Mortgage advice please..

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Third Opinion said:
Lots has changed in the last couple of months!!

Seems the Natiowide now want a 25% deposit to get a decent rate.

http://www.guardian.co.uk/money/2008/feb/25/houseprices.mortgages

I think it is becoming much harder to deny the housing market is slipping into trouble.
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I've just read that myself - house prices also fell 0.2% this month according to Hometrack. We are still in the 'denial' phase at the moment, but that will change very soon and we should see some decent reductions in the property market.

If I need a 25% deposit then that limits me (at the moment) to just over a £100,000 home. In the area I want to buy they are generally around the £350,000 mark. It may take me a while to save the £87,500 I need; but then again I doubt the property will be that expensive by that point ;)
 
This quote from the Times relates to the disappearance of 100%+ mortgages:


Mortgages for up to 95% are also disappearing fast. Alliance & Leicester, West Bromwich, Britannia and Barnsley building societies have all reduced the maximum they will lend from 95% to 90% of the value of the property.
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While all the heat and light relates to the plight of those trapped on 100%+ mortgages, the sentence above is far more important for our purposes.

Because many more people have 95% than 100%+ mortgages. And a reduction of LTV for 95% to 90% for a given deposit reduces purchasing power by 50%.

This is one of those scenarios where intuition, which would suggest a reduction in purchasing power of about 5%, is lying.

EG:

A 10k deposit and a 95% LTV mortgage enable one to buy a house costing 200k.

But a 10k deposit and a 90% LTV mortgage enable one only to buy a house costing 100k.

If you doubt it, one way to convince yourself is to do the maths trying various house values with a 10k deposit and 90% LTV.

Another is to consider the mortgage not in terms of LTV but in terms of deposit required.

95% LTV means a 5% deposit is required, whereas 90% LTV means a 10% deposit is required.

IE:

The deposit needed per pound of house price has doubled. Or the house price purchasable per pound of deposit has halved.

Interesting times!
 
Mad old tory said:
Aha, so you're in the I can't afford the house I want therefore I'm egging on a crash camp. Makes sense.
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As oppossed to lets encourage inexperienced young people to take out huge, interest only mortgages and ridiculous multiples of salary. Also tell them they are being unreasonable if that expect to buy any more than a studio flat in a de-militarised zone for any less than 150k.
 
I'd also recommend buying a place you are going to be happy living in for several years.

This is not as daft as it sounds as more and more people now are buying places simply to get on the property ladder. If you can afford the place you want to live in then now is as good a time to buy as any. I'm looking to stay in our new place for several years so much so that I don't really have to worry about the house prices going up or down as I'm not really going to want to sell anytime soon.



M.
 
Third Opinion said:
As oppossed to lets encourage inexperienced young people to take out huge, interest only mortgages and ridiculous multiples of salary. Also tell them they are being unreasonable if that expect to buy any more than a studio flat in a de-militarised zone for any less than 150k.
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I bought my first house with my girlfriend just over a year ago. A relatively new (15 yrs) 2 bed mid-terraced property in the sticks of Shropshire with modern appliances, a garden, 2 car parking spaces, GSH, double glazing and in a nice area and cost us £106k after a 4% deposit. I'm the main earner on £18k before tax and we get by so there are properties out there, it just takes a while to find them if you can't afford a £250k mortgage.
 
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I think the more deposit you have the better, but i would keep a few K for upgrades fixes. Me and her indoors got our new house 8 years ago (end terrace, 2 bed garage sticks of shropshire too) for £53k, which was the asking price at the time. We had 5% deposite in cash but were turned down. We found out later that it was the guy who was selling the house had unpaid bills on a car.

Thankfully family lent us some to get a 10% deposite and that was that. We choose a 5 year fixed for peace of mind and it helped us with our 'bills' account so we could work out a nice fixed payment (this has gone off the scale now our gas and electric bills are changing all the time!).

Looking back on it we should have gone with a variable as over the first 5 years it dropped so we could have saved money. But 2 years ago when our 5 year fixed ended we still opted for another 5 year fixed with the same provider (aplication fee of £400). We also upped the repayments so we reduced the term from 20 years left to 15 years and i fell off the chair when she asked if i wanted to know how much interest that would save me 'if' the rate stayed unchanged. £15k!!!!.

We are aiming to reduce it again to 5 years next time we go back. We want our mortgage payed off before we are both 40.

I strongly recomend a fixed rate, it means you can just forget about the termoil in the banks and such. Worse case is you 'could' save £50 a month if the interest rates dropped a lot but its a gamble. Bad news with any fixed rate is it is useally more expensive to apply for one.
 
i'm looking to buy on my own, but i think the only way i might be able to get a place is with co-ownership atm. i'm in northern ireland where the prices are just silly compared to the average wage people are on. even for 1 bed 'apartments' (annoying sweet talking estate agents, i hate this term, most of these apartments are flats!)

i'm just going to keep putting money away in my savings account for now to build up a decent deposit.
 
Was planning myself to buy a home, but london prices are just silly at the sametime am pondering if the market does crash and we get some decent prices, but then I feel waiting around for something that may not happen isnt the best move.

For now think ill continue to save and check.....
 
HighlandeR said:
For now think ill continue to save and check.....
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Very wise.

I suggest that you visit www.housepricecrash.co.uk and keep yourself up to date with the state of the economy generally.

You have to accept some of the posts are plain nonsense and they have a vested interest in seeing the market crash, but they can source fantastic external (and therefore reliable) reports and information from the most important financial and housing market institutions.

There's also a few highly intelligent people who post there, who have the ability to explain complex financial systems in a way that's easy to understand.

As I said, you just have to ignore the silly VI members and focus on the real information because there's a lot there.
 
The Mad Rapper said:
If you can put down any deposit over 10% you will also have access to the best available rates - you're pretty much considered 'Super Prime' in that situation.
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I dunno, from what I've seen there are some rates which require a lower LTV than that. While they may not necessarily be market-leading offers, I've seen quite a few lenders offering slightly better rates/different products to those with say a 85%, 80% or 75% LTV. 10% deposit is the figure which gets thrown about a lot as this opens up most of the market, but it will still exclude some offers unless you increase that up a bit.

Note I'm not suggesting that you need a deposit over 10%, but it can open a few doors that would otherwise be closed.
 
Moorron said:
I strongly recomend a fixed rate, it means you can just forget about the termoil in the banks and such. Worse case is you 'could' save £50 a month if the interest rates dropped a lot but its a gamble. Bad news with any fixed rate is it is useally more expensive to apply for one.
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I think it depends a bit on the personal situation of the home buyers. One of the 'pros' is that having a 'fixed' mortgage payment does offer some people peace of mind and also helps them with budgeting as they know exactly how much they will be paying over the next x years/months.

However, there may be more to the 'cons' than simply missing out on any fall in rates. Typically fixed rates tend to have a relatively high application/admin fee (sometimes disguised by having it fairly low but then a pricey valuation fee on top), and will almost certainly have early repayment charges to boot. Of course, for many people ERC are irrelevant - as I said to begin with, it depends on the people involved and how much flexibility they want from their mortgage.
 
The latest figures from Nationwide show another fall in house prices, that's four consecutive months.

The latest BoE mortgage approvals figures are the lowest for at least the last 6 years (I couldn't be bothered looking back past 2002).

The crash contines to gather steam...

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