Adverse mortgages

Penguin66

Hi, I have  been building my credit up and was planning to buy a property in July using Bluestone as I have adverse credit.  I have just looked at their deposit requirements and rates and they have just gone through the roof!!!

Is this down to the virus and does anyone think it’s a temporary thing? Or are we looking at hefty deposit requirements and higher rates in general?

Thanks 

mwarby

it's probably trigger by the virus. The downturn presents the following risks that I can think of

- downturn in housing market - they might get less than property was worth at time of purchase, this makes say a 90% mortgage higher risk than it would be during a time prices were steady or rising

- downturn in jobs - they've seen a number of people needing mortgage holidays(which could require extension) due to coronavirus and it's not clear what the medium to long term effect will be

- downturn in savings, how many have pulled savings from fixed term products, or stopped saving, this might make it more difficult to lend

They've obviously decided for now that there is a higher risk of needing to repossess and repossessions not covering all the loan and costs. I expect for some lenders this may last a while(been a big wakeup call)

Penguin66

Thank you for that info! I guess nothing is certain for anyone for the next couple of years. 

mwarby

this might add some context Nationwide are no longer offering 95% mortgage just 75% for now, and that's for none adverse cases https://www.bbc.co.uk/news/business-52106119

Galloglass

If banks have withdrawn the 95% LTV down to 75% LTV, the Risk departments are factoring in a house price drop of 5%-15%. 

You might want to wait buying a property for a while.