100% Mortgages?

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  • 100% Mortgages?
  • Premier Icon Scott TB
    Subscriber

    Will,

    100% mortgages are pretty much extinct I'm afraid, but good mortgage advice isn't! Where are you in the UK and I'll recommend someone? I used to work for a Building Society so know loads of good brokers who'll do their best to help you.

    goog
    Member

    my advice

    100% don't do it !

    Premier Icon Scott TB
    Subscriber

    Sorry for the double posting – my computer had a senior moment:

    Will,

    100% mortgages are pretty much extinct I'm afraid, but good mortgage advice isn't! Where are you in the UK and I'll recommend someone? I used to work for a Building Society so know loads of good brokers who'll do their best to help you.

    Premier Icon Teetosugars
    Subscriber

    Good luck..

    Me and the Mrs both pay 40% tax, and went for advice..

    As we only have a £10k deposit, we where told the best they could offer was £100k 😐

    and that was with a 7.5% rate..

    The best advice they could give was "go and rent and save like ****"

    so, where are goin to carry on living on one wage, and saving the other..

    Premier Icon BoardinBob
    Subscriber

    Me and the Mrs both pay 40% tax, and went for advice..

    As we only have a £10k deposit, we where told the best they could offer was £100k

    WTF

    something not right there. At a bare minimum you have a combined income of £69,200 and they'll only give you a LTV ratio of 1.44 😯

    jonb
    Member

    Banks are still worried about prices crashing further.

    The bigger the deposit the less risk for them if you default as they have more of a chance getting the loaned money back while any negative equity is paid for by your deposit.

    I would imagine regardless of earnings the loan amount in Teetosugars case was controlled by risk management by the bank.

    Premier Icon Teetosugars
    Subscriber

    BoardinBob – Member

    WTF

    something not right there. At a bare minimum you have a combined income of £69,200 and they'll only give you a LTV ratio of 1.44

    Thats what we thought- mortageabilty wise we where fine, its just that we had "such a small deposit…"

    Does anyone know if these are available anywhere at the minute? I have been enquiring and most places I have asked say 10% minimum.

    Is there any circumstance where 100% would be considered? Or can anyone point me in the right direction for advice and good deals?

    Cheers

    Will

    Scott TB-Newcastle Upon Tyne mate! if you know wheres good I would appreciate the heads up!

    Teetosugars-thats really bad! I might be fine for the mortageability too but I am along way off 10K deposit….

    Premier Icon Scott TB
    Subscriber

    Willy,

    Bite late to sort right now but checkup on the thread tomorrow and I'll post some options for you.

    Premier Icon aracer
    Subscriber

    something not right there. At a bare minimum you have a combined income of £69,200 and they'll only give you a LTV ratio of 1.44

    Thats what we thought- mortageabilty wise we where fine, its just that we had "such a small deposit…"
    Actually at least £82k (and £60k+ take home). Which does make me wonder why you haven't been "saving like ****" up to now if you've only got £10k deposit. Of course your mortgageability wouldn't be so fine if one of you lost your job and interest rates went up – which is the sort of thing the banks take into account in the current climate.

    The thing is, with people asking about 100% mortgages, has nobody learnt anything? In the good old days of stable economic systems even 90% mortgages were pretty much unheard of – people saved up a deposit first. Though I'm probably ignoring the way our whole economy is driven by debt nowadays 🙄

    Premier Icon Scott TB
    Subscriber

    Fundementally there is no real problem with 100% mortgages – you have removed the "saftey net" of an equity cushion between the loan and the house value, but you have little comfort as a lender with 10% either.

    The issue is that if you are lending at a high LTV you have to ensure that the people you lend to are far better credit risks than at lower LTV's – this is where the problems occured with the likes of Northern Rock; it was the quality of the applicant that caused the problems. They'd lend to people at 125% LTV, at 5x income, who had already missed payments on other credit commitments in the past!?! No banking qualifications needed to know that wasn't going to end well!!!!

    Premier Icon Scott TB
    Subscriber

    Will,

    Rather than post peoples names here please e-mail me direct at taylorbarrs@googlemail.com and I'll send you some names and numbers.

    Which does make me wonder why you haven't been "saving like ****" up to now if you've only got £10k deposit.

    That is what I thought! There must be lots of bling in your house!

    Premier Icon Stoner
    Subscriber

    actually, the bottom (or near bottom) of the market is exactly the safest time for 100% mortgages 🙂

    I gather you will also need to demonstrate a good credit history (i.e. not a zero credit history, but one, say with a credit card that you manage well) these days. Seems counter intuitive to me, but was on Moneybox so it must be true 🙂

    epo-aholic
    Member

    i thought i'd heard a rumour that the govt. were going to do something along these lines for first time buyers through the rock???

    Premier Icon aracer
    Subscriber

    actually, the bottom (or near bottom) of the market is exactly the safest time for 100% mortgages

    Very true – one issue being that they need to stop doing so at some point when we are no longer at or near the bottom (the other being that they won't realise the loan value when they try to dispose of the asset, even if the market hasn't fallen, hence 90% is a reasonable maximum at any time).

    Premier Icon miketually
    Subscriber

    When we bought our 3-bed semi 9 years ago, we needed a £5.5k deposit and could get a mortgage for the rest based on one newly qualified teacher's salary.

    If we were starting from scratch now, we would need a £13k deposit and couldn't get a mortgage for the rest based on a top of the pay scale teacher's salary.

    Is it any wonder the market crashed?

    Premier Icon aracer
    Subscriber

    …and of course the prices were driven by the ability to get a 100% mortgage on a silly multiplier.

    FuzzyWuzzy
    Member

    Yeah it must suck atm to be trying to get on the housing ladder. When I bought my place 10 years ago 95% mortgages seemed to be the norm (with a slightly better interest rate for 75%) and 100% mortgages were freely available.

    Anyone who has a joint income of £80K should be laughed out of the room if they are only offering up a deposit of £10k.

    Ok people are bringing up examples of £5k deposits 10yrs ago BUT when i bought my first house 10yrs ago i also put down a £6k deposit, difference was that was a much much higher percentage of my take home earnings.

    £10k is a very low percentage of your available income and shows that either you have not got the ability to pay a mortgage of any greater amount than that offered OR you have shown little commitment to getting a mortgage and curbing your spending.

    Personally i think banks have a duty to carry on taking this course of action. The government has absolutely no right to start pressuring the banks into silly lending which got us into this trouble in the first place.

    This is not to be confucsed with the banks sitting on the money though. They should not be doing that either. It should be the correct interest for the correct risk. For the OP i would say he stacks up as a bad risk unless he can demonstrate a reason for such a poor deposit.

    FuzzyWuzzy
    Member

    I think having cycling as a hobby is enough to justify why you haven't got substantial savings :p

    Then he has demonstrated that he isnt suitable to borrow anything more than that offered and should not be complaining. Thread finished

    Premier Icon convert
    Subscriber

    Some very big assumptions being made about the op's ability to save built on not a lot of knowledge of the person in question (nothing new there from what I've read in the past).

    How do you know their personal circumstances? There could be divorce or some kind of colamity in the past that has sucked up all cash. Depressing as it it for the rest of us, but there are some professions (medics for example) that can virtually start their working life in the upper tax band but with some serious debts to pay off. I could well imagine a couple of doctors only a year or two into their working life "only" having 10K saved.

    Then of course there is the fact that rental rates are not a great deal different from mortgages which makes saving harder than it seems even for those lucky enough to earn that sort of cash. As one of the last of the generation that got through education with not a lot of debt, it must be pretty sucky at the moment being fairly newly graduated – you have studied hard all you life getting good grades then done "the right thing" and gone to uni only to be saddled with £20K of debt and even if you do get (and keep) a good job, you have years of paying back the debt before starting to save way more (as a proportion of income) than my generation had to before having the abilty to buy a house.

    Good luck with it – if you can get a descent offer, now would seem like a good time to get into the housing game with the rest of us having just taken a 20% hit. You might not have much to offer interms of savings at the moment, but as they say, if you don't ask, you don't get!

    Some very big assumptions being made about the op's ability to save built on not a lot of knowledge of the person in question (nothing new there from what I've read in the past).

    We can only work on assumptions unless the OP posts up the details of his past OR we have the benefit of a Mortgage interview with the OP which i would assume the lender would have. In which case that comments is no better than our presumptions.

    The fact that someone has gone through the education system and come out with debts is not something the banks should have to bend over and take ot for. You know the chances are that you are going to finish your education in debt. You know that you are going to have to save for a few years to get a deposit etc etc. What difference does this make to the banks.

    Its simple, if you want to get a mortgage you show an ability to pay it by having a good deposit or proof that you have enough income to cover the outgoings. If he has only £10k deposit from that income he has not demonstrated that ability unless there are other circumstances as you explained. But unless we know them, he doesnt get the money.

    Premier Icon Teetosugars
    Subscriber

    £10k is a very low percentage of your available income and shows that either you have not got the ability to pay a mortgage of any greater amount than that offered OR you have shown little commitment to getting a mortgage and curbing your spending.

    Hang on, let me just say, At the moment I have a mortgage, and yes its very small, but for the last 5 years, we have never defaulted.

    We only thought about moving 8 weeks ago, when we found out that our jobs are moving, and as for only saving £10k, we have only both been in the postion to save over the last 6 months- I was out of work fo a good while, and we where paying the mortgage on our house, while having to rent somewhere else due to work being no-where near our House.

    As it is, we are gonna save for a year, and then see where we are..

    Premier Icon footflaps
    Subscriber

    When I bought my house, 11 years ago, I had saved a £16k deposit on a salary of £26k – didn't take that many years either, just lived frugally.

    Riiiight. Information

    So from the banks perspective

    You have a (Small) mortgage that you have been paying for 5yrs – Great
    You have saved up £10k in 6mths (Wish i could) – Good and demonstrates that you would be able to put your money where your mouth is in 12mths time
    You were out of work for a good while – Bad

    I guess you knew the score before you came on here because in 12 mths time you are gonna have mega bucks deposit and 12mths work history behind you. A hell of a different picture.

    Surely this is a great example of the banks doing their jobs properly.

    Premier Icon Teetosugars
    Subscriber

    Exactly.- Assuming of course I'm still employed..!!

    Premier Icon Scott TB
    Subscriber

    Couple of things to bear in mind here when assesing lending:

    1) Affordability is king, not a multiple of income. So watch the "other" outgoings; food, credit cards, gym membership, etc – they all drag down the mortgage amount you'll be allowed.

    2) Income. Most lenders will currently only use guarenteed income to asses lending ability – so any commission/bonus/overtime will be ignored or only a small percentage of it will be used (maybe as little as 25%). So if you have a job where a good chunk of the money is coming from non-guarenteed sources your ability to borrow will be a lot lower than you think.

    I'm afraid it's all the joys of an open market – money is in low supply so those who have it can charge more and only lend to the safest applicants.

    barca
    Member

    Scott TB – in your professional opnion , what do you think the situation will be with regard to the availability of 95% mortgages in 12 months from now?
    My neice and her boyfriend have just decided to get hitched and have started saving for a deposit. They're hoping that things will have returned to a more normal state (pre 125% mortgages to anybody with a handshake) by then. Is this likely or do you think they will need to wait (and save) longer?

    Free financial advise, can I have some please? In a couple of months we come out of our 2 year fixed rate and go onto standard variable (I presume we do anyway someting will happen which I'm hoping means we pay less). So my question is should we go out and look for a new fixed rate or stick to what we've got. I expect interests rate could rocket in the near future? For what its worth the mortgage is about £100 000 with a £30 000 keyworker equity loan value has most likely lost £20 000 from the original £175 000.

    money is in low supply so those who have it can charge more

    Really?

    I may have this all wrong, but I don't think money is in short supply.

    CF quantitative easing

    I've said this here before (and I don't mind if someone (preferably someone other than Stoner) wants to explain why I've got it wrong as I can hardly believe it myself) but BANKS DO NOT NEED TO TAKE DEPOSITS IN ORDER TO LEND MONEY – they just create a loan and at the same time, write down the amount they have lent as an asset on their books. The reason they won't lend though, is because there is no longer a market for those assets (debts) so they can't resell them and take a profit without taking a corresponding risk.

    Anyhoo, the point is 100% mortgages just don't exist, but from experience, London & Country (brokers) offer the best (free) advice out there on what is available – if I wanted a mortgage I'd ring them.

    Gunz
    Member

    For what it's worth here's my obervances on getting a mortgage in the current climate (April this year).
    – 15% deposit offered with a good lump left over for the inevitable expense of moving.
    – Secure Armed Forces job held for the last 14 years with guaranteed employment for the next 12 years (after which final payment will almost clear amount outstanding).
    – Credit rating of 999. Was informed by Financial Advisor that he had never encountered one this high (I always pay my bills in good time).

    Reply from bank;
    Apologies but this customer presents too high a risk.

    Cue, two months of arguing to get a mortgage.

    Despite a host of promises from the banks, they still seem not to want to lend and are certainly not passing on lower interest rates (bunch of *****).

    stonemonkey
    Member

    I'll lend you a deposit a extortionate level of interest! 😀

    pjt201
    Member

    Gunz – Member

    For what it's worth here's my obervances on getting a mortgage in the current climate (April this year).
    – 15% deposit offered with a good lump left over for the inevitable expense of moving.
    – Secure Armed Forces job held for the last 14 years with guaranteed employment for the next 12 years (after which final payment will almost clear amount outstanding).
    – Credit rating of 999. Was informed by Financial Advisor that he had never encountered one this high (I always pay my bills in good time).

    Reply from bank;
    Apologies but this customer presents too high a risk.

    Cue, two months of arguing to get a mortgage.

    Despite a host of promises from the banks, they still seem not to want to lend and are certainly not passing on lower interest rates (bunch of *****).

    Yeah, the risk you'll be sent to Afghanistan and the mortgage will have to be written off…

    pjt201
    Member

    rightplacerighttime – Member

    I've said this here before (and I don't mind if someone (preferably someone other than Stoner) wants to explain why I've got it wrong as I can hardly believe it myself) but BANKS DO NOT NEED TO TAKE DEPOSITS IN ORDER TO LEND MONEY – they just create a loan and at the same time, write down the amount they have lent as an asset on their books. The reason they won't lend though, is because there is no longer a market for those assets (debts) so they can't resell them and take a profit without taking a corresponding risk.

    Well, there's nothing stopping banks just giving away money either but they don't. It's all about perceptions of risk and given the beating that banks have had recently from risky lending they're perceiving a much higher level at the moment than they were. The deposit reduces the risk to them.

    Gunz
    Member

    Yeah, the risk you'll be sent to Afghanistan and the mortgage will have to be written off…

    Well aware of the risks so insured myself against it. They still bitched.

    Premier Icon Scott TB
    Subscriber

    Ok, a fair few questions and opinions and, being a sucker for punishment and having time on my hands (I'm currently being made redundent – oh the joy of financial services) so here goes….

    a) 95% Mortgages – I wouldn't expect to see them retuning for a good few years yet I'm afraid. The lenders would need to see a positive, sustained upwards trend in house prices as well as increased funding to them via wholesale money markets to justify it.

    b) anagallis_arvensis – I'm afraid I can't give you specific advice here; but send me your location in the country (taylorbarrs@googlemail.com) and I can put you in touch with a decent advisor who'll be happy to help.

    c) London & Country – I know L&C (they used to be one of my key accounts) and if you're happy to deal over the phone and all you want is mortgage advice (as opposed to full financial advice covering protection, pensions, etc) then they are brilliant.

    d) Credit Score – the 999 refered to will be the credit score on an Experian or Equifax file. It's for guidence only – every lender will have their own credit score system and each will have their own "perfect client", so don't pay too much attention to the score on your credit file. I'd have to agree with the comments made that if you occupation is Armed Forces most score cards will punish you for it – it's a high risk occupation!

    e) Quantitive Easing/Lack of Money (this might get heavy – sorry!):

    Basically lenders can no longer sell debt on, the market is simply not there. So all lending is Balance Sheet Lending, i.e. they keep the loans. This means they have to fund the loans themselves in the long term, this ties up the money so they can't produce a new loan until older loans are paid-off.

    Second issue is that they require money to be deposited to lend it out, this is from 2 sources – you and me (retail) and institutions (wholesale). Wholesale money is lacking (poor sales = no profit, so nothing to bank!) and retail money is fiercly competitive – that's why you can get a savings account at 3% when base rate is sub 1%. The problem is then; if you got the money in at 3% you have to lend it at over that to cover the 3%, plus your costs, plus porfit – hence mortgage rates are 4.5% and over.

    Phew!

    Basically lenders can no longer sell debt on

    That's what I said.

    Second issue is that they require money to be deposited to lend it out, this is from 2 sources – you and me (retail) and institutions (wholesale).

    I don't think so.

    What about the practice of fractional reserve banking?

    How come so many people (I'm not having a dig BTW this is a genuine question) who seem to understand other aspects of the economy much better than me don't realise the effect of this? Am I missing something?

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