Permanent ban on 100% mortgages (merged)

Thrugelmir

Numenor wrote: »

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.

Also the term of the mortgage needs to be factored in. As capital will be repaid much quicker on a 15 year period as opposed to a 25 year period.

Straight income multiples to determine mortgage advances are too simple. As individuals may have other fixed financial committments such as car loans, maintenance payments, credit card debt to meet.

When I borrowed from Lloyds bank to buy my first car. I had to demonstrate to the Bank Manager that I could afford the repayments and meet the cost of running the car. I had to produce a budget showing my income and expenditure! Shows how much banking has changed in the past 30 odd years. Maybe this is the direction we're now heading.........

avantra

http://www.thedailymash.co.uk/news/business/prime-minister%27s-brain-goes-into-receivership-200902231597/

:T

lostinrates

Grrrrrr!

I've just caught Brown on the news saying (re Northern Rock mortgages) saying that its to benefit the FTB because young people cannot afford the large deposist lenders are requiring.....

go figure!

NO look at why FTBs cannot afford them, why they aren't saving etc etc. Its not that what he said is not right, its that its a very smal sliver of what is right and how uncoordinated the response is.

Numenor

lostinrates wrote: »

Grrrrrr!

I've just caught Brown on the news saying (re Northern Rock mortgages) saying that its to benefit the FTB because young people cannot afford the large deposist lenders are requiring.....

go figure!

NO look at why FTBs cannot afford them, why they aren't saving etc etc. Its not that what he said is not right, its that its a very smal sliver of what is right and how uncoordinated the response is.

Aaaargh!!

All throughout his time as Chancellor he was obsessed with making it 'easier for first time buyers to afford a property', but his method was to try and make the DEBT more affordable, rather than the property. Will he NEVER learn from his monumental mistakes?!?!?!

lynzpower

The worst of it I agree is how haphazard this all is. He doesnt have a clue and is just flailing about.!

Someone put a stop to him! I cant believe we wont have an election till 2010 :eek: I cant bear to see what state we'll be in then!!

ad9898_3

lynzpower wrote: »

The worst of it I agree is how haphazard this all is. He doesnt have a clue and is just flailing about.!

Someone put a stop to him!

I'd be the first onto 'the grassy knoll', if the opportunity arose.:D