If you wait for the price crash...

WTF?_2

Lotus-eater wrote: »

Wasn't the deal with NR, 95% of the house value a mortage and the other 30% a unsecured loan? So the 30% presumably would go on the std load % rate ouch!

Mind you I might be talking bo**ocks here.

Nope, you're correct. It's effectively a 125% LTV mortgage, however NR wanted to spin it at the time.

eg.

Want to buy: 200k house.
Raise 10k from somewhere (eg. borrow from family or friends, who probably get the money from their credit cards)
Offer the ten grand as 5% deposit.
Get the 250k from Northern Rock.
Pay back your 10k 'deposit'.
Blow the extra 50k on huge plasma telly, BMW X5, two expensive luxury foreign holidays, designer gear, paying down existing credit card debts.
Feel rich, run the cards up again with your new, more expensive lifestyle over the next two years.
Go to remortgage and realise that you can't do so because prices have fallen and your new SVR payments are going to be about 80-100% more than you are currently paying....
:eek:
Complain that the government should do something and demand lower interest rates, irrespective of the effect that these will have on your basic cost of living.
Lose house and go bankrupt.

MissMoneypenny

mitchaa wrote: »

Does a mother really need 5 yrs off work to look after a child? Some want to, but i suspect most only do so because childcare costs are not worth them going back to work. (Lets not forget how long 5 yrs is)

Try looking at it from a childs point of view. Ask a young child of they would like mummy (or daddy) to be with them and their answer would be "yes". Well, if the child had a bond with their parents it would be.

Paul_N_4

HouseBuyer wrote: »

Why would people prefer higher mortgage rates for a smaller loan than a lower rate to a bigger loan? Would you not pay the same at the end of the day (since mortgages are 25 years).

And isn't it still a big ball and chain when you have a mortgage of 10% even though you bought your house at the corrected price?

How many people can realistically afford 25% deposit? If you are lucky and live rent free with the oldies, I can see that happening but even with us (as reasonable wage earners), we will struggle with paying our 250,000 repayment mortgage of about 1900 each month.

And no, we don't live extravagant lifestyles but we do need to have the odd new suit for work and ocassional takeaway.

Well if it really needs explaining. If you have a very large loan (because mortgage rates have been low, and thus house prices have been high), the only way mortgage rates are likely to go is up. Rising rates on a big mortgage is bad news. Even the smallest 0.25% increase has a big effect on what you need to repay over a 25 year period.

If on the other hand you have a smaller loan (because mortgage rates have been high, and thus house prices have been lower), the only way mortgage rates are likely to go is down. Lower rates on a small mortgage is good news. A small 0.25% increase isn't going to have that big an effect on what you need to repay over a 25 year period. And you'll easily be able to overpay.

As for the deposit thing. If you started a poll on here asking FTBers what size deposit they have, I think you'll find most have over 10% because you're on a money saving website. Yes the majority of the public won't have this, but they're not the people you're asking the question to.

MissMoneypenny

!!!!!!? wrote: »

Complain that the government should do something and demand lower interest rates, irrespective of the effect that these will have on your basic cost of living.
Lose house and go bankrupt.

And then look for someone to blame and sue.

hostman

If you can AFFORD the mortgage (fancy that, what a funny concept ...) and have a MINIMUM of 10% deposit, then you will have no problem being accepted by one of the many lenders.

The problem is, the banks have been reckless, lending to everyone, in search of high profits on high risk lending. It is embedded into the public physce that banks lend money to all, regardless of risk. This is wrong and has been corrected, to a degree, it's still not perfect and can be tightened a great deal further if the banks wanted.

mitchaa

MissMoneypenny wrote: »

Try looking at it from a childs point of view. Ask a young child of they would like mummy (or daddy) to be with them and their answer would be "yes". Well, if the child had a bond with their parents it would be.

Thats all and well if you are on benefits, but if you are a working family that has to work to pay for a roof over your head and put food on the table then there's no choice but to get back to work as the cost of living today is completely bonkers.

I/we have a joint income of £66k, if my wife was to give up work, we'd be left with solely my £43k and that simply is not enough for us to survive on with our expenditure. We have no choice but to work, otherwise my child would suffer the consequences. (There would be no 3 wk disneyworld holidays for example)

See where im coming from

It doesn't come down to, what the child wants in my household. Its what puts food on the table for my child to eat that is more important.

Of course, some have the luxury of staying at home and living off of state benefits. That way, the child gets best of both worlds:rolleyes:

Nothing to do with baby bonds, are you trying to say that someone that stays at home loves their child more than what i/we do ours, because they choose to stay at home, whilst we choose to work?

3under3

hostman wrote: »

If you can AFFORD the mortgage (fancy that, what a funny concept ...) and have a MINIMUM of 10% deposit, then you will have no problem being accepted by one of the many lenders.

The scary thing is that the OP it seems CAN afford the mortgage, with 10% deposit saved.. however with repayments of £1900 why would anyone want to sign up to 25 years of that?? I don't know where the house is but around my way 250k would buy a half decent 3 bed semi at best... Like I said before if their circumstances change for the worse at any time in the next 25 years they'd be in trouble.....

AnotherHB

Just in response to someone who was horrified by the amount suggested as a purchase price 250K is not an extravagant purchase price in the South East, basically a reasonable three bedroom semi.

It's an interesting question really. I'm also looking to buy for a similar price as the OP, have about £75K joint income, but also have a lot of cash, something like £120K. But I don't want to sink that into a house in a falling market, so I'd be looking to absolutely minimise the deposit amount. Probably I'll go for some sort of offsetting arrangement, but despite some of the comments here it is not all that sensible to minimise a loan for a house at the expense of capital, because it is not all that difficult to beat mortgage rates with return on capital from other directions, and once you've sunk it into a house you can't get at it.

It's really up to the bank who they lend to. But unless buyers are allowed into the market at reasonably favourable terms, the market will deflate, and this is a very dangerous scenario for the banks at a nervous time anyway. So I think there will be a balance struck personally. No-one is now desperate to get a foot onto the ladder at any cost, we can just sit and wait, so it will be difficult if not impossible to get a premium out of buyers.

If I were selling a house, I'd be very nervous indeed at the moment. Just the slightest hint of a slide in the market has radically shifted the balance: a small correction now could really set things off.

HouseBuyer_2

3under3 wrote: »

The scary thing is that the OP it seems CAN afford the mortgage, with 10% deposit saved.. however with repayments of £1900 why would anyone want to sign up to 25 years of that?? I don't know where the house is but around my way 250k would buy a half decent 3 bed semi at best... Like I said before if their circumstances change for the worse at any time in the next 25 years they'd be in trouble.....

Thank you, I think you've sort of summed up what's been playing at the back of my head. We can afford , we don't need/want a flat screen tv in every bedroom, we just have one in the main living room. We have cheapie furniture that we are happy with and replace ad hoc when necessary.

Of course we're not discounting the fact we will have increases in wages but presume there will be equivalent increases to cost of living (hopefully not as they are right now).

We're on the commuter belt to London, hence the prices.

WTF?_2

Paul_N wrote: »

Well if it really needs explaining. If you have a very large loan (because mortgage rates have been low, and thus house prices have been high), the only way mortgage rates are likely to go is up. Rising rates on a big mortgage is bad news. Even the smallest 0.25% increase has a big effect on what you need to repay over a 25 year period.

If on the other hand you have a smaller loan (because mortgage rates have been high, and thus house prices have been lower), the only way mortgage rates are likely to go is down. Lower rates on a small mortgage is good news. A small 0.25% increase isn't going to have that big an effect on what you need to repay over a 25 year period. And you'll easily be able to overpay.

Well put - and that's also why this time around we don't need the famous 'double digit interest rates' in order to put people into financial trouble repaying their mortgages, which precipitated the previous house price crash of the late 80s/early 90s.

Many people have quite literally taken on more debt than they can cope with. The assumption has been that the good times will always roll and house prices will only ever go up.

I'd expect this of an increasingly ill-informed public but there really is no excuse for the banks, who loaned out money with no regard for risk management.