Fixed rate mortgages disaster looming....
Discussion
Friend of mine that just tried to get a new mortgage at the end of a fixed rate term has found it impossible to get a new deal after his house was devalued by the tune of 35% by the valuation agent.
Means he is now stuck in a mortgage deal long term thats hundreds more than his fixed rate payments.
Fortunatly he's on a good wage in a very secure job. But whats going to happen when all the others on fixed rated find the same issue....? Wholesale repossesions is my guess.
I'm guessing that anyone with less than 40% equity will soon be in an unsellable house with no way to remortgage to a cheaper deal.
Think about that number. At least 40% equity. Did you have 40% at the start of this crisis?
Means he is now stuck in a mortgage deal long term thats hundreds more than his fixed rate payments.
Fortunatly he's on a good wage in a very secure job. But whats going to happen when all the others on fixed rated find the same issue....? Wholesale repossesions is my guess.
I'm guessing that anyone with less than 40% equity will soon be in an unsellable house with no way to remortgage to a cheaper deal.
Think about that number. At least 40% equity. Did you have 40% at the start of this crisis?
Theres worse to come, without doubt but I dont think you can say that 40% as a borrowing requirement is a hard and fast rule, we for instance dont know this chaps financial situation/payment history and many other factors that can influence a lending decision.
Interesting comment in The Guardian. "Interest rates are far too high at 5%"
One can only assume that its a paper written by teenagers or people with very short memories.
Interesting comment in The Guardian. "Interest rates are far too high at 5%"
One can only assume that its a paper written by teenagers or people with very short memories.
Plotloss said:
Theres worse to come, without doubt but I dont think you can say that 40% as a borrowing requirement is a hard and fast rule, we for instance dont know this chaps financial situation/payment history and many other factors that can influence a lending decision.
Interesting comment in The Guardian. "Interest rates are far too high at 5%"
One can only assume that its a paper written by teenagers or people with very short memories.
The point is he now has no equity in the eyes of the valuations agent. According to them the value of his house for mortgage purposes has plumeted 80k!!!!! Therefore making his house both unsellable and un-remortgageable. He cant move his mortgage. End of story. He's gone from haveing a healty equity to having a house that he cant sell and a mortgage he cant possibly clear.Interesting comment in The Guardian. "Interest rates are far too high at 5%"
One can only assume that its a paper written by teenagers or people with very short memories.
Tony*T3 said:
Plotloss said:
Theres worse to come, without doubt but I dont think you can say that 40% as a borrowing requirement is a hard and fast rule, we for instance dont know this chaps financial situation/payment history and many other factors that can influence a lending decision.
Interesting comment in The Guardian. "Interest rates are far too high at 5%"
One can only assume that its a paper written by teenagers or people with very short memories.
The point is he now has no equity in the eyes of the valuations agent. According to them the value of his house for mortgage purposes has plumeted 80k!!!!! Therefore making his house both unsellable and un-remortgageable. He cant move his mortgage. End of story. He's gone from haveing a healty equity to having a house that he cant sell and a mortgage he cant possibly clear.Interesting comment in The Guardian. "Interest rates are far too high at 5%"
One can only assume that its a paper written by teenagers or people with very short memories.
Tony*T3 said:
Plotloss said:
Theres worse to come, without doubt but I dont think you can say that 40% as a borrowing requirement is a hard and fast rule, we for instance dont know this chaps financial situation/payment history and many other factors that can influence a lending decision.
Interesting comment in The Guardian. "Interest rates are far too high at 5%"
One can only assume that its a paper written by teenagers or people with very short memories.
The point is he now has no equity in the eyes of the valuations agent. According to them the value of his house for mortgage purposes has plumeted 80k!!!!! Therefore making his house both unsellable and un-remortgageable. He cant move his mortgage. End of story. He's gone from haveing a healty equity to having a house that he cant sell and a mortgage he cant possibly clear.Interesting comment in The Guardian. "Interest rates are far too high at 5%"
One can only assume that its a paper written by teenagers or people with very short memories.
It is also why , IMHO, the Gubberment and the Bank of England simply MUST slash interest rates and stimulate the economy. Money has to start flowing again, and that includes mortgages and the buying and selling of houses. Then and only then, will a more sensible valuation for the house be made and so, in turn, this chap can re-mortgage at a sensible rate.
cjs said:
Surely when the fixed rate is finished he will just go on the standard variable rate? The mortgage company can't just refuse this it must be in the agreement?
I think the problem is that the 2% (or whatever) jump up he'll get from moving to a variable rate from a fixed rate will give him a kick in the goolies.I'm not looking forward to 3 years down the line when our fixed rate is up. Paying far more for something which is 'worth' far less is a rather gut wrenching feeling!
Just out of interest, assuming the market were to stay more or less the same as it is now would any of you experts out there recommend paying more of a mortgage per month or saving up a greater lump sum to use as equity?
Just out of interest, assuming the market were to stay more or less the same as it is now would any of you experts out there recommend paying more of a mortgage per month or saving up a greater lump sum to use as equity?
toppstuff said:
Tony*T3 said:
Plotloss said:
Theres worse to come, without doubt but I dont think you can say that 40% as a borrowing requirement is a hard and fast rule, we for instance dont know this chaps financial situation/payment history and many other factors that can influence a lending decision.
Interesting comment in The Guardian. "Interest rates are far too high at 5%"
One can only assume that its a paper written by teenagers or people with very short memories.
The point is he now has no equity in the eyes of the valuations agent. According to them the value of his house for mortgage purposes has plumeted 80k!!!!! Therefore making his house both unsellable and un-remortgageable. He cant move his mortgage. End of story. He's gone from haveing a healty equity to having a house that he cant sell and a mortgage he cant possibly clear.Interesting comment in The Guardian. "Interest rates are far too high at 5%"
One can only assume that its a paper written by teenagers or people with very short memories.
It is also why , IMHO, the Gubberment and the Bank of England simply MUST slash interest rates and stimulate the economy. Money has to start flowing again, and that includes mortgages and the buying and selling of houses. Then and only then, will a more sensible valuation for the house be made and so, in turn, this chap can re-mortgage at a sensible rate.
CommanderJameson said:
cjs said:
Surely when the fixed rate is finished he will just go on the standard variable rate? The mortgage company can't just refuse this it must be in the agreement?
I think the problem is that the 2% (or whatever) jump up he'll get from moving to a variable rate from a fixed rate will give him a kick in the goolies.Tony*T3 said:
The point is he now has no equity ..... making his house both unsellable and un-remortgageable. He's gone from haveing a healty equity to having a house that he cant sell and a mortgage he cant possibly clear.
Welcome back to the real world of property ownership.... I was in exactly the same boat in 89/90, having bought unwisely at the top of the market and then watched as prices slid and interest rates went up to 15%.All I could do was sit tight and wait for things to improve... I ended up going to Dubai and renting out my house, just to get away from it! When I eventually sold in 1999, I made a handsome £7000 profit....
Edited by crossle on Saturday 4th October 18:16
CommanderJameson said:
garyhun said:
Naked Man said:
house prices will be going up soon anway
From here, this graph shows the trend clearly:
Onwards and upwards. The question is, can you afford to wait?
remains!Just try and renegotiate with the existing lender. If Remortgaging is not a solution, try calling and asking what deals are available or threaten to move away. The idiots on the other end of the line will normally offer something. If there was equity in the house in the first place, then there is not always a need to move lender every two or so years.
Who is the lender?
Who is the lender?
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