Mortgage lending end of self cert.

[don4l]

groak said:

Gaspode said:

groak said:

Well-to-do bloke wants relatively low LTV loan on decently surveyed property. Won't provide income proof. Will provide A&L sheet and accountant's letter illustrating strong net worth and comfortable affordability.

'No income proof, no loan' is an idiot's decision. Isn't it obvious WHY it's an idiot's decision?

Not to me it's not.

From the other perspective, let's imagine I'm a bank. I have had a load of toxic debt because I've been lending to people who've been claiming they have adequate income to service the loans I've been giving them, now it turns out they haven't. More fool me for believing the "accountant's letters" that they have been offering me as proof.

So now I decide to change my policy, and demand adequate proof of income instead. Some bloke who I don't know from Adam rocks up and refuses to tell me what his income is as it's "none of my business". Why should I lend him anything?

Because the worst case scenario is that you recover your loan and all expenses via repossession.

Surely the worst case scenario is that the bank/Building society collapses, which damages confidence in the banking system- which leads to further collapses - which leads to lack of credit - which leads to recession, unemployment and a stagnating property market.

With hindsight, it might have been better if the lenders had checked the borrowers' ability to repay their loans.

Don
--

[Gaspode]

Alfa numeric said:

Just for fun, have a look on Rightmove and see if a place like your first house in the same area is for sale. Now divide the asking price by 3. Is it above or below 2011's average wage of £26k?

My first place was a 2 bed flat in the East End of London, bought off plan in 1998. Currently it's worth around 8.5 times the average wage and a 15% deposit would be £33k. 13 years after I bought it it's no longer achieveble as a first home for many.

Fair point. Our first house was a redbrick semi built in 1900 that needed complete renovation, it didn't even have an inside toilet. We pooed in a chemical bucket for the first 6 months while we did the place up. I don't think there is anything like that available any more. According to Rightmove, ignoring all the park homes, houseboats, and shared ownership properties, the cheapest 2-bed house within 5 miles of where our place was is £90,000. Admittedly not in a brilliant area, but ok - an outer suburb of Gloucester.

So yes, not within 3 times of average salary, but we didn't buy our first house on a single salary, and I wouldn't expect many people to do so these days. Two people earning below average salary should have a joint income of c. 40k. Save hard for 4 years, get a 30k deposit together. 30k deposit on a house for say 150k means a 120k mortgage - which is 3 times their joint salary.

I'm not saying it's easy, but I do believe its do-able.

[groak]

Trommel said:

Oakey said:

It still amazes me that some people get so bothered about these things they top themselves

It amazes me that people can consider it so inconsequential.

I don't really agree Trom. Ok, it's not inconsequential, that's insultingly trivialising, but no-one should ever even contemplate harming themselves over debt. The guilt and pariah status over financial loss is a 'UK thing' I think, though no doubt the japanese feel similarly. But yanks don't. In fact to many a yank businessman, you're not fully baked business wise till you've at least one 'disaster' on your CV. I kind of know what they mean. And there's an enormous difference between a reckless or even fraudulent scheme that disintegrates into financial chaos and one where circumstances - especially market circumstances beyond adaptability - cause a cake to crumble.

[Oakey]

Trommel said:

It amazes me that people can consider it so inconsequential.

Because in the scheme of things it is and it's a better outlook than the alternatives some choose, like the guy who shot his family and burnt down his house, or more recently the ex-copper who stabbed his family to death.

[groak]

don4l said:

With hindsight, it might have been better if the lenders had checked the borrowers' ability to repay their loans.

Do you mean their ability to pay it 3 years ago, 2 years ago, 1 year ago, and, if the lender's lucky THIS year, as shown by their taxable income via their accounts, or their ability to pay it NEXT year, or the year after, or the year after that. How exactly do you check for certainty that your self employed potential mortgagee can pay the loan next MONTH never mind in 5 years time? What is it they put at the bottom of financial products....' Past performance is no indication of future results'. And THEN they ask for historic accounts to 'verify' ability to repay?

No wonder they're bust.

[Trommel]

I agree that it shouldn't mean putting the barrels in your mouth, but it can't be a positive development that an easy way out of your £30k of personal unsecured debt is just to declare yourself bankrupt, walk away without a care and then do it over again.

From a business perspective (and I understand how that can easily impact on your personal situation), the Chapter 11 badge of honour thing is a bit strange to UK eyes, but I suppose it shows they at least value having a go.

[groak]

Oakey said:

Trommel said:

It amazes me that people can consider it so inconsequential.

Because in the scheme of things it is ........

Nope don't agree with that either. It's not inconsequential. It can have LOTS of consequences. But the solution certaily doesn't lie in self harming never mind harming others. Many people get into many scenarios without considering either exit strategy or worst case scenarios. That doesn't mean accounting for nuclear wars or alien invasions. Just thinking through a bit of 'what if' and how you'll manage matters if 'what if' actually happens.

[Oakey]

Trommel said:

I agree that it shouldn't mean putting the barrels in your mouth, but it can't be a positive development that an easy way out of your £30k of personal unsecured debt is just to declare yourself bankrupt, walk away without a care and then do it over again.

From a business perspective (and I understand how that can easily impact on your personal situation), the Chapter 11 badge of honour thing is a bit strange to UK eyes, but I suppose it shows they at least value having a go.

See, I don't even know if I'll go bankrupt. These companies keep threatening it and have been for years but they never actually go through with it. I could simply just wait it out. Believe me though, it's not something I wish to do all over again, I'm done with credit.

[oyster]

Alfa numeric said:

Guam said:

Bang on, I was in exactly the same situation, what we see on here <and elsewhere> is the whining of the "entitlement" generation.

We should all take a drop in equity so the next generation can have it easier is the call, lol.

Gaspode said:

...but back when we were after our first mortgage we had to find 15% of the purchase price before we could get a mortgage (they would only lend at 3x salary)...

Just for fun, have a look on Rightmove and see if a place like your first house in the same area is for sale. Now divide the asking price by 3. Is it above or below 2011's average wage of £26k?

My first place was a 2 bed flat in the East End of London, bought off plan in 1998. Currently it's worth around 8.5 times the average wage and a 15% deposit would be £33k. 13 years after I bought it it's no longer achieveble as a first home for many.

It's hardly fair to pick a point very close to the start of a bubble as the basis is it?

[Gaspode]

anonymous said:

[redacted]

Round our way, all the cops lived in tied houses - the village police house. My old man was a social worker. He was never able to afford to buy a house, we lived in rented accomodation all the time I was growing up (!960s - 70s).

[Oakey]

anonymous said:

[redacted]

How did the people in my neighbourhood afford their homes in the 80s if that was the case? These people weren't high flyers, just normal people with crappy low paid jobs.

[groak]

The self-cert issue typifies one of the worst kinds of UK thinking. A few can't handle it, so no-one's getting to do it. Drawing a football analogy, long ago I eagerly looked forward to saturday afternoons, two of whose 100% vital component parts were a King Eddie and a flask of good brandy!! Haven't smoked anything for years, but I really miss a swig of good liquor, especially in this cold part of the season. 0.1% misbehave themselves unacceptably, and alcohol is blamed (rather than their personality disorders). So alcohol is banned. So no-one can enjoy a drink at the game. Same with self-cert. I'll miss it. And though I've total confidence that some other strategy will replace it, it's also obvious that lenders will lose a lot of very good business with its demise.

[Gaspode]

Oakey said:

How did the people in my neighbourhood afford their homes in the 80s if that was the case? These people weren't high flyers, just normal people with crappy low paid jobs.

Almost certainly because 30 years ago there was a very good supply of ste old houses that needed modernisation, and people were much more willing and able to restore them themselves. Not likely to be an option these days, for two reasons : The crap old houses have all been done up 30 years ago, and contemporary elf and safety legislation means amateurs aren't permitted to do stuff for themselves any more.

[Alfa numeric]

Guam said:

oyster said:

It's hardly fair to pick a point very close to the start of a bubble as the basis is it?

Hey now dont let FACTS get in the way of a good debate lol

Cherry picking your start/end point is a longstanding tradition on PH <check the climate threads> lol

To be fair I can only use my own experience, but at least you now agree that property prices are a bubble.


I've just done the same exercise for my parents first place in Nottinghamshire which they bought in the late 60's. Back then my Mum's salary wasn't included as she was expected to stop working once they were married, so the mortgage was based on 3 times my Dad's salary. That house is now worth 6 times the average salary.

[Gaspode]

Alfa numeric said:

To be fair I can only use my own experience, but at least you now agree that property prices are a bubble.


I've just done the same exercise for my parents first place in Nottinghamshire which they bought in the late 60's. Back then my Mum's salary wasn't included as she was expected to stop working once they were married, so the mortgage was based on 3 times my Dad's salary. That house is now worth 6 times the average salary.

Is it in the same condition now as it was 40 years ago, though? I daresay it's been extensively modernised since then.

in order to get onto the first rung of the property ladder, many of us bought houses that were pretty stty, and added value to them by working on them as we lived in them. This approach doesn't seem to find favour these days, I get the impression that first-time buyers expect to move into somewhere that is already all done up.

[richardxjr]

Oakey said:

Trommel said:

I agree that it shouldn't mean putting the barrels in your mouth, but it can't be a positive development that an easy way out of your £30k of personal unsecured debt is just to declare yourself bankrupt, walk away without a care and then do it over again.

From a business perspective (and I understand how that can easily impact on your personal situation), the Chapter 11 badge of honour thing is a bit strange to UK eyes, but I suppose it shows they at least value having a go.

See, I don't even know if I'll go bankrupt. These companies keep threatening it and have been for years but they never actually go through with it. I could simply just wait it out. Believe me though, it's not something I wish to do all over again, I'm done with credit.

FWIW Oakey, I understand your situation having had similar business misfortune myself in the past, and have witnessed the same wrt unsecured debt collection. Although in my case, my self-cert mortgage is the one thing that has been paid to terms, impeccably.

I get the feeling this highly publicised now-minor product closure may be a precurser to "safer" regular mortgages but with relaxed ltv.

[Alfa numeric]

Gaspode said:

Is it in the same condition now as it was 40 years ago, though? I daresay it's been extensively modernised since then.

It was brand new when they bought it and the one I found seemed to be identical bar the obligatory replacement bathroom and kitchen. If you wanted to find a "brand new with all mod cons" equivalent in the same area the ratio would be more like 6.5-7 times salary.

[Oakey]

richardxjr said:

FWIW Oakey, I understand your situation having had similar business misfortune myself in the past, and have witnessed the same wrt unsecured debt collection. Although in my case, my self-cert mortgage is the one thing that has been paid to terms, impeccably.

I get the feeling this highly publicised now-minor product closure may be a precurser to "safer" regular mortgages but with relaxed ltv.

How did you resolve it in the end?

[richardxjr]

Oakey said:

How did you resolve it in the end?

What the unsecured? Still ongoing (same as you, but for longer).

[scotal]

richardxjr said:

I get the feeling this highly publicised now-minor product closure may be a precurser to "safer" regular mortgages but with relaxed ltv.

1 x 100% Mortgage is available
95% areback to an extent.
90% is reasonably widespread.

How relaxed an LTV do you want?