Large Deposit Requirements Exclude a Generation of FTB's

IveSeenTheLight

des_cartes wrote: »

Only an idiot would fail to understand that lenders want 30% deposits because the know house prices are 30% overpriced. Lenders are not stupid. If people are stupid enough to want to buy a house with a 2010 price tag then it is the stupid buyer who will lose their money, not the lender.

Absolute !!!!!!!!.
Lenders require a deposit to reduce their risk.
A 10% deposit requirement does not mean that the property is 10% overvalued.
Do you believe that house prices will only be at the correct value when 100% mortgages are available?

I'm sorry to say but these were only available in a rapidly rising market and where the lenders expected the equity to be of the value of a deposit within the initial mortgage period (couple of years)

Would you therefore agree that if there are 90% LTV mortgages available, that the lenders are not foreseeing huge drops

http://www.money.co.uk/mortgages/90-mortgages.htm

shupufski_2

IveSeenTheLight wrote: »

I guess this depend of the figures.
the flaw in your argument is you are referring that house prices drop nearly 40% while the deposit requirements increase only 10%

Would the same analogy work if the deposit requirements increase 15 or 20%

how about my example above where I showed a 20% reduction in the price but only a 10% increase in the deposit requirements?

Agreed - it depends on what changes would be implemented - which none of us know. Therefore the OP should not be adamant that this situation would be a problem for FTB's.

However, it does beg the question as to why depoits are set at 25%. If we assume that this is to cushion the lender against a 25% fall then the argument that percentages demanded for depoists would increase on falling prices assumes that falls will keep on accelerating. This is unlikely and hence a fall in prices would flush out the excess and allow for lower deposits since the risk of falls would decrease.

doire_2

MoneyMiser wrote: »

As a FTB looking to buy in March 2011 i'm not looking for further house price decrease's as in my area the prices are fairly cheap anyway. What I think all FTB's need now more than anything are more competitve 95% LTV mortgages. This will allow more people to buy IMHO.

MM

We have a live one here

the_flying_pig

yeah, i mean, just t'other day the housing minister said that "House price booms keep people out of the market"... i refuse to accept that both rising and falling prices are bad for FTBs, that just seems stupid.

my take is that house prices are maybe sticky on the way down and take a long time [years] to reach their proper level as buyers' and sellers' expectations gradually change. this is in contrast with lending criteria, which change to 'computer says no' at the flick of a switch... i believe that today's lending criteria already, if you like, have modest [say 10-20%] future falls built into them and that they would not get any stricter if these falls were to happen. a matter of faith of course but more plausible IMO than hamish's take.

Mini_Bear

i don't think there is anything wrong with saving up for possibly the biggest purchase of your life. if nothing else it gives you time to contemplate your purchase and not rush into it with gusto (and potentially your girlf/boyf at the time).
saving has never been cool, but at least this forces the younger generations to do this.
sure, during the next few years i imagine the market will flounder as there isnt the FTB numbers to prop it up. But long-term i think it will change peoples perceptions of earnings and property affordability. Things went a bit crazy up til 2007!
Oh and i am 25 and saving for a deposit!!

Percy1983

So save a little longer and have a lot lessor mortgage to payback...

Sounds good to me.

IveSeenTheLight

shupufski wrote: »

Agreed - it depends on what changes would be implemented - which none of us know. Therefore the OP should not be adamant that this situation would be a problem for FTB's.

However, it does beg the question as to why depoits are set at 25%. If we assume that this is to cushion the lender against a 25% fall then the argument that percentages demanded for depoists would increase on falling prices assumes that falls will keep on accelerating. This is unlikely and hence a fall in prices would flush out the excess and allow for lower deposits since the risk of falls would decrease.

There are a number of 10% deposit products available.

I think the OP is refering to what occured the last timeprices dropped in which the 90% LTV products were removed from the market place.

It's likely we would see this again if there were sustained falls

One thing you need to consider, if prices fall, then the lenders risk increases, including all the properties they have lent to and then become in NE or simply reduces their cover.

This is why if prices fall, lenders would be looking to increase their cover acrross the products they have lent to and be looking for an increased cover from new products lent.

Batchy

If a buyer wants 200k for a property, thats what they want. its theirs to sell and unless they are distressed, then, they will sit and wait.
Effectively they will drop or be willing to drop when someone higher up the ladder drops theirs, then the cost to swap/ upsize is the same anyway.
The losers, will be the ones at the top of the chain (but they have already made a mint, or earn a mint)/ or the FTB's (who dont earn a lot at all, or are struggling to raise a decent deposit) trying to raise finance as banks get itch feet about deposits.
The estate agents / solicitors/ and the mortgage lenders lose out, as fee's fall into lower categorys. Thye have a vested interest to always achieve as high a price as possible.

The supply demand theory, suggesting there are more properties than WILLING buyers is ridiculous, the problem with the buyers is the UNWILLINGNESS of the banks for allowing them the finance. There is so much pent up demand, its ridiculous.

IveSeenTheLight

Mini_Bear wrote: »

i don't think there is anything wrong with saving up for possibly the biggest purchase of your life. if nothing else it gives you time to contemplate your purchase and not rush into it with gusto (and potentially your girlf/boyf at the time).
saving has never been cool, but at least this forces the younger generations to do this.
sure, during the next few years i imagine the market will flounder as there isnt the FTB numbers to prop it up. But long-term i think it will change peoples perceptions of earnings and property affordability. Things went a bit crazy up til 2007!
Oh and i am 25 and saving for a deposit!!

Well done on focussing and saving for your deposit.
You seem reasonably level headed.

You refer to FTBers not propping up the market, however there is another potential for this and that's property investment.

We are seeing the population increase and the number of properties built to support this not being sufficient.

If there are a reduction in FTBers due to cost or deposit required then this likely increases the rental demand meaning investors may find markets where it is beneficial.

Mini_Bear

You're right IveSeenTheLight. With the current returns on "high interest" (*cough*) savings accts on offer, i imagine the yield on properties is more attractive even after the risks and costs.