100% Mortgages

sunshinetours

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.

Think we will agree to disagree on that one! A dramatic "overnight" fall would IMO have a catastrophic on the hosuing related industry as well as grinding the housing market to a virtual halt apart from forced sales. A gradual decline (it has taken a number of years to get to this poisition and it will IMO take a number of years to get out of it) has to preferable surely?

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

Agree - in our relatively recent history of the housing market we have had a fairly volatile (in the sense of the super-profit percentage rises we have seen) market and as mentioned earlier I think 100% lending only works in a stable market and only then with strict lending criteria. I think 95% maximum is fine for our market most of the time to ensure the house buyer is taking some capital risk at least

poppysarah wrote:

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...)

And screw "everyone" who has bought within the past 5-10 years as well then - nice! An overstatement I appreciate.
After the initial rush of cash rich and first time buyers after this proposed crash what do you think will happen to the overall house market which will have many millions trapped in negative equity.
Where will all the houses come from for the first time buyers other than forced sales - noone else will be able to move up the mid/higher market because they will have been trapped in negative equity for many years until they pay down the debt (or as is more likely) lose jobs becuse of the depression it will plunge the country into

Struggling to see (apart from personal selfish reasons that many will have) how a period of longer stagnation or slight dips until the market has corrected substantially is not better for the country as a whole?

poppysarah

angel.cake wrote: »

Yep, living off your parents is great!!

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

Independent living should be possible in the UK on low wages without "living off your parents" and you're just missing the point too - £52k should buy you something perfectly acceptable.

It doesn't because of the easy credit system that finally broke - the credit crunch happened because some assets were considered to be worth insane amounts of money.

When I started looking for a house in late 2003 I watched house prices go up astromonically as people watched telly and painted the walls magnolia, within a year they were almost double.

Magnolia and beige doesn't make your house worth so much more.

poppysarah

sunshinetours wrote: »

And screw "everyone" who has bought within the past 5-10 years as well then - nice! An overstatement I appreciate.

Those who bought sensibly within budget, with a deposit have a safe buffer around them. Those who bought insanely with 125% mortgages deserve everything they get.

You'd never got an pay 125% for a can of beans than the ticket price - so why borrow that insane level of money on a house...

The economy got broken by very poor management by people, banks and govt alike. The govt just showed off about it's "economic boom" to the point people got sucked in so much to believe debt is wealth.

Credit cards should be called "debt cards" perhaps...?

tara747

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
Agree - in our relatively recent history of the housing market we have had a fairly volatile (in the sense of the super-profit percentage rises we have seen) market and as mentioned earlier I think 100% lending only works in a stable market and only then with strict lending criteria. I think 95% maximum is fine for our market most of the time to ensure the house buyer is taking some capital risk at least

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I agree too.

sunshinetours

poppysarah wrote: »

Those who bought sensibly within budget, with a deposit have a safe buffer around them. Those who bought insanely with 125% mortgages deserve everything they get.

You'd never got an pay 125% for a can of beans than the ticket price - so why borrow that insane level of money on a house...

The economy got broken by very poor management by people, banks and govt alike. The govt just showed off about it's "economic boom" to the point people got sucked in so much to believe debt is wealth.

Credit cards should be called "debt cards" perhaps...?

No one was discussing 125% mortgages which are clearly insane in any market. The bean analogy is not really relevant as you are comparing borrowings and the price of something which isn't the same. If price of beans goes up 25% then you would pay 125% of its current price but that has nothing to do with borrowing levels

Despite all that i do kind of think we are probably in general agreement that the system has been broke for a while and many are now sucked into a system that needs some sort of fix - we just don't agree on the method may be which is fine!

weehev

geoffky wrote: »

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..

i don't agree. - generally flats/houses are costing £100,000 + for anything other that high rise, you are then saying that if you don't have £20,000 deposite, then you shouldn't buy - thats insane. most ftb and young couples in general jobs wouldn't stand a chance, take away dig money or rent, car, living costs etc and it would take years to save that kind of money.

its ok for people who bought their house years ago for say £35,000, and now its worth £135,000, but not for people starting out on the ladder.

poppysarah

weehev wrote: »

its ok for people who bought their house years ago for say £35,000, and now its worth £135,000, but not for people starting out on the ladder.

So make houses cost 35k again!

Psychological_2

poppysarah wrote: »

Learning to save up for things really should be a part of any big financial decision. Rushing in because you can is often a BAD idea.

Save. It doesn't physically hurt.

Not sure I agree, have been in a steady and well paid job now for 3 years and trying to save for a deposit so I can buy my first property. It's not necessarily the saving that physically hurts but paying empty money each month in the form of rent which is frustrating. Surely on a 100% mortgage I would be paying towards a property that I own rather than just lining my landlords pockets?

tara747

matt.mcginty wrote: »

Not sure I agree, have been in a steady and well paid job now for 3 years and trying to save for a deposit so I can buy my first property. It's not necessarily the saving that physically hurts but paying empty money each month in the form of rent which is frustrating. Surely on a 100% mortgage I would be paying towards a property that I own rather than just lining my landlords pockets?

Rent does not equal dead money. Ask anyone who bought a house/flat in the last 3-4 years and are now stuck with a property which is worth less than they bought it for (and are also making massive interest payments - interest = dead money?).

If you really hate renting, move back in with your parents. If that's not an option, look for cheaper ways of renting. What is your current situation i.e. where do you live, how many people do you share with and how much rent do you pay? Is there any way you can reduce your rent e.g. moving to a cheaper area or a different house/flat, or sharing with others? Can you cut other costs e.g. travel costs?

I rent and have managed to save up £33,000 so far, am aiming for £41,000 by the end of 2010. It can be done.

princeofpounds

Surely on a 100% mortgage I would be paying towards a property that I own rather than just lining my landlords pockets?

No. An interest-only mortgage is effectively renting from the bank, together with buying an option to purchase the house at a price (and which you hope price inflation will make increasingly valuable over time, something that has been generally true in the UK since the 60s but is not a fundamental law of economics as the Japanese would tell you).

OK, so you technically have title and so can do what you want with the place so there is a convenience yield to take into account, in the financial jargon.

But anyone who thinks rent is dead money should just ask themselves what mortgage interest is!