Nationwide Deal Blow To Second Time Buyers, Or Third...

[Converted Lurker]

Can't believe the mis-directed fuss over this, you've always been able to get the better rates, depending on how big a deposit/credit rating. FTBs do not generally have 25% deposits, home movers do, they use their equity to move up a rung and as a consequence get the better deals when re-mortgaging... I despair at the levels of muppetry in the press of late...

[mrpleasant]

But who buys the movers' home? At the bottom of the chain will be the FTB - or not, as the case may be.

Every little helps...

Edited February 26, 2008 by mrpleasant

[Realistbear]

Can't believe the mis-directed fuss over this, you've always been able to get the better rates, depending on how big a deposit/credit rating. FTBs do not generally have 25% deposits, home movers do, they use their equity to move up a rung and as a consequence get the better deals when re-mortgaging... I despair at the levels of muppetry in the press of late...

Not a lot of people know this but........very few existing occupier owners have 25% to buy their next house. THe amount of equity held by OOs is very little given the high level of MEW and declining values.

When you buy a house with a long term loan it takes years for equity to build. After the first 5 years you have barely paid off 5% due to amortisation.

The requirement to have 25% down will finish the market off.

I have said it all along, the lack of credit is the Achilles heal in Gordon's HPI-MEW-BTL miracle economy.

As Alan Greenspan's grand daughter allegedly said over a year ago:

"Like, this house price thing is, like, so OH-verrrrr."

[Converted Lurker]

But who buys the movers' home? At the bottom of the chain will be the FTB - or not, as the case may be.

Every little helps...

FTBs always thrive 'in the dips', but will need 5-10% deposits, but heh, (for the most part) that's what they usually have

[Converted Lurker]

Not a lot of people know this but........very few existing occupier owners have 25% to buy their next house. THe amount of equity held by OOs is very little given the high level of MEW and declining values.

When you buy a house with a long term loan it takes years for equity to build. After the first 5 years you have barely paid off 5% due to amortisation.

The requirement to have 25% down will finish the market off.

I have said it all along, the lack of credit is the Achilles heal in Gordon's HPI-MEW-BTL miracle economy.

As Alan Greenspan's grand daughter allegedly said over a year ago:

"Like, this house price thing is, like, so OH-verrrrr."

the N-Wide have increased rates on sub 25% deposit mortgages by 0.2%...shock horror this won't kill the lending market, even if others follow suit. However, if they close the door on any new business without a 25% deposit ...guess what they will, on BTL, very soon IMHO. In relation to your 'equity calc' you're not far wrong, average price, 190K average mortgage 135K, a 25% correction will reak havoc.

[Realistbear]

FTBs always thrive 'in the dips', but will need 5-10% deposits, but heh, (for the most part) that's what they usually have

I am not sure--it looks like the 25% deposit is for FTBs as well:

http://business.timesonline.co.uk/tol/busi...icle3434633.ece

From The TimesFebruary 26, 2008

Nationwide squeezes all but the most cash-laden buyersRebecca O'Connor

Mortgage borrowers unable to muster a big deposit have become the latest victims of the credit crunch after Britain's biggest building society effectively shut its doors to all but the most cash-rich buyers.

Nationwide has told customers wanting a loan for more than 75 per cent of a property's value that they will pay higher rates of interest to reflect the increased risks involved. It raised interest rates on deals above that threshold by 0.2 percentage points last week, blaming higher mortgage funding costs and a cooling housing market for the decision.

Experts gave warning that the move would hit cash-strapped first-time buyers the hardest and could be a sign of further tightening of mortgage lending by other banks.

Nationwide's cut penalises

even

existing customers who want to remortgage

. The average deposit in the UK, at 20 per cent, is also below the Nationwide threshold.

Even existing OOs are affected! This means 25% for all. .2% may be just the beginning as risk aversion builds. In the US market IR have been rising as the Fed has been cutting. The more the Fed cuts the higher the rates as it is a credit issue that is facing the world today and lowing IR exacerbates the problem. IR are up by almost .25% in the US last week aloone. If Ben cuts again next month they could start to see a return to 7% on the 30 year.:

Rates

MortgageHome EquitySavingsAutoSee today's average mortgage rates across the country. Source: Bankrate.com

Loan Type Today Last Week

30 Year Fixed 6.08% 5.82%

15 Year Fixed 5.55% 5.24%

1 Year ARM 4.93% 4.96%

30 Year Fixed Jumbo 6.96% 6.76%

5/1 ARM 5.15% 5.02%

3/1 ARM 5.02% 4.94%

» View rates in your area

See today's average home equity rates across the country. Source: Bankrate.com

Edited February 26, 2008 by Realistbear

[Converted Lurker]

I am not sure--it looks like the 25% deposit is for FTBs as well:

Not so sure on what? They don't need a 25% dipper to get a mortgage, just 25% if they want the best deal available, at a massive 0.2% reduction over and above svr....wow

[Realistbear]

Not so sure on what? They don't need a 25% dipper to get a mortgage, just 25% if they want the best deal available, at a massive 0.2% reduction over and above svr....wow

Agree, the penalty is small......so far. But see:

http://www.telegraph.co.uk/money/main.jhtm.../26/ccom126.xml

..../

The Nationwide Building Society has brought about a big rise in the deposit home-buyers must find if they are to qualify for its best mortgage rates.

If the Nationwide is doing this, then it's a fair bet some of the movement's other lenders will follow.

The Nationwide is trying to de-risk its lending book, which speaks volumes about the times we live in. It has more than doubled the amount of money people will have to find for a deposit if they want to buy a property at the best rates. From a 10pc deposit, you will now need to find a 25pc deposit. If you need to borrow more than 75pc, then you'll pay a higher rate. It's done similar things in the past but not since the credit crunch hit lenders last August.

...../

Its a trend and, IMO, its going to get worse. Or better, depending on your position as a bull or bear.

[Converted Lurker]

Agree, the penalty is small......so far. But see:

http://www.telegraph.co.uk/money/main.jhtm.../26/ccom126.xml

..../

The Nationwide Building Society has brought about a big rise in the deposit home-buyers must find if they are to qualify for its best mortgage rates.

If the Nationwide is doing this, then it's a fair bet some of the movement's other lenders will follow.

The Nationwide is trying to de-risk its lending book, which speaks volumes about the times we live in. It has more than doubled the amount of money people will have to find for a deposit if they want to buy a property at the best rates. From a 10pc deposit, you will now need to find a 25pc deposit. If you need to borrow more than 75pc, then you'll pay a higher rate. It's done similar things in the past but not since the credit crunch hit lenders last August.

...../

Its a trend and, IMO, its going to get worse. Or better, depending on your position as a bull or bear.

try getting a decent BTL deal with less than a 15% deposit, in fact try getting one at all without 15%, approaching the impossible soon. You know the next big big move/news? Lenders withdraw from BTL market. They'll squeeze first, closing the doors slowly, unless you have 15%+ deposit you won't get in. Once they taken all the cash back they'll fukc the BTL players over good style, sitting on their handed back gains whilst the market corrects by 25%+.

[talksalot81]

Finally someone points this out! I did so several days ago on MSE and they were pretty confident I was an idiot without a clue... (does MSE stand for moronically stupid eejits?)

[OnlyMe]

Main drivers to changes to the BTL maket are likely to be uncovered fraud and taxation, both of these will make those "safe" loans that the banks thought they were making (or in many cases really didn't care about) go sour the premiums to have to rise to cover the default risk.

Very early days.

[Converted Lurker]

Main drivers to changes to the BTL maket are likely to be uncovered fraud and taxation, both of these will make those "safe" loans that the banks thought they were making (or in many cases really didn't care about) go sour the premiums to have to rise to cover the default risk.

Very early days.

I'm going to run a title "major lenders close doors on buy to let lending"...it can be backed up with precisely the points made by the meeja yesterday in relation to FTBs...although with BTL it is happening/will happen, it has already with Paragon. "No BTL deals out there unless you have 15% deposit signals end to BTL industry"...I'll just make the rest up...

Edited February 26, 2008 by Converted Lurker

[Wayo]

Not a lot of people know this but........very few existing occupier owners have 25% to buy their next house. THe amount of equity held by OOs is very little given the high level of MEW and declining values.

When you buy a house with a long term loan it takes years for equity to build. After the first 5 years you have barely paid off 5% due to amortisation.

The requirement to have 25% down will finish the market off.

I have said it all along, the lack of credit is the Achilles heal in Gordon's HPI-MEW-BTL miracle economy.

As Alan Greenspan's grand daughter allegedly said over a year ago:

"Like, this house price thing is, like, so OH-verrrrr."

What I want to know is how amortisation works with remortgaging and introductory fixed rates?!

Using an amortisation calculator, £100k over 25 years at 5.25% produces about 4% capital repaid after 2 years (8% of the term), and 11% repaid after 5 years (20% of the term), 25% repaid after 10 years (40% of the term).

Assuming fixed rates are amortised in the same way as any other (but with a different IR perhaps) and the payment schedule is reamortised on remortgaging (effectively taking another loan out), you might spend 25 years paying but only clear about half the loan! Can this really be true?

Needless to say the broker and lender websites barely mention the 'A' word, let alone ream*^^%&%$&ing. Even the brokers and advisors would have a *huge* VI in nobody ever finding out about this, as they must make a tidy sum from all those remortgages.

[thecrashingisles]

Whilst the repayment profile of a typical mortgage means that very little is paid off in the early years, this is by no means where most "equity" comes from. Most equity comes from asset price inflation.

Most recent "equity" will prove to be nothing more than an asset price illusion.

[19 year mortgage 8itch]

What I want to know is how amortisation works with remortgaging and introductory fixed rates?!

Using an amortisation calculator, £100k over 25 years at 5.25% produces about 4% capital repaid after 2 years (8% of the term), and 11% repaid after 5 years (20% of the term), 25% repaid after 10 years (40% of the term).

Assuming fixed rates are amortised in the same way as any other (but with a different IR perhaps) and the payment schedule is reamortised on remortgaging (effectively taking another loan out), you might spend 25 years paying but only clear about half the loan! Can this really be true?

Needless to say the broker and lender websites barely mention the 'A' word, let alone ream*^^%&%$&ing. Even the brokers and advisors would have a *huge* VI in nobody ever finding out about this, as they must make a tidy sum from all those remortgages.

I'm not sure what question your asking because your maths is right and RB's isn't.