Keep 100% mortgages?

Really2

mewbie wrote: »

Well I'm certainly going to tell my grandkids how I suffered to buy a house - gave up eating for three years "Did you Gramps?", no sex due to fear of calorie loss "Really Gramps?", [strike]and had [/strike] and liked to work evenings at a gay strip joint "Oh Poor Grampy".

:rotfl:

I changed it for you. (it's not right teaching children to lie.:))

I can see you like me will be acting def a senile when inappropriate.

That did make me lol.

Thrugelmir

mewbie wrote: »

Well I'm certainly going to tell my grandkids how I suffered to buy a house - gave up eating for three years "Did you Gramps?", no sex due to fear of calorie loss "Really Gramps?", and had to work evenings at a gay strip joint "Oh Poor Grampy".

He died around 17 years ago. So didn't see the property boom of recent years. In fact lived in the same house all his life. Never complained about anything.

Just got on with life and made the most of it. But there again if you lost 3 brothers in 2 days of battles on the Somme your attitude to people and life would be different. Your playground comments suggest that you have little worthwhile to contribute to society. Life is a generational cycle it's all be said and seen before. Once people have forgotton the past.

Really2

Thrugelmir wrote: »

He died around 17 years ago. So didn't see the property boom of recent years. In fact lived in the same house all his life. Never complained about anything.

Just got on with life and made the most of it. But there again if you lost 3 brothers in 2 days of battles on the Somme your attitude to people and life would be different. Your playground comments suggest that you have little worthwhile to contribute to society. Life is a generational cycle it's all be said and seen before. Once people have forgotton the past.

I don't think it was a stab at your family tree just a poke at the clich! of "in my day we..."

mewbie_2

Thrugelmir wrote: »

. Your playground comments suggest that you have little worthwhile to contribute to society.

My playground comments are what I offer to society, it is all I have to offer.

But of course I did not mean to strike any nerve about anything, it was a simple jokey comment.

Kenny4315

I just don't get it Devon, you think the 100% deposits are okay, yet are in favour of a 3 X salary cap. In my view the deposit is far more important than the salary multiplier. This allows the bank to reduce its exposure to the risk of a falling market, and control the downward cycle much more effectively, as the cushion would allow the bank to give the customer some scope, payment holidays or whatever, if it knew it was still in a position where it could at least recoup the mortgage amount.

I'd like to see deposits at around the 15% to 20% mark (maybe 10% in law but with a hefty premium for this type of service). This is easy to enforce as its a stragiht percentage of purchase price, salary control isn't. Salary moves overtime and with experience, also with the economic cycle, say overtime, short working weeks, etc, and can stop almost immediately through redundancy.

A deposit against a properly valued property is set at that point pretty effectively. Obviously it will move over time upward and downward, but you have a sensible start point.

A set deposit allows for a reasobale degree of control throughout the cycle. In a boom period when you remortgage the deposit threshold allows some release, but controls the amount, while it importantly gives you time in the correction, as it is going to take at least a year to fall 15% to 20%, that allows the sale or re-organising of finances.

In terms of salary cap, I wouldn't have one, I'd let the banks do business on the affordability to the client, I not fussed in reality if that works out to be 5 or 6 times salary, as the exposure to to bank and the system is eliminated by the large deposit, which would have otherwise been blown on sh8te in all proability. Obviously it has some impact on consumer spending but a debt fuelled consumer spend isn't that good anyway, as the evidence shows.

What I'd also like to see is better incentives between rates for holding a larger amount of equity, at present there is but it just isn't enough. This would encourage people to hold equity rather than releasing and spending on sh8te. A factor that Mr Clown used to defeat the 'boom and bust cycle'.

In my view if folk can't afford to put down this sort of level of deposit there not ready to buy a house, and all the costs that are entailed with one. They'll simply have to rent, in this time they'll save more deposit (enhancing a saving culture so lacking in the UK), they'll get more experienced and so command a better salary.

The problem we are in now is that the deposit was not enforced and has resulted in significant negative equity and those within the 85% to 100% bracket, in a falling market. So it really is how low can the government allow the market to go before it scr4ws up the whole economy seriously big time.

tomterm8

Graham_Devon wrote: »

Any thoughts, would this help? Or would it be reckless lending? We are in an era of change of the taxpayer owning a large chunk of banks.

Well, I am in favour of sorting out the system so that banks can make their own commercial decisions. I tend to think that the government safety nets should be removed. Banks should be allowed to rise and fall on their own decisions. If a bank makes a bad decision, they should go bust. Depositors should no longer have risk free banking, if the bank fails they should lose their money. And no bank should be allowed to be greater than 1% of GDP.

If we were to introduce that system, then I seriously don't care how the banks lend.

If we retain the current system where banks are highly subsidised, and the risk is born by taxpayers, then you should highly regulate them to remove as much risk from the system as possible. That means, controlling risky lending. And 100% mortgages are risky. Long term fixed mortgages pose a large interest rate risk to the banks.

baileysbattlebus

I tend to agree with Graham_Devon on this one - I see nothing wrong with 100% mortgages in principle.

The first house we bought we had a 99% mortgage - but we also had an indemnity policy for 25% of the mortgage, the building society were guaranteed 25% of the mortgage from the insurance company if we defaulted and were repossessed, plus whatever the house sold for. We would have liable for any shortfall - they would have kept any profit. We paid the premiums by the way. It used to be standard pratice especially for first mortgages where the mortgage was for more than 75% of value.

We never did default - it was 1982 and interest rates were 12% and no one was offering fixed rates either. We took the maximum multiple the BS would lend us.

OH had a stable job, he still works for the same organisation.

Backed up by an insurance policy I can't really see what the issue would be.

Where we live renting can be more expensive than buying. The cheapest one bed flat here is £600. 2 bed flat £750, 2 bed house £800, these are the cheapest, if you want to rent somewhere nice stick about £150 - £200 on top of those rents.

So it can be quite tough to save enough for a decent deposit.

So 100% mortgages don't have to any riskier than any other mortgage if it is backed an insurance policy.

Infact I think any mortgage with a deposit of less than about 30% should be backed by an insurance policy - removing a lot of the risk for lenders.

Long term interest rates also pose a risk to the borrower - think of all of those people on fixed rates now who are tied in at 5 or 6% interest rates.

JonnyBravo

baileysbattlebus wrote: »

Infact I think any mortgage with a deposit of less than about 30% should be backed by an insurance policy - removing a lot of the risk for lenders.

But therein lies your problem. This removal of risk is partly responsible for the problems we currently have.

(Banks became less and less fussy about who they lent to as they then packaged it all up and sold it on. It was no longer the banks problem if they couldn't pay.... it was a problem for whoever they sold it to. Unfortunately the oh so clever banks didn't work out everyone was doing this and the stuff they were buying from other banks was equally toxic.)

What's to stop the banks slowly sliding into lax practices again as the risk lies with the insurer?
What if all the policies are then needing to be claimed on? The insurer goes bust and the banks are left high and dry again. Again, it's essentially their fault, but we're just back in the same position as now.

Graham_Devon

JonnyBravo wrote: »

But therein lies your problem. This removal of risk is partly responsible for the problems we currently have.

(Banks became less and less fussy about who they lent to as they then packaged it all up and sold it on. It was no longer the banks problem if they couldn't pay.... it was a problem for whoever they sold it to. Unfortunately the oh so clever banks didn't work out everyone was doing this and the stuff they were buying from other banks was equally toxic.)

What's to stop the banks slowly sliding into lax practices again as the risk lies with the insurer?
What if all the policies are then needing to be claimed on? The insurer goes bust and the banks are left high and dry again. Again, it's essentially their fault, but we're just back in the same position as now.

Come on, be fair. You could ask the same question to any mortgage policy, and its not like I said 100% with no other criteria.

Infact the criteria, which no one has mentioned throughout, was very very strict and picky, so wouldn't be lax lending, as you stated, at all.

HAMISH_MCTAVISH

Graham_Devon wrote: »

I know many people who are paying rent out, but cannot neccesarily save, as they have to live. BUT their rent they are paying each month, is more than in some cases a mortgage would be. So they can afford the payments, they just can't afford to pay rent, feed their kids, run their lives AND save 10-25k (depending on their area) for a deposit for a mortgage too.

So it's a case of being able to afford the payments, just not being able to save the deposit.

Even if house prices plummeted 80%, these people still may not be able to afford it, as they simply cannot save with the cost of living, to produce that deposit, allowing them onto a mortgage.
.

Wow.

Graham used to be sensible.

Who'd have thought it.;)