100% Mortgages

rl290

Under Lib Dem plans to decouple investment banking (the "casino" businesses) from retail banking (savings, loans and mortgages), 100% mortgages would probably NOT come back. Banks would be much more limited in selling on debt obligations (such as the sub prime debt mess we are in now) and would therefore have to look more at the quality of loans.

While it is certainly possible that some people could support a mortgage but are in a position of being unable to raise a deposit, the vast majority of people CAN raise a deposit - banks should require this as a signal that that person is financially capable of managing their long-term finances.

For people who are unable to raise a deposit, one would expect banks to see very much more evidence that they are financially sound enough to give a mortgage to. Perhaps several years' worth of records that show the applicant is able to pay his rent (which should be comparable to the monthly mortgage rate) as well as long term proof of employment.

Certainly the idea of someone getting a 100% mortgage based on a job they've held for a brief time is mad. Either these people should be forced to take some time in building a deposit OR show the bank that they can afford the mortgage rate by paying a comparable rent+saving each month for several years. That would get rid of applicants who have no hope!

R

DVardysShadow

sunshinetours wrote: »

As I said it would help first time buyers but how would that help the millions with already sizeable mortgages or indeed the mortgage free?

The best compromise is that house prices remain stagnant or drop in real terms for a number of years. That makes it less painful for the majority who have mortgages as they continue to repay the debt and makes it gradually more and more affordable for those who aren't yet on the ladder

Back to the OP, the 100% mortgage actually then works in the longer term (to a better degree) in a stagnant market more so than in a "bubble market" as long as traditional lending criteria are upheld so people aren't overstretching affordability wise

You are right about how to get house prices back to sensible levels - in part. Certainly, an overnight drop causes lots of dislocation in the economy as we have already seen. But it may be better just to pull the rug from under the market and let people rethink the idea that high and rising house prices are a good thing.

On percentage loans, I think it should be left to the market, with one important proviso - which is that mortgages can only be 95% to 98% secured. That would mean that the lenders would be exposed to some risk and would have to think through who they lent to and how much

poppysarah

sunshinetours wrote: »

Odd post.

If the market dives by a third or half even then how will that put money in the pockets of the majority of existing home owners? I appreciate it will help first time buyers who are a minor (but important) part of the house owning public.

Tough. Negative equity only occurs because a govt let a boom happen and the bust that follows is they can't do anything about.
(Think of the quantative easing they've been doing as pumping air into an inflatable rubber ring ... after six months, the ring is only slightly got air in it ... so it's not working...)

poppysarah

angel.cake wrote: »

10% deposit would be great but this is just not practical for eveyone. Does not mean they cannot afford to pay a mortgage just because they can get £15k together.

Oh you SO miss the point.

On 15k a year you should be able to save £3 a year imo (I am not one for expensive nights out and posh frocks though) - so over a couple of years you should be able to save 5k easy peasy.
So by age 24 you should be able to get a 10% deposit for a house worth 50k

Sounds fine to me until house price inflation went utterly insane and now a house costs 150k.

tara747

Homersimpson wrote: »

On this basis a single person on 30k would be able to borrow 120k + a 10% deposit would give a maximum of 132k. Around by me that won't by a nice three bed semi and you would struggle with a two bed in a nice area.

So what if it won't buy a 3 bed semi? Could the person on £30k actually afford to service a mortgage that's more than 4x their income?? How much do you think they should be allowed to borrow? Should they also have some disposable income to, you know, have a life?

House prices should be lower - but some seem to have the idea that we should be able to borrow more to buy them. Madness.

DVardysShadow wrote: »

You are right about how to get house prices back to sensible levels - in part. Certainly, an overnight drop causes lots of dislocation in the economy as we have already seen. But it may be better just to pull the rug from under the market and let people rethink the idea that high and rising house prices are a good thing.

I agree. This idea that those who bought at over-inflated prices should be 'saved' by not 'allowing' property prices to fall too much is ludicrous.

To the OP - I hope (and believe) that 100% mortgages will never return, they were a very bad idea.

puddy

im unsure what i think really. ive never had a 100% mortgage and it would scare me a bit, but is it so different to borrowing 100% of the money you might need for a car, or house renovation etc. obviously the amounts are smaller but the principle is the same. the car is going to depreciate, its never going to go up, but you pay for the cost of it

lottie176

I've saved up 15% deposit with my partner and we both have steady jobs that pay reasonably well. We had to stretch to 15 rather than 10% deposit to get a monthly mortgage rate that as a couple we could pay comfortably. I dread to think how much repayments would be on a 100% mortgage. My worry is that it will be too tempting for ftb who see it as an easy step on the ladder, underestimate the costs of running a home and then find themselves in financial trouble further down the line.

geoffky

If you can not save 20% you should not be buying...plus they want you to take the first hit on price falls...100% mortgages are for financially illiterate..

angel.cake_2

poppysarah wrote: »

Oh you SO miss the point.

On 15k a year you should be able to save £3 a year imo (I am not one for expensive nights out and posh frocks though) - so over a couple of years you should be able to save 5k easy peasy.
So by age 24 you should be able to get a 10% deposit for a house worth 50k

Sounds fine to me until house price inflation went utterly insane and now a house costs 150k.

Yep, living off your parents is great!!

And what a lovely place you could buy for £52.5K....

maya+2

ive sed yes soon, I'd guess in a couple of years,
The answer should be never, but banks are greedy and the riskiness is probably worth the reward for them.