Permanent ban on 100% mortgages (merged)

mike_the_bike_2

The_White_Horse wrote: »

bad idea.

stop interfering!!! if banks want to lend 100% then that is up to them.

liberal lefties, want to interfere in every part of peoples lives and businesses.

if people default, they lose their home. if the home doesn't cover the loan, then the bank loses. the end.

that is how it works.

Err excuse me I WILL INTERFERE because in case you hadn't noticed many of the UK banks are only still in existance because your and my tax payers money has been used to the tune of 33K per household to bail them out! Without our seemengly bottomless charity pot they would have gone bust due to their reckless lending!

mewbie_2

Cleaver wrote: »

Just a quick post to let SGE1, mewbie and Dooooooooooooooooooonut know that I've gone through the thread and thanked all their knob gags. Something this forum needs more of I think.

I made one pertinent comment on page one and have left it at that. I don't spoil every thread with inanities I'll have you know. If you think I'm going to pull out a knob gag and wave it about - well you're wrong.

overlander

The_White_Horse wrote: »

bad idea.

stop interfering!!! if banks want to lend 100% then that is up to them.

liberal lefties, want to interfere in every part of peoples lives and businesses.

if people default, they lose their home. if the home doesn't cover the loan, then the bank loses. the end.

that is how it works.

What planet are you on planet cuckoo, the banks are incompetent need to be heavily regulated. 100% mortgages are dangerous and contributed to the mess we are in.

exil

In the "good old days" the BOE was able to restrict credit in all sorts of ways, with the result you more or less had to make some sort of indedent proposal to your bank manager to get a loan - but this was decided to be undue interference with the free market. Banks can regulate themselves we were told!

mewbie_2

Here's another pertinent comment for you. A few short months ago Brown and Darling were demanding bank lending returned to 2007 levels. Now they want to scrap the sole thing that kept their inflated economoy afloat. It would appear they have no clue what to do, are out of touch with events, and drifting from one harebrained idea to another. This is not very encouraging.

Ian_Griffiths_Halifax

Copied from the same subject on the Mortgage and Endowment thread:

I've been thinking about this and I've come to the conclusion that FTBs would benefit from lower Income Multiples but they shouldn't be penalised by higher rates, as we are seeing just now.

By lending at say 3 times 1st income + 1 times 2nd (similar to lending multiples when interest rates hit 15%), this would limit their borrowings until they had experience of home ownership. This would also ensure that we don't have the same problem as we have seen for the last 10 years, where every FTB wanted a 3 bed semi with a garage, rather than the 2 up 2 down terrace.

When I was growing up, you were posh if you had a semi and it was something for young families to move up to. The new equivalent of that 3 bed semi is a 5 bed detached.

Newly qualified drivers show a "P" on their car to show their inexperience on the roads and I wonder if a simlar approach to mortgages might work.

Obviously this wouldn't go down too well with some people, so I'm not saying that all FTBs need this limitation, but I've seen too many FTBs with new cars and a mountain of credit card and loan debt wanting to buy houses. Far more debt than when I started as a broker nearly 20 yers ago.

adr0ck

lynzpower wrote: »

What you are missing here is that people have bought and sold homes since time immorial here, and 100% mortgages have not always existed. its fair to say ask your grandparents and paretns how they bought thier first home and they will probably tell you they scrimped to get the deposit together so their bank manager says yes.

my parents in law bought their first home on 100% mortgage

this was in the early 70's

lostinrates

mbga9pgf wrote: »

. No-one should be allowed to borrow more than 4 times income, period. This includes unsecured lending. So, if you have 20K on the plastic, this will reduce what you can borrow by 20K on your mortgage..

I do think that affordability is relevant, not just income mulitples.

If you are on a high income earning, say, £150,000 a year and want to borrow over four times your salary on a mortage you can not only meet but overpay without struggle it doesn't seem too dreadful to me. Especially if you have evidenced saving by having a deposit.

Ian_Griffiths_Halifax

lostinrates wrote: »

I do think that affordability is relevant, not just income mulitples.

If you are on a high income earning, say, £150,000 a year and want to borrow over four times your salary on a mortage you can not only meet but overpay without struggle it doesn't seem too dreadful to me. Especially if you have evidenced saving by having a deposit.

This is true. A simple 'one income multiple fits all' scenario wouldn't be necessary as your household bills are not going to go up tremendously if you buy a £300,000 house as opposed to a £150,000 house, and a single person with no dependants will be able to afford more than a Married couple with 2 kids when the wife isn't working. Four mouths to feed and four using the electric etc but only one income coming in.

Numenor

I think an outright ban on 100% mortgages would be a bad idea; the problem is not enough diligence in risk assessment. There should be more human interaction in the approvals process, because there is more to 'risk' than simply the amount of money potentially lost if the borrower defaults. Let's see what some of the variables are, shall we?

- Amount potentially lost if borrower defaults.
- Estimated stability of borrower's job, therefore LIKELIHOOD of default.
- Borrower's demonstrated budgeting skills (deposit is one form, but carefully planned budget sheets are another.
- Maximum multiple that borrower WANTS to borrow, as opposed to being allowed to, showing individual prudence.
- Borrower's attitude toward taking undesirable employment versus outright unemployment.

As you can see, it might be less risky to lend someone 100% of a property's value if it's only 2.5% their salary and they have shown they know how to look after their finances. If you'd lend that very mature and responsible borrower who earns £40K a sum of £160K against a £200K house, why not lend them £100K against a £100K house? They'd find it easier to pay off, and be able to save more in the meantime making the likelihood of future default much lower than if they borrowed the full whack.