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AvoidDebt

Telegraph: With house prices falling in many regions, should anyone take out a 95pc mortgage?

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Can I be the first to pount out the error in the HTB pictorial ? The home value is of course £240k, being the total of the mortgage and the deposit. The government loan sits on top of this, bringing the purchase price up to £400k. As Warren Buffett pointed out, price is what you pay, value is what you get. 

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Confidence is key. I normally would opt for a 25% deposit, but with current prices dropping, I'll be waiting for the media mad bre-divorce drama to unfold... next year is going to be carnage... B)

Probably bigger than a Royal Divorce... it's interesting as a 100 years ago when the UK ruled the world, divorcing meant a gun to the head.

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2 hours ago, I'm out said:

Can I be the first to pount out the error in the HTB pictorial ? The home value is of course £240k, being the total of the mortgage and the deposit. The government loan sits on top of this, bringing the purchase price up to £400k. As Warren Buffett pointed out, price is what you pay, value is what you get. 

Doesn't the government take the loss if prices drop by more than 5%. If that's true it could be the most sensible way of buying at the moment.

 

 

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2 hours ago, I'm out said:

Can I be the first to pount out the error in the HTB pictorial ? The home value is of course £240k, being the total of the mortgage and the deposit. The government loan sits on top of this, bringing the purchase price up to £400k. As Warren Buffett pointed out, price is what you pay, value is what you get. 

Very good point. Here's a corrected graphic:

london-htb-example-FINAL-corrected.png.5f56752591a171f5437dfa2e496f2fce.png

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Don't know too much about help to buy.

In one of the places I am looking in there is a lot of new build on help to buy. Maybe I'm wrong but these houses are expensive but affordable, in the respect the bank mortgage is lower and therefore the bank is much more willing to lend.

The ones that seem to be getting it in the neck are the second steppers, who are finding it difficult to get the banks to fund mortgages for buyers for their places, even though they are quite a bit lower in terms of cost, because the bank has to take on nearly all the risk they won't provide the mortgage.

Is anyone else seeing this or is it just an illusion/me not understanding the way it works.

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Depends how long you want to live in it..... long-term, why not.....depends if can afford an extra 1% to 2% mortgage rate increase.....depends if you expect income to increase, is stable and secure......why not.....anything can happen in the next 25 years.;)

 

 

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11 minutes ago, Gigantic Purple Slug said:

Don't know too much about help to buy.

In one of the places I am looking in there is a lot of new build on help to buy. Maybe I'm wrong but these houses are expensive but affordable, in the respect the bank mortgage is lower and therefore the bank is much more willing to lend.

The ones that seem to be getting it in the neck are the second steppers, who are finding it difficult to get the banks to fund mortgages for buyers for their places, even though they are quite a bit lower in terms of cost, because the bank has to take on nearly all the risk they won't provide the mortgage.

Is anyone else seeing this or is it just an illusion/me not understanding the way it works.

+1

Help to Buy Bail Banks is where the sub prime borrowers are being sent by mortgage brokers.

Over a £1m of our taxes handed over to bankers on properties re-sold at a loss, when I asked the HCA last year. Who this year refused "not in the public interest" to give me the figures on the 40% London scheme.

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5 hours ago, AvoidDebt said:

They might want to take a second look at this too. 

london-htb-example-FINAL.png.68dcd466b834968275a6b989b9d7072e.png

Where the flock did you get that graphic from? I nearly blew an artery when I saw 40% government loan 

SO then I went on the guvment website https://www.helptobuy.gov.uk/equity-loan/equity-loans/ and the graphic looks more like 20% government loan

Regards

Mr confused ;-)

 

help-to-buy-equity-loan-example.png

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3 minutes ago, cognitive dissonance said:

Where the flock did you get that graphic from? I nearly blew an artery when I saw 40% government loan 

SO then I went on the guvment website https://www.helptobuy.gov.uk/equity-loan/equity-loans/ and the graphic looks more like 20% government loan

Regards

Mr confused ;-)

 

help-to-buy-equity-loan-example.png

The 40% is for London - look at the bottom of the page you linked.

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3 minutes ago, cognitive dissonance said:

Follow up: Jesus H Christ I've just read that it is 40% for Central London, the poor bloke must be sh!tting himself when it's time for the second coming......

 

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55% London H2B Mortgage on a £600K new build stretched over say 30 years would be a hell of a lot cheaper after all costs than renting an equivalent property in London despite losing your 5% deposit, limited repayments and SDLT/Fees.

It may be unethical but you could buy a flat as the prices come down to effectively rent for 5 years and then sell at a loss and walks away about 45K down after 5 years. (Due to the non-recourse lending nature of the Government's equity loan)

To rent an equivalent property in London would probably cost you 50% more.

Problem is i cant find any London H2B mortgage rates advertised on bank websites, so not sure what theya re like However should be low as in effect the Bank has 45% equity on the supposed housing asset as a MAXIMUM. rates of 1.69% 5 year fixed should be available, no idea if they are.

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More "help" on the way!

Quote

Jeremy Corbyn has told Radio 1 Newsbeat that Labour are working on a "state-backed mortgage scheme" to help young people buy a home.

Speaking exclusively to Newsbeat at a rally in Birmingham the Labour leader said he wants to "encourage home ownership" as well as rented accommodation.

He added that "very high deposits" were a part of the problem.

http://www.bbc.co.uk/newsbeat/article/39987106/labour-working-on-a-state-backed-mortgage-scheme

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41 minutes ago, BlueRat said:

OMFG

I thought extending help to buy until 2027 was financial illiteracy of the worst kind, then they go and do this.

You can tell he is born into money and always been rich as he hasnt got a fckn clue about it.

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2 hours ago, PropertyMania said:

I find this chart astonishing. What's going on here?

The drug dealers can't find anyone to give a free fix too, that isn't already hooked.

 

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4 hours ago, PropertyMania said:

I find this chart astonishing. What's going on here?

Probably a couple of things:

Price obfuscation. Ultra-low headline rates combined with huge hidden fees (think arrangement fees of £1.5-2k, or even 1%)

Preying on apathy - even a month's delay in paying your new arrangement fee, can run up excess interest costs of £500 or more.

A new application means a new credit check - you can poach your competitor's best customers, and hopefully get rid of your highest risk customers.

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10 hours ago, Quicksilver said:

55% London H2B Mortgage on a £600K new build stretched over say 30 years would be a hell of a lot cheaper after all costs than renting an equivalent property in London despite losing your 5% deposit, limited repayments and SDLT/Fees.

It may be unethical but you could buy a flat as the prices come down to effectively rent for 5 years and then sell at a loss and walks away about 45K down after 5 years. (Due to the non-recourse lending nature of the Government's equity loan)

To rent an equivalent property in London would probably cost you 50% more.

Problem is i cant find any London H2B mortgage rates advertised on bank websites, so not sure what theya re like However should be low as in effect the Bank has 45% equity on the supposed housing asset as a MAXIMUM. rates of 1.69% 5 year fixed should be available, no idea if they are.

or.... plan c) dont live in London

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11 hours ago, Lambie said:

The drug dealers can't find anyone to give a free fix too, that isn't already hooked.

 

Hahahahahaha... I wonder what happens to all the rusty credit when the temporaries leave the shores... errmmm..... lets create an illusion of affordability... 

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21 hours ago, PropertyMania said:

I find this chart astonishing. What's going on here?

All of what ChumpusRex said, plus the fact that 2 year fixes are priced off the corresponding swap rate

5921a5d8c8fce_BoECCR2017Q1swaprates.png.f47dc276c1f3d04565d5e1a1ab7eede3.png

Source

IIRC few banks will lend a new mortgage at the SVR (you've got to take a fixed rate product or a tracker) hence it's really just a reversion rate. As it is higher than the market rates for new products it seems to serve two purposes: marketing to new customers and fleecing customers who are stuck on the SVR.

During the boom lenders started to ignore the fleecing role and set SVRs on a marketing basis, which is why you ended up with mortgage contracts resetting to base rate + 0.5% (or whatever), which blew up in the lenders' faces in 2009. Base rates moved from 5%-6% to 0.5% and the banks found they had books of loans where the interest they were getting from the borrowers not cover the interest that they were paying to depositors/bondholders on the money the bank had borrowed to fund the loan.

Today you have lenders being more cautious about where they put that reversion rate (i.e. the marketing role is taking a back seat and the fleecing role is on their minds again).

If you put the SVR too high it crucifies your mortgage prisoners and will probably draw some heat from the ombudsman as the crucified mortgage prisoners start complaining. If you put it way too high then it might influence the decisions of potential borrowers sending them to your competitors, cutting your flow of new lending. If you put it too low then you're cutting interest income (and therefore profits) that are there for the taking.

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