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Minimum deposit of 10% to get 7.3% might bring tears to the eyes too.

yeah wow that extra 20K for a ten basis point discount. wait till people start 'shopping' oh dear i can see the blood on the streets now...

I wonder if they offer this rate on a 9 times salary multiplier?

Edited by jonpo

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Things are getting really exciting at the moment. Credit crunch looming (or here already) manifest through higher mortgage rates.

"Q3 2007 - this is when the real fun and games will begin" ;)

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Minimum deposit of 10% to get 7.3% might bring tears to the eyes too.

Actually these are just example rates averaged over an entire mortgage lifetime. Their highest rate is their standard variable rate at 7.24%. Their best seems to be a 5.68% tracker. Admittedly this is a touch more epxensive than it may have been a year ago but no panic yet.

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Actually these are just example rates averaged over an entire mortgage lifetime. Their highest rate is their standard variable rate at 7.24%. Their best seems to be a 5.68% tracker. Admittedly this is a touch more epxensive than it may have been a year ago but no panic yet.

the APR (7.2%) on that tracker looks similar to the others with 5% deposit.

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BTL's pay up to another 1% on top. They are paying >8% to the bank and getting <3% from the tenant.

BTL certainly works for the lender but not the landlord.

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BTL's pay up to another 1% on top. They are paying >8% to the bank and getting <3% from the tenant.

BTL certainly works for the lender but not the landlord.

I read yesterday that some just get the residential mortgage anyway!

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Actually these are just example rates averaged over an entire mortgage lifetime. Their highest rate is their standard variable rate at 7.24%. Their best seems to be a 5.68% tracker. Admittedly this is a touch more epxensive than it may have been a year ago but no panic yet.

The column you should concentrate on is the APR column. The APR is required by law to be displayed next to any other information as it gives the best idea of the all in costs of purchasing that product. The 5.68% of their tracker only lasts for two years and as the name suggests, there is a risk that the rate can go much higher if the base rate goes higher in these two years. So it is not something for nothing

Best,

L

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I read yesterday that some just get the residential mortgage anyway!

I'm sure this is true but I would argue that this reflects a miscalculation of risk by the lenders. In a bull market, both owner occupiers and BTLs are a good risks as they have compelling incentives to keep up with mortgage payments.

In a bear market an owner occupier has an incentive to keep up the mortagage payments even when the house value is falling. The BTL by contrast has no incentive to keep up with payments. If the debt gets too large, the BTL has every incentive to walk away from his liabilities. This chapter of the risk equation has not yet played itself out yet but I suspect it is about to. In 5 years time, we could find BTLs paying a big premium for borrowed money.

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In 5 years time, we could find BTLs paying a big premium for borrowed money.

There might be no BTL mortgages at all in 5 years. Back to the old days where you would only have a BTL if there was the cash to outright buy the flat.

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There might be no BTL mortgages at all in 5 years. Back to the old days where you would only have a BTL if there was the cash to outright buy the flat.

It has always surprised me that people can borrow like bandits on property but not stocks and shares.

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It has always surprised me that people can borrow like bandits on property but not stocks and shares.

not true many retail FX dealers will lend you 200:1 leverage and +-200 basis on yeild differentials

stocks again can be traded on a 10% margin deposit basis and indexes on <1%!. not that its prudent to do so......

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not true many retail FX dealers will lend you 200:1 leverage and +-200 basis on yeild differentials

stocks again can be traded on a 10% margin deposit basis and indexes on <1%!. not that its prudent to do so......

Too true , was looking at an FX account for my club recently , decided to stick to shares in the end as at least we have some idea of what we're doing. FX just looked too risky for us.

D :ph34r:

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Actually these are just example rates averaged over an entire mortgage lifetime. Their highest rate is their standard variable rate at 7.24%. Their best seems to be a 5.68% tracker. Admittedly this is a touch more epxensive than it may have been a year ago but no panic yet.

APR is actually not always the best way to compare products if you do not plan to keep them for the full term.

For example, I've got one of the Nationwide tracker mortgages. Mine is at 6.78%. To calculate my APR they work it on two years discount plus the remaining 23 at the base rate. So, the APR ends up being pretty close to the base rate. However, few people run their mortgages at the base rate unless they need real flexibility to come and go as they please. Most would renew with a tie in.

Where this gets interesting is when you have loans with fees attached. These are upfront and the APR looks identical whether you have the fee version or the fee free version. Does it matter which one you choose?

The answer is yes. If you assume your deal will run for only the discounted period, you have 24 months of payments to consider. After this the rate is identical.

On a £100,000 loan, the monthly payments during the discount period at 5.68% would be £473.33. To this add one twenty fourth of the fee, i.e 499 divided by 24. The monthly equivalent of interst and fee comes to £494.

The same loan, fee free gives a monthly payment of £507, £13 more than the fee based one.

In this case the fee based one is cheaper over the two year discounted period

The opposite is true if you had a much smaller loan of £40,000.

In this case the fee based monthly equivalent comes to £210 which is £7 more than the non-fee based product.

For info, the breakeven point on this product is a loan capital of just over £62K.

Now, I'll admit that I've not factored in the interest I could earn on the £499 over the two years in the non-fee example. It might make a difference in you're in the region of the crossover point but if you're at the upper or lower values given in this example, it wouldn't change the outcome.

Conclusion: APR is helpful but is not the golden bullet that allows you to cross compare two loans unless it has been calculated taking the capital and the term into account.

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Guest wrongmove
It has always surprised me that people can borrow like bandits on property but not stocks and shares.

Google CFD

Also, those APR rates must assume that you just sit on the SVR for the remaining 20-23 years of your mortgage. You don't have to do that.

Edited by wrongmove

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not true many retail FX dealers will lend you 200:1 leverage and +-200 basis on yeild differentials

stocks again can be traded on a 10% margin deposit basis and indexes on <1%!. not that its prudent to do so......

Are you saying I could borrow £200K on a 2 year fixed rate loan (at say 7%) and put the money into an investment trust?

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Are you saying I could borrow £200K on a 2 year fixed rate loan (at say 7%) and put the money into an investment trust?

You could definitely get an "any purpose" unsecured loan and invest the money in whatever you like, although I don't know what the prevailing rate for that sort of lending is.

I think what he was actually saying, veiled in stockbroker-speak, is that if you hold a bunch of shares (or other securities) with a retail investment brokerage, they will be happy to lend you money secured against them to make further investments. It's called "trading on margin".

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Guest wrongmove
You could definitely get an "any purpose" unsecured loan and invest the money in whatever you like, although I don't know what the prevailing rate for that sort of lending is.

I think the maximum unsecured loan for any purpose is £25k in UK. Is it possible to get more, unsecured?

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I think the maximum unsecured loan for any purpose is £25k in UK. Is it possible to get more, unsecured?

I don't know... I believe a credible business would have no difficulty (modulo upcoming credit squeeze) in borrowing a lot more than £25k unsecured; not sure about individuals though.

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Are you saying I could borrow £200K on a 2 year fixed rate loan (at say 7%) and put the money into an investment trust?

almost.

lets say you have 10K in depositmoney/risk margin collateral. you open up a CFD account/spreadbetting account and deposit the money.

you think that oil prices are going to go to the moon in the next couple of months so you decide to buy a ton of BP shares.

you bring up the BP page and the dealer quotes you 558-564 on Mar08 BP shares.

you buy the BP March08 cfd at 564 at 177 pounds per point this is slightly higer than the present cost of the shares 555 offered but the price of the shares is discounted by a financing rate of say 6% and also discounts the expected dividend which will mostly offset the financing.

the dealer either borrows the money and purchases the cash shares or enters into a derivative transaction in order to hedge his exposure to the 100 grand in BP you just bought.

NOTE: at no point do you really OWN the shares the shares are collateral against the borrowing.

a few months pass.

Scenario 1 : probability 2% : you were dead right Oil went to the moon the BP shareprice went up 436 points to 1000. you close out your cfd/spreadbet and pocket a profit of 77 172 pounds. you withdraw that and your origional 10 000. you withdraw. both from your account and go get yourself a new Aston Martin.

Scenario 2: probability 98%: the price moves against you. you are asked to put up more than your origional 10 grand. you can't your broke the dealer liquidates your position. and pays back the money you owe with the collateral (shares).

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BTL's pay up to another 1% on top. They are paying >8% to the bank and getting <3% from the tenant.

BTL certainly works for the lender but not the landlord.

...why do you think the lender pushes it....?...and it is free of the FSA regulatory controls.....good going Gordo.... :lol::lol::lol:

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this is going to hurt......

http://www.nationwide.co.uk/mortgage/exist...erest_rates.htm

would you buy a 500 grand house now?

You are taking the fixed rate and then the average variable rate across the term of the mortgage and then flagging the 7.4% APR -which is the cost of borrowning over a long number of years. You know as well as everyone else that no one is going to stick on that deal - and that the 7.4% is included in the illustration for regulatory reasons. A classic "spin post" without much subtlety IMO.

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You are taking the fixed rate and then the average variable rate across the term of the mortgage and then flagging the 7.4% APR -which is the cost of borrowning over a long number of years. You know as well as everyone else that no one is going to stick on that deal - and that the 7.4% is included in the illustration for regulatory reasons. A classic "spin post" without much subtlety IMO.

only a fool would borrow money without looking at the cost. if they dont stick they can never repay, they might as well rent or go IO god forbid.

the 7.4% is the REAL cost. looking at any other measure of the mortgage is purely a "spin" rate. dont worry im sure you can remortgage. everyone can pay 7.4% right?

i was only saying because people at work keep whinging about how expensive their RESET rate is now the teaser rate has finished... I was just trying to spread awareness of the rocketing cost of money these days. the price of money seems to be going up nearly as fast as houses....

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