006 5 UP

1-Jan-2007 5.25 UP

1-May-2007 5.5 UP

1-Jul-2007 5.75 UP

1-Dec-2007 5.5 DOWN

1-Feb-2008 5.25 DOWN

1-Apr-2008 5 DOWN

1-Oct-2008 4.5 DOWN

1-Nov-2008 3 DOWN

1-Dec-2008 2 DOWN

1-Jan-2009 1.5 DOWN

1-Feb-2009 1 DOWN

5-Mar-2009 0.5 DOWN

Edited November 18, 2013 by thecrashingisles

[“Nasty Piece of work”]

Gosh - a meaningless "stress" test again, next we will have Bankers clueless and buying class A drugs.

[gimble]

One, who had an annual salary of £100,000 and wanted to borrow £300,000, was rejected even though he didn't have any credit issues. He was, however, accepted for an 85pc mortgage for £500,000. Mr Montlake said this showed the lenders are imposing much tougher credit scoring for 95pc loans, as well as a higher affordability threshold.

That makes absolutely no sense! He wanted to borrow 300K @95% LTV on HTB and was turned down.. so instead he's borrowing 500K at 85% LTV - meaning the home is 588K. Plus stamp duty he needs £111K to do this! - why the hell was he looking at HTB in the first place?! I hate this sort of journalism, they're quoting these anecdotals without even checking that they make sense or filling in the holes to make sure they do make sense.

It's quite worrying to me that someone on 100K is borrowing 500K. His monthly payments at 5% will take up well over half his net income.

Edited November 18, 2013 by gimble

[TheCountOfNowhere]

That makes absolutely no sense! He wanted to borrow 300K @95% LTV on HTB and was turned down.. so instead he's borrowing 500K at 85% LTV - meaning the home is 588K. Plus stamp duty he needs £111K to do this! - why the hell was he looking at HTB in the first place?! I hate this sort of journalism, they're quoting these anecdotals without even checking that they make sense or filling in the holes to make sure they do make sense.

It's quite worrying to me that someone on 100K is borrowing 500K. His monthly payments at 5% will take up well over half his net income.

You must be old school no one worries about mortgage repayments these days, the government will just cover it.

The numbers being quoted just to buy a shelter are quite preposterous.

One day people will look back at this and think....no wonder they hung them blokes from lamp posts.

Edited November 18, 2013 by TheCountOfNowhere

[NorthamptonBear]

You must be old school no one worries about mortgage repayments these days, the government will just cover it.

The numbers being quoted just to buy a shelter are quite preposterous.

One day people will look back at this and think....no wonder they hung them blokes from lamp posts.

Obviously legally as the law will change to ensure that this is totally legal. It is of course objectively the correct law/punishment to enact.

[“Nasty Piece of work”]

I was presuming it was a mortgage rate, and the base rate relationship depends on the huge margin the bank wishes to make. I am unsure whether this makes me right, or wrong. The point I take away is that stress it is not, other than in a false IR being applied.