Too good to be true? [95% LTV]

grholden

Relative newbie to the world of mortgage enquiries, but please can someone tell me what the catch is with the Skipton's apparent offering of 95% LTV mortgages here: http://www.skipton.co.uk/mortgages/fixed_rate_mortgages/2yr_95ltv.aspx

Any help is appreciated.

DannyboyMidlands

Well:

1. The initial rate isn't great. 5.99%.
2. The follow on rate is arguably worse. Base rate plus 4.45%.
3. The fix is only for 2 years.

What happens in 2 years time if base rate has risen or you've lost your 5% equity or both?

DVardysShadow

No catch, AFAICS. But they may be very picky about their borrowers.

95% looks like a bet on the part of Skipton that house prices have stabilised. If that assumption begins unravelling during your purchase process, you may find the product pulled.

grholden

DannyboyMidlands wrote: »

Well:

1. The initial rate isn't great. 5.99%.
2. The follow on rate is arguably worse. Base rate plus 4.45%.
3. The fix is only for 2 years.

What happens in 2 years time if base rate has risen or you've lost your 5% equity or both?

Thanks for your response.

We are planning on staying for a long time and although the rates do seem high, it would get us into the property that we want to buy (a 4bed (we are currently in a 3bed)).

We were just lead to believe that 5% didn't exist at all.

grholden

DVardysShadow wrote: »

No catch, AFAICS. But they may be very picky about their borrowers.

95% looks like a bet on the part of Skipton that house prices have stabilised. If that assumption begins unravelling during your purchase process, you may find the product pulled.

Thanks for your input - appreciate what you're saying.

steveM1978

Skipton are VERY picky when it comes to offering this product. I spoke to a Business development manager and he said that if you are under 25 you dont stand a very good chance, additionally I know an advisor who once said "you have to be related to the queen for that product!"

grholden

steveM1978 wrote: »

Skipton are VERY picky when it comes to offering this product. I spoke to a Business development manager and he said that if you are under 25 you dont stand a very good chance, additionally I know an advisor who once said "you have to be related to the queen for that product!"

We are both over 25 (one well and the other 3 years), both teachers and have a combined income of about 55k.

Do you think it is worth a phone call to Skipton in the morning?

DannyboyMidlands

I'm not suggesting that you're going to want to move in 2 years but say base rate has risen to 2% (or 3% or 4% or whatever) then you'll be paying 6.45% (or 7.45% or 8.45%). You'll therefore be wanting to remortgage.

But

If you only have the 5% equity that you started with or have lost it due to price falls, then you'll be trying to find a 95% or 100% mortgage and who knows if they will be available?

Basically I'm saying that you need to work out a few scenarios and make sure that you can cope. At the moment it sounds like a bit of a gamble. Far better to save a decent deposit.

DVardysShadow

grholden wrote: »

We are both over 25 (one well and the other 3 years), both teachers and have a combined income of about 55k.

Do you think it is worth a phone call to Skipton in the morning?

To me, your income stands against you.

Follow the logic. At income*3.5, you are looking at a loan of 192,500. That is 95% of 202.63. You are saying that you only have about 10,000 in savings. On an income of 55,000? You don't make it to 90% with 20,000?

In your position, I suggest a serious review of how you manage your money and develop a plan to get to 10% deposit within 9 months. Despite today's news that house prices went up by 1.3% in July, this is only noise. Even if house price inflation takes off a little bit, you can outstrip the effects of that inflation on your deposit and get yourself to 90%, where the deals will be that much better and you will easily beat any house price inflation over the time it take you to save up to a 10% deposit.

grholden

DannyboyMidlands wrote: »

I'm not suggesting that you're going to want to move in 2 years but say base rate has risen to 2% (or 3% or 4% or whatever) then you'll be paying 6.45% (or 7.45% or 8.45%). You'll therefore be wanting to remortgage.

But

If you only have the 5% equity that you started with or have lost it due to price falls, then you'll be trying to find a 95% or 100% mortgage and who knows if they will be available?

Basically I'm saying that you need to work out a few scenarios and make sure that you can cope. At the moment it sounds like a bit of a gamble. Far better to save a decent deposit.

Thanks for your voice of reason mate, I appreciate that my posting suggests actions of haste and, in all blatant honesty, I'll admit to thinking along risky lines at times. We're desperate to move. Although I feel that your suggestion of such a sizable rise of BOE rate may not occur, nevertheless you do right to suggest it as it IS a possibility.

But, having slept on it and talked about it at length last night, we're not as inclined to clutch at as many straws today, lets say

grholden

DVardysShadow wrote: »

To me, your income stands against you.

Follow the logic. At income*3.5, you are looking at a loan of 192,500. That is 95% of 202.63. You are saying that you only have about 10,000 in savings. On an income of 55,000? You don't make it to 90% with 20,000?

In your position, I suggest a serious review of how you manage your money and develop a plan to get to 10% deposit within 9 months. Despite today's news that house prices went up by 1.3% in July, this is only noise. Even if house price inflation takes off a little bit, you can outstrip the effects of that inflation on your deposit and get yourself to 90%, where the deals will be that much better and you will easily beat any house price inflation over the time it take you to save up to a 10% deposit.

Thanks, I hear what you're saying and, yes, the fact that house prices are rising shouldn't panic us into making a purchase now. I understand from your post that our saving of a healthy deposit would be more considerable than any average % rise in house prices.