Average first-time buyer age to rise to 43

Emy1501

Graham_Devon wrote: »

Higher lending just fuels higher prices.

We got to saturation point with this scenario in 2007/8.

Sure, you could get a few thousand added to house prices in the next couple of years if your ideal actually came through to fruition. But you would be at saturation point within months....not years.

Then we have to move on to 110%, 125%. More debt simply isn't the answer.

As for your loan scenario. Go buy a car with a loan. They will ask for a deposit every time, as the loan is secured on the car. Same with a mortgage. You are compaing an unsecured loan to a secured loan.

For me higher house prices especially between 2004-2007 were cause by larger multipliers rather than 100% loans etc. In those days a borrow could borrow anything they wanted with a self cert.

I don't think its coincidence that prices have started to struggle recently around the time that banks started to use affordability calculators rather than the simple 4x joint etc. Now banks have to deduct monthly credit commitments, and many will deduct monthly child care fees from the amount they are willing to lend meaning many have seen the amount a bank is willing to lend drop by up to 25% Banks will often now go through bank statements also to check affordability.

Damaged

ILW wrote: »

Odd that that figure comes from housebuilder Redrow, whilst asking the Government to help FTBs. If they were that concerned they could just try dropping their prices.

It is hardy a trustworth and non vested interest source is it?
It is bit like the MD for JD weatherspoons complaining about government taxs on pubs, only for the group to make an additional 7% profit last year.

drc

In London, if you have kids, you would be looking for at least a 2 bed "starter" property. The cheapest 2 beds are flats, most of which are leasehold only. In north London, the cheapest flats in relatively nice areas start at £200k (sure you might be able to buy a small 2 bed flat in Tower hamlets for £140k in a tower block but not really the most ideal starter home for most people).

If you want a slightly larger 2 bed, a 3 bed or to live in a more salubrious area, you are looking at paying £300k just for a fairly basic starter flat (not including the lease, maintainance, ground rent etc). So that's over a quarter of a million pounds just to start. I don't think there are that many people who can afford that at the moment unless they are LLs who "invest" in properties or very rich people who have downsized or bought for their kin.

The flat I live in is a small (50sq metre) 2 bed in a large block of flats in a relatively nice area of north London. The kitchen is tiny (cannot fit a proper table) and there is no storage. All the flats are the same size. In 2000 you could buy this flat for £60k. The last flat to sell in this block, which did so in March 2010 sold for £250k. The lease is another £30k and our LLs have to pay over £1k a year in maintainance. It has also been announced that all flat owners in the block will have to contribute approx £10k to have the lifts replaced within the next year. It just seems totally nuts to me that it has come to the stage where a very basic 50sq metre "home" costs a quarter of a million pounds just to start off with. How many people without help from mum and dad can afford that, let alone a proper sized family home?

shortchanged_2

I think one thing they should do which I believe will help reduce house prices in the longer term is get rid of interest only mortgages.

I wonder how many people have seriously overstretched themselves by taking an interest only mortgage out. Plus many of these people are doing nothing more than glorified renting off the banks as they probably have no means of paying off the lump sum at the end of the term.

Generali

IveSeenTheLight wrote: »

If I went into my bank and asked for a loan of £5,000, I wouldn't be asked to put down a £1,000 deposit would I?

HSBC secured loan with deposit (mortgage) = 3.8% APR
HSBC unsecured loan, no deposit = 9.9% APR

The reason you don't need a deposit for the latter is that you pay a risk premium.

IveSeenTheLight

Procrastinator333 wrote: »

Personally I disagree. If I put myself in the position of a bank. I appreciate what you are saying about just charging more to cover the additional risk, but banks already charge 4, 5, 6% for the 90, 95% LTV. What would they charge for 100%? 7%, 8%?

If that was what the calculated risk was worth.
People then have an option to take it or not.

All I'm saying in relation to the OP's post is that FTBers oppertunity to own is being withdrawn but higher deposit requirements.

The market has loosened and we are seeing higher LTV product become available.

It would appear that it's not prices or monthly repayements that stopping FTBer's, it's the deposit requirement that is.

IveSeenTheLight

Generali wrote: »

HSBC secured loan with deposit (mortgage) = 3.8% APR
HSBC unsecured loan, no deposit = 9.9% APR

The reason you don't need a deposit for the latter is that you pay a risk premium.

This is what I'm saying, in both products you are not putting down a deposit.
In relation to property, the property is the security.
Therefore theoretically, you don't need a deposit and those with little or no deposit for a proeprty would naturally be expected to pay a higher premium if they chose that product.

My point is about looking at why FTBers don't necessarily have the option to buy today that they have in the last decade.

I'm sure we would all prefer FTBers to have the option, not for it to be taken away.

Generali

IveSeenTheLight wrote: »

This is what I'm saying, in both products you are not putting down a deposit.
In relation to property, the property is the security.
Therefore theoretically, you don't need a deposit and those with little or no deposit for a proeprty would naturally be expected to pay a higher premium if they chose that product.

My point is about looking at why FTBers don't necessarily have the option to buy today that they have in the last decade.

I'm sure we would all prefer FTBers to have the option, not for it to be taken away.

There are 2 problems with low or no deposit mortgages from the banks' pov. Firstly, if you don't have any 'skin in the game' it's pretty easy to walk away if things get hard.

Secondly, if you lend someone money, your losses aren't limited to the loan. You also lose the interest that accrues while they are getting in to arrears. If you have borrowed 95% of a house at 6% for example and stop paying the mortgage, you won't even be summonsed until you are 6 months behind. Add a month to get to court and a month notice to get out then you've used up all of the deposit in interest arrears and selling costs (4% interest, 1% estate agent fee).

Legal and administration fees will have to be found from somewhere still and plenty of people smash up the bathroom or something before they get kicked out.

IveSeenTheLight

Generali wrote: »

There are 2 problems with low or no deposit mortgages from the banks' pov. Firstly, if you don't have any 'skin in the game' it's pretty easy to walk away if things get hard.

Secondly, if you lend someone money, your losses aren't limited to the loan. You also lose the interest that accrues while they are getting in to arrears. If you have borrowed 95% of a house at 6% for example and stop paying the mortgage, you won't even be summonsed until you are 6 months behind. Add a month to get to court and a month notice to get out then you've used up all of the deposit in interest arrears and selling costs (4% interest, 1% estate agent fee).

Legal and administration fees will have to be found from somewhere still and plenty of people smash up the bathroom or something before they get kicked out.

I can understand all that and agree with it.
However that was why I proposed that the higher LTV products have higher rates, thus the banks are earning a higher return for their lending.

Similarly those who put down more equity / deposit get preferrential rates.

I'm sure the legal aspects could be sorted out if people really put their minds to it.
As I understand it you can;t walk away from the debt, so if you borrow £200k and after a year are forced to sell, then you are still liable for any outstanding debt (incurring interest) until it's repaid.

Generali

IveSeenTheLight wrote: »

I can understand all that and agree with it.
However that was why I proposed that the higher LTV products have higher rates, thus the banks are earning a higher return for their lending.

Similarly those who put down more equity / deposit get preferrential rates.

I'm sure the legal aspects could be sorted out if people really put their minds to it.
As I understand it you can;t walk away from the debt, so if you borrow £200k and after a year are forced to sell, then you are still liable for any outstanding debt (incurring interest) until it's repaid.

I take your point and as a banker I certainly agree that a riskier product like a higher LTV mortgage should attract a higher interest rate.

The real problems at the moment are that banks have been burned by assuming that house prices can't go down so they have to assume that they can.

Also, they have limited funds available, a problem that will worsen for many as Basle III (an agreement between Central Banks that looks highly likely to introduce new rules on increased bank reserves). In that case, why lend to the riskier end of the market? The profit just isn't there compared with people that have a lot of equity in the house.