The End Of An Era

Dan_Collins_2

OK, let me make my self clearer.

They way in which the 100% product was used is wrong to a point. Over 5X income etc etc. However in the correct market conditions it can be used well. Also for proffessionals its a very good idea. It got me on the market, as I have posted before I made over 45k! I agree the 100% mortgage I took out was a really bad move!!?

The 100% in theory could be used now. 90% secured and 10% unsecured. A very very good credit score and no silly 5X income. Lets say you earn 25k per annum in your new job and you get 5k per annum bonus etc and your oh earns 25k but no savings. Rent will be 600 plus per month. Base the lending on the base only and they can reduce the lending when they are paid the bonus! Also repayment only.

They have been phased out for different reasons. Lack of funding and possible house price reductions. Makes sense to me but I think they will be back.

Also whats to stop a client taking a personal loan for 10% then borrowing the rest! Sounds like a 100% mortgage to me!

Although I do think 125% was always a little silly!

So please wind your necks back in!

mpsavuk

Dan_Collins wrote: »

OK, let me make my self clearer.

They way in which the 100% product was used is wrong to a point. Over 5X income etc etc. However in the correct market conditions it can be used well. Also for proffessionals its a very good idea. It got me on the market, as I have posted before I made over 45k! I agree the 100% mortgage I took out was a really bad move!!?

The 100% in theory could be used now. 90% secured and 10% unsecured. A very very good credit score and no silly 5X income. Lets say you earn 25k per annum in your new job and you get 5k per annum bonus etc and your oh earns 25k but no savings. Rent will be 600 plus per month. Base the lending on the base only and they can reduce the lending when they are paid the bonus! Also repayment only.

They have been phased out for different reasons. Lack of funding and possible house price reductions. Makes sense to me but I think they will be back.

Also whats to stop a client taking a personal loan for 10% then borrowing the rest! Sounds like a 100% mortgage to me!

Although I do think 125% was always a little silly!

So please wind your necks back in!

A mortgage advisor suggesting customers borrow a 10% unsecured deposit as well?

Surely that's grossly irresponsible advice?

If prices go down only 1% they'll be in instant negative equity!!

If they go down a heck of a lot more and they get into financial trouble they will be the first to walk and post their keys back because they have no "skin in the game".No investment to protect.

What happened to the old fashioned idea of saving for a deposit?

hugglette

we had a 100% for our first house and I think that in certain circumstances they are a good idea. as long as they are not used to lend crazy amounts and the people can afford them i think they are a good way to help people get on the ladder. we used one for our first house of 73k. if we had waited till we had a deposit it would have been months before we could have got a house and then it prob would have been too expensive for us anyway

Dan_Collins_2

mpsavuk wrote: »

A mortgage advisor suggesting customers borrow a 10% unsecured deposit as well?

Surely that's grossly irresponsible advice?

If prices go down only 1% they'll be in instant negative equity!!

If they go down a heck of a lot more and they get into financial trouble they will be the first to walk and post their keys back because they have no "skin in the game".No investment to protect.

What happened to the old fashioned idea of saving for a deposit?

Please dont add to my post. I would not advise that a client should take an unsecured loan. That is the way that most 100% mortgages were set up. I then go on to say that a client can take the 10% as a loan before even talking to me. They would not be in negative equity as they have 90% secured.

You have to understand, every 100% mortgage I arranged, we went through the " a deposit would be better in the long run" type chat. However most asked about 100% mortgages. We have to explain the pros and cons and in our letters confirming our advice we have to confirm it all over again.

I cant turn business away just because a client is going against my advice or is wanting a 100% mortgage.

Nobody says anything when people buy car on finance, you are in neg equity the day you buy it!!

I keep hearing about back in the day when people saved for a deposit, pre crunch conditions were very hard on FTB's and it was increasingly hard to get on a ladder. I even had to use 100% products when a client had 10k savings. After fees they may only have 2 or 3% deposit and before anybody shouts Halifax charge HLC!

Conrad

The beginning of the end for the army of mortgage 'advisers' as well.

By the end of the last crash all the EA's in my town bar one had gone out of business taking 'advisers' out with them.

A mass cull is long overdue

Geoff13_2

mpsavuk - old fashoined way of savings?

I read an article the other day that stated that during the late 80's 100% mortgages accounted for around 30% of the market - last year they accounted for 5%. Maybe lenders haven't been quite as irresponsible as people are making out - but where are the headlines in that

Dan_Collins_2

Conrad wrote: »

The beginning of the end for the army of mortgage 'advisers' as well.

By the end of the last crash all the EA's in my town bar one had gone out of business taking 'advisers' out with them.

A mass cull is long overdue

Conrad I hope your not judging me on a forum?

Your right, the rubbish or maybe good but with no back up may go down the tube! I am happy with the advice I give and so are my clients!

chappers

I agree with Dan the product in itself is not inherently bad, in fact quite the opposite and has it's place amongst the whole portfolio of mortgages, Its sometimes the advice , the iressponsibility of both borrowers and lenders and the overeagarness of some buyers that is to blame.
A gun can be either a tool or a weapon depending upon whose hands it is in.
Think I heard today that B&W were still doing 100% gaurantor mortgages.

Gorgeous_George

In a rising market, 100% was no problem. In a falling market, they are a disaster.

Brokers do not know which way the market will turn and therefore should always advise against them (as Dan says he does).

A 40% fall in prices will see many people looking for 100%+ remortgages. It may be worth paying a ERC to get a long term fix now before the equity disappears.

GG

Dan_Collins_2

Its common sense that a 100% mortgage is risky, and as you say George in a falling market they can go wrong. I imagine that if house prices drop a large % then when they start to rise they will come out of the closet again!