Heads up - 100% mortgage imminent.

nollag2006

Conrad wrote: »

According to 3MC, a new 100% mortgage product is about to be launched.

It has a catch - the lender will apparantly require a 25% charge over parents property, meaning only those with sufficient equity can stand behind the FTB mortgage.

Interesting, and creative, way to help potential FTBs to buy their own home. Anything that helps FTBs along has to be good news

abaxas

nollag2006 wrote: »

Interesting, and creative, way to help potential FTBs to buy their own home. Anything that helps FTBs along has to be good news

So genocide of the over 50's is good news?

Nice to know...

Herbie_Hancock_I_wish

Sibley wrote: »

I want 100% mortgages back because I know it will kick start HPI.
I dont think we will ever see sharp rises but a steady 3-5% a year will do nicely.

I would not have been able to buy my 2nd place without a 100% mortgage.
It worked for me.

Why the heck do you want more HPI . Sorry , I don`t believe much what you say , apart from HPI = higher rents .

Perhaps we should go the whole hog and bring back serfdom . It beggers belief .

Blacklight

Sounds to me like it's just a way for lenders to justify the risk of lending 100% again and get around the bureaucratic regulation. Looks a lot like banks have decided there's not going to be any house price crash any time soon.

They wouldn't be doing this if they thought there was the slightest possibility of 50% off by Christmas.

Graham_Devon

Blacklight wrote: »

Sounds to me like it's just a way for lenders to justify the risk of lending 100% again and get around the bureaucratic regulation. Looks a lot like banks have decided there's not going to be any house price crash any time soon.

They wouldn't be doing this if they thought there was the slightest possibility of 50% off by Christmas.

If they had decided there was not going to be any reduction in value, they wouldn't ask for the 25% backup of another house.

Please. Open your eyes. They are covered. Up to 25% on a parents house could be a significant amount of equity to take charge of.

Cleaver

At the risk of sounding pedantic, I don't think banks asking for a 10% or 25% deposit means that they think that prices will fall by these amounts. Asking for a deposit is just a sensible thing to do when you're lending money, end of. It's not really based on whether there's a possibility that house prices will fall or rise, there should be some sort of security provided regardless.

Obviously the pure 100% mortgages and 125% mortgages of the past were probably based on someone thinking that price falls just couldn't happen, and they were wrong. I imagine that if lenders knew then what they knew now they wouldn't have offered these products. Having said that, I doubt they regret doing so as the mortgage lending part of most UK institutions have remained very profitable with low default levels.

GMS

Full details of the product have yet to be confirmed but it is expected to be as Conrad says.

First Time Buyers have been forced out of the market to a point over recent years with a lot relying on the kindness of their parents to give a cash deposit.

This new product will allow them a 100% mortgage with the parents not needing to part with any hard cash, or raise finance from their home or other means.

There are many asset and equity rich parents out there who would love to help their children purchase a home but for many reasons find themselves unable to do so. This could be due to lack of income, restricted terms for mortgages, etc.

These mortgages allow the parents to give their children the start they want to.

Not for everybody and there are obviously cynical views towards this but if parents were to take a remortage to fund a deposit there would be a monthly payment to be made which would in effect put the home at risk anyway. Selling and downsizing may not be an ideal choice for all and equity release can often be a poor choice.

As long as all parties are happy with the transaction this product could be a huge boost to the housing market

dtsazza

Loopgames wrote: »

If these banks would just stop with their gimmick type mortgages and let the natural demand and supply economics kick in then FTBs will be able to soon buy their homes. Homes will ironically be more affordable.

FTB should just be patient.

I completely agree with the sentiment - though I don't think it's the banks that are entirely at fault.

I cringe every time I see the government trying to step in and come up with some sort of scheme related to the housing market, especially when it's in the name of "helping FTBs". Most of these appear to be coming from the thought that house prices falling are bad somehow, and the key is to stimulate demand to prop up the current prices.

When in reality, house prices have been distorted through an availability of (too-)easy credit; if markets are to return to rationality then almost certainly prices will need to fall. Incidentally this is almost certainly the best help that FTBs can get - more affordable homes will trump stamp duty cuts and deposit assistance on more expensive homes any day.

The truth is, we've had a binge where we consumed in the past against future earnings. The sober truth is that the only return to normality is to underconsume now to redress the balance. The longer this is denied by politicians and voters, the worse the eventual correction will be.

Cleaver

Loopgames wrote: »

If these banks would just stop with their gimmick type mortgages and let the natural demand and supply economics kick in then FTBs will be able to soon buy their homes. Homes will ironically be more affordable.

Let's say you're a bank. Would you prefer to lend someone £150,000 now or £120,000 if and when house prices fall? High house prices are good for banks, because they make more money from lending larger amounts. So the key for banks at the moment (and always has been and always will be) is to try and come up with 'gimmicky' products to get people to use them, thus making more money. Banks don't want lower house prices.

The product in question sounds quite clever really. Who has a lot of equity in their homes? Old people. What do old people have? Children. What can't children afford? Houses. Do banks want house prices to come down? No. But do banks want to lend to kids who can't afford houses? No. Hmmm, catch-22. Ahh, but can we base a product on the equity of the parents, give the risk to the parents, but lend the money to the kids? Yes. Good, let's do that then.

Graham_Devon

Cleaver wrote: »

At the risk of sounding pedantic, I don't think banks asking for a 10% or 25% deposit means that they think that prices will fall by these amounts. Asking for a deposit is just a sensible thing to do when you're lending money, end of. It's not really based on whether there's a possibility that house prices will fall or rise, there should be some sort of security provided regardless.

Obviously the pure 100% mortgages and 125% mortgages of the past were probably based on someone thinking that price falls just couldn't happen, and they were wrong. I imagine that if lenders knew then what they knew now they wouldn't have offered these products. Having said that, I doubt they regret doing so as the mortgage lending part of most UK institutions have remained very profitable with low default levels.

Due solely to the taxpayer, and low interest rates. Would have been carnage otherwise.