100% Mortgages - They’re back, thoughts?
Discussion
It's being sold as a solution to renting, but in many cases it may not be. Case in point, there's a house up for rent near me for £850 a month. There's a house a couple of doors down on the market for £195k. Both in a similar condition internally.
Even over 35 years, the mortgage is still nudging 200 quid a month more.
Even over 35 years, the mortgage is still nudging 200 quid a month more.
OutInTheShed said:
I see nothing wrong with a 100% or even 105% mortgage if you have the career prospects to support it and can tough out a few years where there's a negative equity risk.
It might be a risk for lenders if income multiples are high.
35 years ago it was not unusual.
It sure is a very big risk for lenders! A huge chunk of people will walk away from a mortgage and choose to default as soon as the cost of living gets too much for them to afford their mortgage and they feel that their property is in negative equity due to falling house prices. With a 100% or higher mortgage in the face of a downward trend in house prices and near certainty of further interest rate rises this is insanely risky for lenders.It might be a risk for lenders if income multiples are high.
35 years ago it was not unusual.
Once a mortgage lender then ends up with a slew of subprime mortgage assets on their books they can very quickly reach a crisis. This is fundamentally what happened in 2008 and caused the whole banking crisis.
Im sure Skiption will limit their exposure on this product, but nevertheless the timing of such a product returning seems very questionable.
Having struggled for years to save for a deposit I think this is a great idea, you have a proven track record of paying off some boomers mortgage so it’s about time that counted for something.
The issue will still be multiples, in some areas, even on s good 35k you’ll struggle to find anything to buy if you’re single
Great in other areas though where it’s a bit cheaper to live.
Coupled with not having stamp duty to pay, it should help a lot of people, but that’s if the repayment is less than their rent, which again might be a struggle
The issue will still be multiples, in some areas, even on s good 35k you’ll struggle to find anything to buy if you’re single
Great in other areas though where it’s a bit cheaper to live.
Coupled with not having stamp duty to pay, it should help a lot of people, but that’s if the repayment is less than their rent, which again might be a struggle
Interest rates will be extortionate.
In London/South East, mortgage interest costs for 80LTV are higher now than rent. Once you add in the extra 20% of debt, plus the high interest rate, cost of debt will likely come in at 25-30% higher than renting, and then add on the repayment, plus stamp duty costs (spread over say 8 years) and its likely 50% more expensive.
I suspect this will be a very niche product for the very stupid.
In London/South East, mortgage interest costs for 80LTV are higher now than rent. Once you add in the extra 20% of debt, plus the high interest rate, cost of debt will likely come in at 25-30% higher than renting, and then add on the repayment, plus stamp duty costs (spread over say 8 years) and its likely 50% more expensive.
I suspect this will be a very niche product for the very stupid.
Joey Deacon said:
I have no idea what people who rent plan to do when they retire?
I’ve been having similar thoughts myself and wonder whether we have a generation or people sleepwalking into a retirement nightmare, especially as I wouldn’t be surprised if there’s a higher likelihood of life long renters having less retirement provision. Joey Deacon said:
But after 35 years you don't have to pay any more money, whereas if you rent you will be paying rent forever.
I have no idea what people who rent plan to do when they retire?
No more money to pay...just make sure you have enough for the building maintenance so its in tip top condition if the care home needs to sell it...I have no idea what people who rent plan to do when they retire?
Joey Deacon said:
But after 35 years you don't have to pay any more money, whereas if you rent you will be paying rent forever.
I have no idea what people who rent plan to do when they retire?
I suspect a lot of people are expecting an inheritance. I know of a few very successful people happily renting in the knowledge that they will get a house given to them in their 50s or so, when the inevitable happens.I have no idea what people who rent plan to do when they retire?
Jiebo said:
Interest rates will be extortionate.
In London/South East, mortgage interest costs for 80LTV are higher now than rent. Once you add in the extra 20% of debt, plus the high interest rate, cost of debt will likely come in at 25-30% higher than renting, and then add on the repayment, plus stamp duty costs (spread over say 8 years) and its likely 50% more expensive.
I suspect this will be a very niche product for the very stupid.
This is a very strange post.In London/South East, mortgage interest costs for 80LTV are higher now than rent. Once you add in the extra 20% of debt, plus the high interest rate, cost of debt will likely come in at 25-30% higher than renting, and then add on the repayment, plus stamp duty costs (spread over say 8 years) and its likely 50% more expensive.
I suspect this will be a very niche product for the very stupid.
I rent, I'm 60, I'm feked 
Still, on the bright side, even if I owned a house outright but only had the state pension and a tiny private one, I'd still be feked.
Any problems with the house, the boiler, the roof etc are going to be a shocker financially.
My dear old mum doesn't have these problems, no money worries at all as long as she leads a simple life.
She does live in Holland though.
Still, on the bright side, even if I owned a house outright but only had the state pension and a tiny private one, I'd still be feked.
Any problems with the house, the boiler, the roof etc are going to be a shocker financially.
My dear old mum doesn't have these problems, no money worries at all as long as she leads a simple life.
She does live in Holland though.
Edited by croyde on Wednesday 10th May 18:35
Joey Deacon said:
But after 35 years you don't have to pay any more money, whereas if you rent you will be paying rent forever.
I have no idea what people who rent plan to do when they retire?
Absolutely - but people now would absolutely struggle to find another 200 quid a month over an 850 rental figure. That kind of ask isn't going to be achievable for many. So your options would be to move down a level (say from a 3 bed at 850 a month to a 2 bed and still maybe be paying another 100 quid a month for the privilege) or... stay renting. I have no idea what people who rent plan to do when they retire?
The problem is that house prices as they are at the moment (ignoring any corrections) don't correlate to rental figures, at least around where I am in North Wales, at 100%. It seems rental prices perhaps don't factor in making any money on the deposit/equity in a property.
I think its a bit of a publicity stunt to get people talking and its certainly done that. As above there are a few examples of where it works if you can ride out potential negative equity in the short term should prices fall. They are not really exposing themselves much as the repayments have to be less than the rent you are currently paying so it limits suitability of the offer for a lot of people. I am sure it will help some people out of rentals onto the ladder.
Hopefully it shouldn't be a huge problem as long as strict income verification and credit checks are done.
The kind of people who would just default at the first sign of trouble probably wouldn't pass these tests in the first place, not that I've looked at any sources for my assumption or anything.
I like the idea of more people being able to get into a mortgage easier. When I was a young adult in about 2011 I wasn't able to get one (unsurprisingly considering how much i earned), and had to work pretty hard to finally make it happen in 2019. In just a short space of time from then to now, I wouldn't even be able to afford my own house the way prices have gone. I don't know how anyone on what used to be considered a fair wage, ie: £30-35k is able to buy anything around my area unless they have a partner on equal salary. Pretty much rules out any young family. Interest rates have gone up of course, but if new buyers didn't need a huge deposit, that might help this a bit.
The kind of people who would just default at the first sign of trouble probably wouldn't pass these tests in the first place, not that I've looked at any sources for my assumption or anything.
I like the idea of more people being able to get into a mortgage easier. When I was a young adult in about 2011 I wasn't able to get one (unsurprisingly considering how much i earned), and had to work pretty hard to finally make it happen in 2019. In just a short space of time from then to now, I wouldn't even be able to afford my own house the way prices have gone. I don't know how anyone on what used to be considered a fair wage, ie: £30-35k is able to buy anything around my area unless they have a partner on equal salary. Pretty much rules out any young family. Interest rates have gone up of course, but if new buyers didn't need a huge deposit, that might help this a bit.
Gassing Station | Finance | Top of Page | What's New | My Stuff