chat with mortgage advisor

Carl31

J_i_m wrote: »

Whilst that is true...

Many people still overlook that currently the market rent rates on properties of comparable value are significantly higher than the monthly mortgage repayment would be...

And I don't know about anyone else, but I struggle to see how a monthly rent which is significantly higher than the monthly mortgage repayment is anymore affordable.

* I know you didn't say it was But I just wanted to point out the irony of refusing mortgages on the grounds of affordability when the result is more likely to push people into even less affordable rents.

That's not really the banks problem though, they want to know if they will get all of their interest payments up to the end of the term and their investment is safe

I can't see they are that worried about defaulting, as surely they can just claim the property if there was a problem

ukcarper

Carl31 wrote: »

I was asked for utilities costs to include phone and Internet, travel/fuel costs, food, credit commitments, any tv/sky subscriptions, then general living costs, which didn't need details. Plus how many kids

So basically everything and the £50 is just spare cash.

neverdespairgirl

When we worked out what we could afford to spend on a mortgage, we set out our budget including things we like to have.

If our mortgage went up 3 times, we wouldn't enjoy it. But we'd cut back on holidays / nights out / theatre tickets / day trips before we'd risk the roof over our heads. I have a funny feeling we're not alone in that.

lisyloo

Well, that's surely the point being made? The advisor said that people were being offered mortgages when they have 50 quid left after their outgoings?

If that is AFTER 7% interest rates i.e. worst forseeable case and all living expenses are included then I don't understand what the issue is.

Can you explain why you think there is a problem if all expenses and rising interest rates have already been accounted for?
What scenario are you forseeing that I'm missing?

How is that affordable?

Well - my understanding is that it includes the worse case scenario on interest rates and all living expenses and they STILL have money left over.

Why do you think it isn't affordable?

I'm open to the possibility I've got something wrong but please elaborate so I can understand.

Thrugelmir

Carl31 wrote: »

I can't see they are that worried about defaulting, as surely they can just claim the property if there was a problem

Lenders are under a regulatory requirement to lend responsibly. MMR had a broader remit than the media has reported. Any lending decision will be based on a conservative level of outgoings.

lisyloo

Lenders will be worried about defaulting.
Houses get about 70% of their market value at auction.
If a lender has to maintain a property e.g. Cut the grass, weed the garden, then they have to pay professionals.
If a lender has to sell a property that needs to be done in professional time by paid staff.
Plus those getting repossessed sometimes deliberately trash a property out of spite knowing the bank can't get anything from them if they are bankrupt.
Also there is the potential for bad press.
Does it still look attractive?

michaels

lisyloo wrote: »

Lenders will be worried about defaulting.
Houses get about 70% of their market value at auction.
If a lender has to maintain a property e.g. Cut the grass, weed the garden, then they have to pay professionals.
If a lender has to sell a property that needs to be done in professional time by paid staff.
Plus those getting repossessed sometimes deliberately trash a property out of spite knowing the bank can't get anything from them if they are bankrupt.
Also there is the potential for bad press.
Does it still look attractive?

Don't think that is quite the point - in reality the banks can no longer just look at it on the 'what is in it for us' basis, otherwise they could lend at 25% ltv to those with no income as they could be certain of not making a loss whether the borrower ever paid.

Thrugelmir

lisyloo wrote: »

Lenders will be worried about defaulting.
Houses get about 70% of their market value at auction.
If a lender has to maintain a property e.g. Cut the grass, weed the garden, then they have to pay professionals.
If a lender has to sell a property that needs to be done in professional time by paid staff.
Plus those getting repossessed sometimes deliberately trash a property out of spite knowing the bank can't get anything from them if they are bankrupt.
Also there is the potential for bad press.
Does it still look attractive?

The whole point of good mortgage lending is to lend to the best risks and minimise repossessions. Simply isn't profitable enough otherwise.

aardvaak

lisyloo wrote: »

If the calculations already allow for increasing interest rates then why do you think people need loads of money spare?

£1000 seems a lot to me, but of course it depends what was included.
For example was there a budget for unexpected household or car maintenance which can be foreseen to a degree. We're holidays included?

If everything is covered off then I'd almost go as far as saying it's too much and you might want to consider increasing pension contributions or other investments. That's a gut reAction though because I don't know the details of what't included e.g. Emergency fund?, household repairs, car repairs?, holidays?

These low interest rates have not helped anyone really.

Back in the normal rates of 6-7%+ people stretched themselves - when rates changed they winged now they are artificially low idiots are still stretching themselves and when they change they will still winge - there are a whole load of youngsters who have never seen normal rates.

lisyloo

Agree aardvark - as rates have fallen prices have risen.
However I've always said it was primary done for the banks/ business and not primarily for. Indivividuals or the housing market.

Still waiting to have the main point elaborated as to why it's unaffordable if the calcs show it can all be afforded under stress conditions ??