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theblacksheeple

End Game

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Hello everyone. Here are some opinions on how i see mortgage lenders setting out their criteria as the credit crunch reaches End Game.

. 20% Deposit required for all first time buyers

. No self cert

. Self employed assessed based on min of last 2 years income as reported to the inland revenue

. 3.5 x income max

. Max age 65

. Full written justification for interest only with a ban on providing interest only for sole purpose of allowing the customer to borrow more money

. Interest only with a vechile to repay at the end of the term only. Including detailed plans and estimates of valuations of any investments.

. Required to be on voters role at current address for 12 months or be able to prove 3 years worth of address history in all applications.

. Brokers no longer able to certify identification on behalf of a client. Original documentation to be provided to FSA Key partners to authenticate as original only.

. Subprime borrowers to provide full evidence of how they got into the situation that made them sub prime. Minimum 6 months with no missed mortgage payments and 12 months without a CCJ. Customers to demonstrate they can sufficiently service current responsibilities before a mortgage is offered. Mortgage payment profile for the last 2 years to be reviewed when assessing credit worthiness.

. Loans to people with permanent rights to reside in the U.K only.

. BTL viewed as a commercial proposition only. Commercial rates and Criteria to be applied in all circumstances

If anyone else feels like adding/arguing [dogbox] with this list please feel free.

PS Eric does this go far enough to stop or reduce fraud?.

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I see no reason why a 90% LTV mortgage shouldn't be available for 3x or 3.5x incomes. 20% is a large deposit and would effectively shut down all lending to FTBers. I purchased my first (and only) property in 2000 with a 90% LTV mortgage at 3.5x income (and I had to provide two proofs of income and have my IFA speak directly with the underwriters).

Getting back to the practices of responsible lending (ie proper checks on affordability and income) are much more important than an insistance on customers having an "equity cussion" to protect the lenders IMHO. Whether it pans out that way, we'll have to see.

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I see no reason why a 90% LTV mortgage shouldn't be available for 3x or 3.5x incomes. 20% is a large deposit and would effectively shut down all lending to FTBers. I purchased my first (and only) property in 2000 with a 90% LTV mortgage at 3.5x income (and I had to provide two proofs of income and have my IFA speak directly with the underwriters).

Getting back to the practices of responsible lending (ie proper checks on affordability and income) are much more important than an insistance on customers having an "equity cussion" to protect the lenders IMHO. Whether it pans out that way, we'll have to see.

In 2000 the market was rising out of the slump and had been doing so for a while. in that scenario I guess the protection of equity is not such a big deal. if we are talking final days of his coming downturn do you think it will be the same? just curious really, I was 20 in 2000 so wasn't looking at mortgages at all.

.

cheers,

.

ST

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. 20% Deposit required for all first time buyers

I think a 10% deposit would be sensible for FTB's, but they need to stop mom and pop mewing their own property to get the deposit.

The money should come from years of saving/inheritence/lottery win.

None of this nonsense that allows leverage to lift prices to generate more leverage to lift prices... (you know the story by now)

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In 2000 the market was rising out of the slump and had been doing so for a while. in that scenario I guess the protection of equity is not such a big deal. if we are talking final days of his coming downturn do you think it will be the same? just curious really, I was 20 in 2000 so wasn't looking at mortgages at all.

.

cheers,

.

ST

I Agree with ST here, in that the purpose of my thread here was more aimed at the point in the credit crunch when things are really bad, so bad that things seem they will never get better.

Though I do agree with you that 90% is fine if the income is there to support it, during end game i just don't see this as available. Lenders will be too worried about negative equity to give such a small cushion.

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I see no reason why a 90% LTV mortgage shouldn't be available for 3x or 3.5x incomes. 20% is a large deposit and would effectively shut down all lending to FTBers. I purchased my first (and only) property in 2000 with a 90% LTV mortgage at 3.5x income (and I had to provide two proofs of income and have my IFA speak directly with the underwriters).

Getting back to the practices of responsible lending (ie proper checks on affordability and income) are much more important than an insistance on customers having an "equity cussion" to protect the lenders IMHO. Whether it pans out that way, we'll have to see.

20% is only a large deposit at current prices. If they fall 50% then 20% will be okay!

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20% is only a large deposit at current prices. If they fall 50% then 20% will be okay!

Lots of lenders are already limiting to 90% LTV and we are hardly underway yet. I am not saying I agree with the decision but based on current information this is where I can see lenders demands being a few months being in the next few months.

PS do we all agree self cert needs to go?

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I reckon variable deposits between 10-20% will get you a mortgage in the future.

ID cards will be needed for everything sooner or later, but debt attachment and identity verification is essential.

I don't know why they ever stopped people from needing a deposit. It seems so obvious to have to put a little effort in and save some money up if you want something badly enough.

And that is the root of the problem, this "must have now" disease people have.

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Just to extend the idea a bit, there are the assumpitons on which the house price boom have been built on which have now been disposed of:

- A continual high growth, recession free economy

- Continued high levels of liquidity

- Low inflation and low interest rates

- Low unemployment

- A continued shortage of housing

- Immigrants, from Poles to "rich Russians" being prepared to prop up house prices

- BTL as a free lunch

All of these are dumped or are being challenged at present. How things change so quickly.

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Just to extend the idea a bit, there are the assumpitons on which the house price boom have been built on which have now been disposed of:

- A continual high growth, recession free economy

- Continued high levels of liquidity

- Low inflation and low interest rates

- Low unemployment

- A continued shortage of housing

- Immigrants, from Poles to "rich Russians" being prepared to prop up house prices

- BTL as a free lunch

All of these are dumped or are being challenged at present. How things change so quickly.

Ah-so, what is your avatar photo actually of? It intrigues me every time I see it.

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Ah-so, what is your avatar photo actually of? It intrigues me every time I see it.

The corner turret of a Japanese castle, surrounded by the moat.

Nice to hear that someone was interested!

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Although it would be nice to see sensible lending criteria back, the effect will be to further deflate house prices until entry level houses are once again affordable to the FTB, i.e. sensible income multiples and saveable deposits; a good thing in and of itself but the transition process will be painful because steeply lower house prices will impair the value of the mortgages banks already hold thus reducing the cash available to lend.....another self-feeding spiral....

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The shape is unmistakeable though, the previous crash matches our working hours very well, I don't know if it is a trailing indicator or leading but something weird is happening this time around so the question of affordability and income multiples doesn't seem to match income, just as working harder may inflate the price, or working less deflates it without regard to the money.

Not finished, house prices not to scale, working hours is to scale, time period is identical.

hourshpi.gif

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I think a 10% deposit would be sensible for FTB's, but they need to stop mom and pop mewing their own property to get the deposit.

The money should come from years of saving/inheritence/lottery win.

None of this nonsense that allows leverage to lift prices to generate more leverage to lift prices... (you know the story by now)

Think that's unnecessary. If Mum & Dad have effectively been saving for years by reducing their mortgage and now have only (say) a 10% mortgage, why shouldn't they pass on some of their wealth to their kids at a point when the kids actually need it to get started, rather than when M&D finally turn their toes up and the kids are in their 40s/50s?

Unless you'd like to see inheritances abolished as well, but that's a different branch of politics altogether.

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Think that's unnecessary. If Mum & Dad have effectively been saving for years by reducing their mortgage and now have only (say) a 10% mortgage, why shouldn't they pass on some of their wealth to their kids at a point when the kids actually need it to get started, rather than when M&D finally turn their toes up and the kids are in their 40s/50s?

Unless you'd like to see inheritances abolished as well, but that's a different branch of politics altogether.

What's wrong with people saving for themselves?

The M&Ds will need every penny to pay for their care when they get older. Unless of course sneaky brown decides to make your family pay for it however they can.

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Think that's unnecessary. If Mum & Dad have effectively been saving for years by reducing their mortgage and now have only (say) a 10% mortgage, why shouldn't they pass on some of their wealth to their kids at a point when the kids actually need it to get started, rather than when M&D finally turn their toes up and the kids are in their 40s/50s?

Unless you'd like to see inheritances abolished as well, but that's a different branch of politics altogether.

If M&Ds wealth is tied up in their property, it is not always easy to free that money.

1. Downsize.

2. MEW...say they are appoaching retirement, is it wise to take on further debt to repay in a shorter period of time?

3. Lifetime/Equiry release.

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If M&Ds wealth is tied up in their property, it is not always easy to free that money.

1. Downsize.

2. MEW...say they are appoaching retirement, is it wise to take on further debt to repay in a shorter period of time?

3. Lifetime/Equiry release.

Assuming M&D are in their 50s, the sequence is

MEW to provide deposit, upping mortgage to say 20-25% (still probably perfectly manageable)

Downsize on retirement, becoming mortgage-free.

Equity/ lifetime release schemes are a snare and a delusion and to be avoided at all costs unless you're over 85!

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Assuming M&D are in their 50s, the sequence is

MEW to provide deposit, upping mortgage to say 20-25% (still probably perfectly manageable)

Downsize on retirement, becoming mortgage-free.

Equity/ lifetime release schemes are a snare and a delusion and to be avoided at all costs unless you're over 85!

MEW is a snare and a delusion.

Why should parents take on debt to pay for the children not wanting to save?

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I bought my first place at the end of the last crash. I got a 96% mortgage and had to pay indemnity insurance.

The point is, once we've gone through a crash/correction, the mortgage lenders will want to lend to people as they'll hav very low levels of transactions. Sure, they will be careful and will want to vet all borrowers much more carefully than they have been doing of late BUT they will lend. I think the criteria outlined by the OP are much too conservative.

For example, post crash there will still be a market of lenders and some will specialise on those with bad debts, CCJs etc. This has always been the case and those lenders simply charge higher fees or rates to compensate for the risk.

Personally I think the new trend is that there is a flight from all mortgage backed securities (even AAA rated). The whole thing will have a bad name for a few years and at that point lenders will be crying out for quality borrowers to build their books back up. I'd expect to get some reasonable deals in a few years time (not give-aways like recent times mind you).

I agree with the OP's general point though, but I don't think the lending criteria will be that severe.

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Hello everyone. Here are some opinions on how i see mortgage lenders setting out their criteria as the credit crunch reaches End Game.

. 20% Deposit required for all first time buyers

. No self cert

. Self employed assessed based on min of last 2 years income as reported to the inland revenue

. 3.5 x income max

. Max age 65

. Full written justification for interest only with a ban on providing interest only for sole purpose of allowing the customer to borrow more money

. Interest only with a vechile to repay at the end of the term only. Including detailed plans and estimates of valuations of any investments.

. Required to be on voters role at current address for 12 months or be able to prove 3 years worth of address history in all applications.

. Brokers no longer able to certify identification on behalf of a client. Original documentation to be provided to FSA Key partners to authenticate as original only.

. Subprime borrowers to provide full evidence of how they got into the situation that made them sub prime. Minimum 6 months with no missed mortgage payments and 12 months without a CCJ. Customers to demonstrate they can sufficiently service current responsibilities before a mortgage is offered. Mortgage payment profile for the last 2 years to be reviewed when assessing credit worthiness.

. Loans to people with permanent rights to reside in the U.K only.

. BTL viewed as a commercial proposition only. Commercial rates and Criteria to be applied in all circumstances

If anyone else feels like adding/arguing [dogbox] with this list please feel free.

PS Eric does this go far enough to stop or reduce fraud?.

I would think that the banks will get rather squeamish about the debts that you already have even if you are servicing. So debts already held may be counted against the LTV ratios in some way.

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I bought my first place at the end of the last crash. I got a 96% mortgage and had to pay indemnity insurance.

The point is, once we've gone through a crash/correction, the mortgage lenders will want to lend to people as they'll hav very low levels of transactions. Sure, they will be careful and will want to vet all borrowers much more carefully than they have been doing of late BUT they will lend. I think the criteria outlined by the OP are much too conservative.

For example, post crash there will still be a market of lenders and some will specialise on those with bad debts, CCJs etc. This has always been the case and those lenders simply charge higher fees or rates to compensate for the risk.

Personally I think the new trend is that there is a flight from all mortgage backed securities (even AAA rated). The whole thing will have a bad name for a few years and at that point lenders will be crying out for quality borrowers to build their books back up. I'd expect to get some reasonable deals in a few years time (not give-aways like recent times mind you).

I agree with the OP's general point though, but I don't think the lending criteria will be that severe.

You're right. Specialist lenders will come back. However I suspect that although not all the stipulations will be made for every loan, all the terms laid out will be found in different loans. So if you have a small deposit don't expect high multiples.

Mortgage lending may become very profitable if you are a new lender and are not afraid to charge high rates.

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MEW is a snare and a delusion.

Why should parents take on debt to pay for the children not wanting to save?

Why shouldn't they? No-one is forcing them! A hundred years ago, if you were going to inherit you quite probably did so when you were in your 30s, or even earlier. Now you may very well be 60. It makes sense for parents to pass on some of their assets early, when their children need it, and when they do finally conk out, leave whatever's left to the grandchildren, as by then the children will be in the most affluent part of their lives.

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last time the sheeple went bust, this time it is the BANKS and the sheeple who look like they are going bust. I don`t think comparisons to the last crash are helpful as the dynamics are totally different. The banks want to lend now but don`t even know what damage exists on their balance sheets yet, the sheeple have unsecured debts unimaginable to the ordinary person in the late 80`s, the multiples used to buy a house recently are many more times salary than the last crash. The global banking system may be damaged badly enough that it cannot continue in it`s present form. this is nothing like the last crash, and isn`t hoping that it is, and that it is quantifiable in terms of the last crash just like the sheeple hoping that GB passes some law that protects house prices? We seem to be in very dangerous uncharted financial waters, but I seriously think the banks have the most to lose this time.

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  • 297 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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