5% mortgages........

GoldenEye07

Hi all,

late last year I was advised there are "one or two" 5% mortgages out there......just wondering what the latest companies to offer these are and what the beat offers are.......?

getting 10% isn't going to be possible so I need to make the best of this as looking to buy in next few months! i'd probably look to go interest only for say 2 years then get onto a better deal after that.....

any suggestions appreciated, please state variable/tracker etc!!

thank you.

_Andy_

I stand to be corrected but I didn't think 95% LTV interest only would be available now.
Certainly a sure fire way to get into negative equity fairly quickly anyway.

beecher

If you're intending to go interest only you won't have paid anything off the capital in 2 years, and will almost definitely be in negative equity unless you get the deal of the century. You'd be lucky to get any deal after 2 years, let alone a better one. Wait, save up at least 10% and save yourself a lot of hassle would be my advice.

bigstevex

I agree, save another 5% and by the time you have property will be down another 5% too, so its a win win situation if you wait!

lets-save-money

GoldenEye07 wrote: »

Hi all,

late last year I was advised there are "one or two" 5% mortgages out there......just wondering what the latest companies to offer these are and what the beat offers are.......?

getting 10% isn't going to be possible so I need to make the best of this as looking to buy in next few months! i'd probably look to go interest only for say 2 years then get onto a better deal after that.....

any suggestions appreciated, please state variable/tracker etc!!

thank you.

Firstly, let me decare that that I work in the mortgage industry so hopefully know what I am talking about. What I dont know is what the future holds but can make a reaonable guess as to what the next two years holds.

Secondly dont believe what the press tells you - its not all doom and gloom.

House prices are falling but probably not at the rate the press claims. There is a fair chance that house price falls are beginning to slow down and may level out by the end of the year. After that the general belief is that rises of 5% a year are likey.

The main factor that is causing price falls is the reluctance of lenders to lend especially to those with small deposits (ie: first time purchasere). If this is ever to change then lenders must start encouraging first time buyers and this is what the government wants and is trying to make happen.

To answer your question, there are a couple of lenders who offer 95% deals - Nationwide is one of them but the rates charged are extortionate (in excess of 7.5% and ususlly fixed for 5 years).

In terms of the cost it is too early to go house hunting as prices are still falling. If you costed out a mortgage versus renting, renting would probably work out cheaper. If I had to make a prediction I would say the housing market will bottom out towards the end of this year - that would be the time to buy. Why buy a house now when it could be worth 10% less by the year end.

Having said that house price falls wouldnt cause you a problem unless you were intending to move in a year or two. I had a house in the last price crash (1980's or was it 90's). It went down in value and then regained the losses and some. If this was your plan it would be wise to look at fixing your rate for 5 years or so - as rates are almost certain to rise in the next couple of years. The last thing you want to be is stuck on the lenders SVR when rates start to rise again.

There is however one way you could buy a house now without it costing an arm and a leg. Builders are desperate to sell their stock of unsold properties which nobody now wants or can afford (due to the shortage of lending). Many will now lend new buyers 25% of the home value for up to 5 years - they charge about 1.5% as a form of rent. Lenders will treat such a transaction as though you had personally put up 25% and offer you the 75% deals at much lower interest rates. Hopefully by the time the 5 years is up your property will have increased in value and you will be in a position to remortgage and repay the 25% portion of the loan.

It is quite likely that in 2 or 3 years time lending will have returned to normal and 95%, even 100% deals will return to the market. Unlikely though that 125% lending such as the likes of Northern Rock offered will ever be available again.

GoldenEye07

Some interesting points particularly from lets-save-money…………so thanks.

At the risk of confusing matters…..I currently have a flat which was bought with my mate 2 years ago, but this summer we both plan to move in with our girlfriends (either renting or buying) and rent the original flat out…..

My question is, at the moment we are on a discounted rate for 2 years (which runs out this may) but realistically we may find we are in negative equity – we payed £172k for the flat 2 years ago with a 5% deposit. Wot is the best way to deal with this situation?
We went on a SVR rate which allows us to walk away without any fees this summer so is it just a case of shopping around now? Will we need to have the flat revalued etc?
:eek:

beecher

lets-save-money wrote: »

House prices are falling but probably not at the rate the press claims.

To answer your question, there are a couple of lenders who offer 95% deals - Nationwide is one of them but the rates charged are extortionate (in excess of 7.5% and ususlly fixed for 5 years).
.

Just to pick up on a couple of points - what evidence do you have that house prices aren't falling at the rate being reporting by the press?

And are you sure that Nationwide are offering 95% deals to FTB as their website only mentions 85% LTV deals.

Also, I do not think that house prices have fallen purely because of a lack of lending. I think it is more likely that we're seeing a pyramid scheme collapse.

beecher

GoldenEye07 wrote: »

Some interesting points particularly from lets-save-money…………so thanks.

At the risk of confusing matters…..I currently have a flat which was bought with my mate 2 years ago, but this summer we both plan to move in with our girlfriends (either renting or buying) and rent the original flat out…..

My question is, at the moment we are on a discounted rate for 2 years (which runs out this may) but realistically we may find we are in negative equity – we payed £172k for the flat 2 years ago with a 5% deposit. Wot is the best way to deal with this situation?
We went on a SVR rate which allows us to walk away without any fees this summer so is it just a case of shopping around now? Will we need to have the flat revalued etc?
:eek:

that does indeed confuse matters. You won't be able to shop around if you're in negative equity, and you won't be able to change the mortgage to a BTL one to let you get a 2nd mortgage. I fear your chances of buying another flat with this one in negative equity and without a 10% deposit are limited, but an adviser is bound to about soon who will let you know what options you may have.

GoldenEye07

Yeah I realise there are many permutations and none are very attractive…….the third option I suppose is for one of us to stay in the current flat with our partner while we save…..but again there would be a lot of complicated issues….i.e. if it was me then effectively I would be paying my mates mortgage, how would that work when we finally sell up?

sdooley

GoldenEye07 wrote: »

if it was me then effectively I would be paying my mates mortgage

Well yes but he would have to pay 100% of the rent on another property, paying someone else's mortgage.

The fair way to do this might be for whoever lives in the property to pay 100% of the interest element on the mortgage but for both of you to agree to pay an amount towards the capital (say £200 a month each or whatever is affordable). This would help pay down the negative equity over time.

Alternatively, if you can get a mortgage in your own right you could 'buy' the flat from your friend (for £1, £1,000 or whatever). Yes you'd be on the hook for 100% of the negative equity but in a way you are already. You could remortgage by using your deposit funds.

GoldenEye07

Sdooley (or anyone else) I’m intrigued, can you tell me more……..

Let me try and put this clearly……we bought the flat 2 years ago for 172k, with 6k deposit……..so our mortgage is 166k, so what is the fairest way if I want to buy him out, do I need a revaluation etc?

As you say I am taking liability for the possible negative equity but what is the fairest scenario?

I also need to know I can def afford the new mortgage deal before any of this happens if you know what I mean so how would I go about this when my deal isn’t up for rewnewal until may….?

Confused……….:mad: