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Beaker

Finding the 95%LTV sweet spot

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I've only just managed to scrape together enough for a 5% deposit on the kind of house I'm after (plus enough for stamp duty and all the other crap that goes with it)

Now, as thing fall and interest rates rise, we're going to see lending tighten.  So, I need to buy when the 95LTV mortgages start to get thin on the ground, but not so late that I can no longer borrow. 

Any idea how I can monitor this?  I remember last time around people on here were able to watch the number of 100%, then 95% products dropping, but no idea how.

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I'm guessing this is a joke post (my apologies if that's not the case).

20:1 leverage on houses sounds absolutely crazy to me, and just the sort of thing that inflated the bubble in the first place. As the Count alludes to, there is a significant chance that if you sit on it, your deposit will turn into an 90% LTV opportunity without you doing anything ... but that's still a crazy leverage.

Keep saving, and hope that the value of labour starts to rebalance against capital soon.

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15 minutes ago, RomfordDon said:

I think the real question is how many 95% LTV products are there in the market? Is this number more or less than a year ago?

I think theres some but they are expensive.

Looking at prices, banks/regulator want at least 20% down. Once you dop to 40%+ then mortgages get pretty cheap.

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56 minutes ago, TheCountOfNowhere said:

I wonder why that is.

 

....could it be that they are between 20% to 40% over priced depending....borrowers lose their money before lenders lose theirs......5% deposit is high risk to lenders, therefore there is a price to pay for that?;)

56 minutes ago, TheCountOfNowhere said:

:lol::lol::lol::lol::lol::lol::lol::lol::lol::lol::lol::lol::lol::lol::lol::lol::lol::lol::lol::lol::lol::lol::lol::lol::lol::lol::lol::lol:

 

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No, it's not a joke post!! (I've been away a couple of days, hence no reply)

 

I don't consider the mortgages at 95% to be too bad. I'll be paying 3.8% fixed for 5 yrs, hopefully to see through any immediats brexit crap (if not all the longterm fallout) and I'll overpay to max, ensuring when I come out of the other side of the fixed, I have some equity - at least enough to be able to move onto a decent rate and not be stuck on svr. 

I'm also in my early 40's -  continuing to save to increase my deposit (at about 500/month) isn't really an option as to get up to 10% deposit will take me another 30 months, so I won't get a 25yr mortgage.  This is why I really need the 95%, but also to hold on as long as possible through this downturn to get the  cheapest price before the 95% products get cut.

 

 

 

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On 9/18/2017 at 10:01 PM, Beaker said:

I've only just managed to scrape together enough for a 5% deposit on the kind of house I'm after (plus enough for stamp duty and all the other crap that goes with it)

Now, as thing fall and interest rates rise, we're going to see lending tighten.  So, I need to buy when the 95LTV mortgages start to get thin on the ground, but not so late that I can no longer borrow. 

Any idea how I can monitor this?  I remember last time around people on here were able to watch the number of 100%, then 95% products dropping, but no idea how.

you are willing to buy a house with only 5%  i wish i was that ignorant in a blissful state .  where has my bottle of blue smarties gone. 

 

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...but I'll only buy a house which has clearly dropped 25% from peak, and I'll never go greater than 4x earning. At some point you've got to take the best you can and jump. At least I'm going in with my eyes open (I've been a member here since 2005!)

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On 9/19/2017 at 8:03 AM, TheCountOfNowhere said:

I wonder why that is.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

:lol::lol::lol::lol::lol::lol::lol::lol::lol::lol::lol::lol::lol::lol::lol::lol::lol::lol::lol::lol::lol::lol::lol::lol::lol::lol::lol::lol:

Because they want to attract those buyers with fat equity chunks. And of course as you allude, they are less at risk in a crash.

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On 9/18/2017 at 10:01 PM, Beaker said:

I've only just managed to scrape together enough for a 5% deposit on the kind of house I'm after (plus enough for stamp duty and all the other crap that goes with it)

Now, as thing fall and interest rates rise, we're going to see lending tighten.  So, I need to buy when the 95LTV mortgages start to get thin on the ground, but not so late that I can no longer borrow. 

Any idea how I can monitor this?  I remember last time around people on here were able to watch the number of 100%, then 95% products dropping, but no idea how.

So lets say that your 5% is 25k on a nice 500k 3 bed semi.

In ten years your three bed semi will be worth 1million (minimum) and you will have saved 18k PA on rent, thats 180k.

Your mortgage will be pennies and you have a chance of inflating your debt away.

What could possibly go wrong?

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On Wednesday, September 20, 2017 at 11:21 PM, GreenDevil said:

So lets say that your 5% is 25k on a nice 500k 3 bed semi.

In ten years your three bed semi will be worth 1million (minimum) and you will have saved 18k PA on rent, thats 180k.

Your mortgage will be pennies and you have a chance of inflating your debt away.

What could possibly go wrong?

I can't work out if you're taking the piss or not.

 

I just need to buy a house for my family, not an investment and have no interest in profiting.

Edited by Beaker

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5% minimum deposit isn't great.

there is a number of factors to think about, its a complex decision. Make a decision matrix, you know whats important to you. and your educated guess is probably pretty good given your time on HPC.

options:

1. keep saving (wait)
2. buy 
3. dont buy
4. move away

heres a quick stab of things to think about:

- job security (tied to a house in location A when your new job is location B )
- inflation (will your debts erode to nothing? or grow to crush you) 
- house size (stuck with it until your dead, is it big enough, including housing your offspring into their early 30's)
- internet rate rises, turning a seemingly ok interest into a monster, do you think this will or wont happen?
- security (or at least a sense of it) 
- politics, is the current situation going to carry on forever?
- brexit, wait and see wont do much harm for an extra year or two
- parking, as most houses now have 2 generations in, can be 4 cars for each house, on a terraced road thats a nightmare (and getting more common)
- not being able to just walk out of your job with no ties
- job progression and pay rises, these normally fit a curve for a 'standard career' you can have a reasonable guess at future pay rises
- health does buying mean a long commute that will destroy your health or a shorter one?
- schools, is the local one stabs-ville or ok?
- area, is it a BTL hot-spot with lots of transient 'orrible dirty renters? who have no stake in the local area
- cost of ownership over renting
- things at play in the market, BTL being killed off, starting mid way through next year
- age is time running out for mortgage terms?

theres loads of factors to consider and score. and loads of reading so you have the best grasp of the situation.
i have been through the above, and for me waiting an extra 2 or 3 years makes sense as i can out-save even the worst HPI locally, and have a degree of protection against raging inflation. 
i want to wait out brexit a bit longer, and see what happens with the BTL crackdowns. so my choice is wait longer (currently 32% deposit on good sized home). I will probably buy in 2-3 years with a 45% deposit. 

with a 5% deposit, theres a lot of downside with only a little upside given certain conditions. But its your choice. Could bang it all in a pension, i think theres a cut-off line at around 45 where buying a house should not really be a concern but pension is. 

if your pension can cover rent and living costs your basically in the same situation as a home owner. without the commitment. 
 

Edited by jiltedjen

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I can't add much to JJ's post. Other than to say 5% deposits should be used solely by 20yr olds for dirt cheap starter flats. If you're older or stretching yourself income wise .... You're effing insane. IMHO.

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If you're happy with 3.8% fixed over 5 years for the type of house you are after and have no interest in profit, why are you trying to time the market?

I have no idea how you would monitor a tightening mortgage market apart from checking comparison sites regularly. But IMO the first thing that will happen in a tightening market is 5% mortgages will be done away with overnight.  

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I understand exactly where the OP is comming from. Went through the very same excercise a few years ago, just trying to do the best for the family before the clock runs out. Nothing wrong with that. I was early 40s (west midlands/south west) borrowing 3.5x salary, aiming for the best 75% LTV deals, thinking they could start to get more expensive or disappear but no, more props rolled out and IRs fell further. Who knew... the expected crash/correction never came, Gidiot Osbrown / Carney blew a bubble on a bubble with HTB and FLS, genius.

Taking on a 25 year mortgage, at mid life starting at 95% LTV 5yr fix without much headroom seems a bit close to the wind at this moment in time. Fine if you have your eye's wide open to the potential risks if prices fall and IRs ever rise (though we've been saying that for more than 8 years). Can't really blame anyone after many years of insecure renting along with pressure from the wife n kids. This system has screwed up so many of us into making decisions we wouldn't normally make, so be careful and good luck.

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7 hours ago, Beaker said:

I can't work out if you're taking the piss or not.

 

I just need to buy a house for my family, not an investment and have no interest in profiting.

Is emigration an option? 

I've got kids, nearly 40, and after scouring this site (and a fair few others), I'm now seriously considering it. I worked abroad for a few years back in the late 90s/early noughties. Mistake I made was coming back here!

I've set a timeline for a year to see how things work out. If I'm still in this same position by this time next year, we've decided to cut loose and emigrate. Not my ideal situation, but needs must.

 

Edited by Princekie

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On 9/20/2017 at 10:32 PM, Beaker said:

...but I'll only buy a house which has clearly dropped 25% from peak, and I'll never go greater than 4x earning. At some point you've got to take the best you can and jump. At least I'm going in with my eyes open (I've been a member here since 2005!)

What you shouldn't do is work out what position you'd be in had you bought in 2005

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On 20/09/2017 at 9:30 PM, Beaker said:

No, it's not a joke post!!

Sorry, Beaker, I wasn't intending to be a jerk.

At the risk of making yet more unwarranted assumptions, it sounds like you have somewhat unusual circumstances, which are catching people here off guard. You clearly have a good income, since you can contemplate buying at a sensible salary multiple (even in this market), yet you don't have big savings. Three possibilities spring to mind, in increasing order of likelihood:

1. You're a spendaholic. Very unlikely, given you're here. Obvious first step in this case is to stop being a spendaholic, then things will become clearer.

2. Through life circumstances, you have been stripped of your savings (or you have recently found a more lucrative career). In this case, you have the option to build up more substantial savings fairly fast, and that could be a good move. On the other hand, if you buy now, and can afford it, then you can hope to pay down the mortgage quickly so you don't get trapped on high rates at the end of the fix. Personally, I'd go for the first choice, but then I always make bad financial decisions.

3. You're being drained by parasites. Hard to avoid in this rental market; and here I can see it makes sense to buy, provided you can then save enough to pay the mortgage down quickly (so as not to get trapped). As for timing, locky82 said:

10 hours ago, locky82 said:

5% mortgages will be done away with overnight

Spyguy has said in the past that central bank interventions have removed interest rates as a signal of financial stress, and so we may now be in the situation that lending is simply binary: you can either borrow at good rates ... or not at all. The experience even from 2008 was that 95% mortgages simply evaporated, and didn't come back for a year or two. That would speak to taking up a good deal now, rather than waiting, if you find one, and you're happy your employment is secure. Personally, if I were to take that decision, I'd still expect to be in for a nail-biting ride over the next few years.

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Thanks JiltedJen and Toast. There's a few things at play here. 

 

First, my local market.. north Herts. A year ago there was nothing I could buy. 2 beds  £350+, three beds £450+. In my good part of town, I watched he'd 2 bed victorian terraces go from £240k to £500k. Everyone without exception moving in from London.

 

Then, London stopped.  About 10 months ago, a 3 bed semi appears for £399, I remember thinking ' hang on something's going on here'. The street with the £500k terrace, now has 2 beds for £400k not moving. Last week I put an asking price offer on a nice three bed bed with a mahoosive garden for £300k guide price (didn't get it). 

 

Basically, the crash is here. Certainly in prime commuter belt. The market has a lot of obvious ex rentals coming on. I know of other renters being given notice because the LL is selling up too. Winter is going to be a good place for the chain free buyer.

 

As for I'm a pretty good saver, but I got married at 35, then had baby, then had to pay  £47k to the nursery(!!), now I can save for the deposit, but now I'm 41, wife 42. I've got a really good old fashioned rental, old bloke who owns the place, I look after it, and no rent increase for 10yrs. Rent is less than  half other places on street. I save about £500, maybe 700 on a good month, but even then that rate by the time I'd get to 10%, my mortgage terms would be reducing.

My job is very very seriously secure.Wife's is ok. My conditions are:

Gotta be  proper house.

Fix has to be for 5 years to insulted from brexit shenanigans.

Will overpay at max.

I've just got to get on with it now, but I certainly remember last time, it took a good couple of months for the 100%, then 95% mortgages to go. I remember there being  a count down on here, or in the breakaway faction I was a member of ☺☺

 

Thanks for the replies though,  this place always gives a good balance the blind ignorance of other forums.

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15 minutes ago, Beaker said:

Thanks JiltedJen and Toast. There's a few things at play here. 

 

First, my local market.. north Herts. A year ago there was nothing I could buy. 2 beds  £350+, three beds £450+. In my good part of town, I watched he'd 2 bed victorian terraces go from £240k to £500k. Everyone without exception moving in from London.

 

Then, London stopped.  About 10 months ago, a 3 bed semi appears for £399, I remember thinking ' hang on something's going on here'. The street with the £500k terrace, now has 2 beds for £400k not moving. Last week I put an asking price offer on a nice three bed bed with a mahoosive garden for £300k guide price (didn't get it). 

 

Basically, the crash is here. Certainly in prime commuter belt. The market has a lot of obvious ex rentals coming on. I know of other renters being given notice because the LL is selling up too. Winter is going to be a good place for the chain free buyer.

 

As for I'm a pretty good saver, but I got married at 35, then had baby, then had to pay  £47k to the nursery(!!), now I can save for the deposit, but now I'm 41, wife 42. I've got a really good old fashioned rental, old bloke who owns the place, I look after it, and no rent increase for 10yrs. Rent is less than  half other places on street. I save about £500, maybe 700 on a good month, but even then that rate by the time I'd get to 10%, my mortgage terms would be reducing.

My job is very very seriously secure.Wife's is ok. My conditions are:

Gotta be  proper house.

Fix has to be for 5 years to insulted from brexit shenanigans.

Will overpay at max.

I've just got to get on with it now, but I certainly remember last time, it took a good couple of months for the 100%, then 95% mortgages to go. I remember there being  a count down on here, or in the breakaway faction I was a member of ☺☺

 

Thanks for the replies though,  this place always gives a good balance the blind ignorance of other forums.

I'm just 40, with 2 kids (4 and 6). My price limit is £300k. I can't help but think give it a year, keep saving, that 5% deposit could become a 10% one. I'm south of London... You're north of London... The ripples are spreading.

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I’m South but looking West of London, pretty much same happening there too. Same price ceiling of 300k too.

Will be an interesting year ahead, daft to jump in right now with so many downside factors. I don’t think further possible props are getting us out of the bust, just a question of how bad it’ll be.

Edited by Barnsey

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Hi Beaker we were in a not dissimilar situation to yourself, nursery fees were an absolute killer and made buying anything completely out the question due to the circa £900 a month fees until last September when they ended.

We weren't going to buy but this time last year our LL had passed away, he was living abroad with a new wife and had children and ex wife over here so we could see things were going to get messy.

We asked the LA for first refusal on the house if they decided to sell it (which they did) though what they asked for was out of our price range. We offered our max budget which was circa £40k less than what they originally asked for it. We'd started looking at houses in the area and it was seriously depressing looking at semi detached ex council houses for nearly £400k.

Long story short they surprisingly accepted and we've ended up with a detached house in rural village in Oxfordshire at 90% LTV.

It wasn't the plan but we were fed up renting and being moved on at a LL whim, the clock was ticking for us too and we've got a family home (not an investment) that we can do things to and make our own.

You've got to do what's right for you, best of luck ?

BF

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  • 295 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% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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