Thursday, June 14, 2007

Signs of a doomed market

Rise in number of 100% mortgages

Further good news for first-timers is that, despite a 1% rise in interest rates over the past year, 100% mortgages have lagged behind in price. The typical initial rate now payable on a mortgage for someone without a deposit is 6.49%, compared with 5.89% a year ago.

Posted by inbreda @ 02:41 PM (452 views)
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8 thoughts on “Signs of a doomed market

  • Not a lot of mention of the fees involved .

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  • Seenitallbefore says:

    Ha..ha. ..ha….ha…ha….ha…ha…ha….ha.

    Mr Boulger says: “In many ways it is more worrying to have a 50% loan-to-value that you can’t afford than a 100% loan-to-value that you can.”

    WTF !!. This really is scraping the bottom of the bottom of all attempts to prop up a ship that is going to sink to the earths core…

    Oh well, when Boulger get’s gets his P45 he can at least go on TV and present a compilation on ITV45 called “Britains Best/Worst Bullshitters” . The series will be able to run and run supported by the endless ‘rent a commet’ that he and his ilk spew up week in, week out. Pass the sick bucket please. UIrgggghhhhhhhhhhhh.

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  • fahrenheit451 says:

    How loud does one have to shout “Sub-prime” before anyone takes any notice.

    This is so daft it’s unbelieveable, What do the mortgage companies want … more bad debts ???

    The reasoning is simple.

    1) 100% Mortgage
    First Time Buyer: Joe(anne) Bloggs, cannot afford a deposit, so to get on the housing ladder, (s)he gets a 100% mortgage, possibly with all fees paid, so is already in negative equity.
    But because they have no deposit they get charged an extra 1%.
    However they have no deposit because they spend all their money (hopefully not more than actually have as income).
    Therefore if mortgage rates go up, they will not be able to pay the extra.
    Therefore in 6 months they will be in arears – and Reposession is INEVITABLE.

    2) 90% Mortgage
    First Time Buyer: John Smith, can afford a deposit, so to get on the housing ladder, (s)he gets a 90% mortgage, possibly with all fees paid.
    Because they have saved the deposit, they should also NOT have Credit Card Debts, etc to worry about.
    They pay 10% – 20% less than Bloggs on the mortgage because it is 1% less.
    They also pay an additional 10% less because it is only a 90% mortgage.
    Therefore if mortgage rates go up, they should be able to pay the extra.
    Therefore in 6 months they should be still struggling to pay the mortgage – and Reposession is hopefully AVOIDED.

    ======== Quote of the day ========
    Now, anyone who has attempted to balance a household budget will have noticed that the trick involves adjusting money coming in to money going out. This delicate adjustment is mentioned by Charles Dickens, the author of David Copperfield, in connection with Mr. McCawber’s finances:

    “Annual income of pounds 20 coupled with expenditure of only 19 pounds 19 shillings and 6 pence was, he mused, happiness itself. But spend say 20 pounds and 6 pence and it’s misery.”

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  • At least quotes from Dickens make more sense than the drivel logic that emanates out of most financial publications.

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  • fahrenheit451 says:

    Ok Sovietuk, I’ll stick to quotes.

    But this one (from the article) sucks … they must be living in Beckingham palace, or similar. If they have a 50% deposit, and can’t pay the mortgage, they’ve got more money than sense.

    ====== from the article =====
    “The first question first-timers should ask themselves is ‘Can I afford it?’,” said Mr Boulger. “In many ways it is more worrying to have a 50% loan-to-value that you can’t afford than a 100% loan-to-value that you can.”

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  • What fool would get a 100% mortgage in this market?

    What fool would offer one?

    Ah another quote; A fool and their money are soon parted.

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  • That’s because fixed term rates are based on long term interest rates, set by the market, not the MPC. These have only started rising meaningfully in the past few weeks, so, they will catch up. Long term rates are now greater than short term MPC rates, so, it will happen just as the mass re-mortgage of low fixed term mortgages is happening. They won’t be this low by autumn.

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  • Fixed term rates represent the typical mortgage because the majority of mortgages today are fixed term. Variable rate mortgages are relatively meaningless right now, thus, the MPC has little control over the housing market. In fact, by not raising short term rates, market inflation expectations will rise, which will do more to raise the costs of fixed term mortgages than a rise in short term interest rates could have, at this point in the cycle.

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