GOLDMAN 555

Britain's biggest mortgage lender came under fire yesterday over plans to offer a 125% home loan.
It would mean borrowers without any savings could buycould buy a property, pay their stamp duty and legal fees, and still go on a shopping spree for furniture.


But critics warned prospective clients against taking on such liabilities, which would plunge them into instant negative equity.

The move by HBOS, which has 20% of the mortgage market, is a radical step to open doors to first-time buyers, many of whom find themselves unable to get a foot on the housing ladder after a decade of rampant property price inflation.

They are also aimed at older single people, perhaps divorcees who have left the family home and have no savings.

But experts fear the trend can only fuel the debt crisis, with official figures showing a 22% jump in the number of families at risk of losing their homes after missing mortgage payments.
To make matters worse, it comes in the week mortgage costs look likely to rise. The Bank of England is tipped to increase the base rate from 4.75% to 5% on Thursday, and some analysts predict another hike in the New Year to a five-year high of 5.25%.

GOLDMAN 555

From today's Daily Mail:


Almost one in four homebuyers fear a quarter point rise in interest rates will cause real hardship.
The Bank of England is expected to announce an increase in the base rate tomorrow which will take it up to 5 per cent.
Some 23 per cent of the 11.6 million with a mortgage believe the increase, coming on top of an earlier rise in August, will cause genuine difficulties.
The combined effect of two rate rises would add around 10 per cent to monthly mortgage bills, increasing the average repayment from £400 a month to £440.
An interest rate rise will also make life tougher for 2.25 million who are showing signs of financial distress, such as relying on overdrafts and credit cards to meet living expenses.
And it could drive an estimated two million households in Britain whose debt is already at crisis point towards a financial abyss.
The figures come from a leading Government adviser who has carried out research on personal finance, triggered by rising family debt, bankruptcies and home repossessions.
Professor Elaine Kempson said a significant number of young adults and middle income families have put themselves under pressure by spending beyond their means and taking on huge mortgages.
Professor Kempson said people are not saving enough with the result that millions are relying on the next pay packet to keep their heads above water.
Many households - around 30 per cent - have no more than £400 in a 'rainy day' account, which would barely cover the bills, food and other expenses for a month.
Professor Kempson said that any sudden financial shock, particularly the loss of a job, would be catastrophic for this group.
She identified a psychological 'spending addiction' among some people, which she said had similarities with compulsive gamblers and alcoholics.
'There are some people whose natural instincts are to spend and think afterwards,' she said.
'There has been psychological research done across Europe, which shows that many of the people who are impulsive buyers are also the people who are most inclined to gamble, most inclined to have addictions.
'There is something about some individuals which means its quite difficult to control behaviours.'
Professor Kempson said many people who are clearly showing signs of financial stress do not recognise the signs. 'There are people who believe that it is perfectly okay to run their finances right on the edge,' she said.

FlightMan

HBOS offering 125% mortgages. Halifax offering 5x salary. Smacks to me of lenders pushing the envelope to get more people into the market, because house prices are over inflated.

The "correction" is looming folks.

Freak

*grabs popcorn and awaits the show*

SJ_Skyline

We'll all be dead from global warming, bid flu, killer bees and speeding motorists before house prices crash!

We're doomed I tell you, doomed!

Alas

"Woe, woe & thrice woe"

For all who remember Up Pompeii.

jaytc2003

iTrader: (1)

is this the same daily thread with a different author and different words???
Wonder who is going to do this one tomorrow

Petem95

Its going to be nasty when it all goes t1ts up - and the effects are likely to be felt by everyone - homeowner or not.

We have Labour to thank for this crazy situation getting so out-of-control. If they actually included things like mortgage payments, fuel and gas and electric bills, council tax in their inflation calculation, interest rates would have risen long ago to prevent an unsustainable "boom"

And [Crash] Gordon Brown says "Labour have brought an end to boom and bust" FFS!

MJW

Halifax and HBOS are one and the same aren't they ?

rossyboy

iTrader: (8)

Yes, Halifax Bank Of Scotland.

106rallye

The facts are I have enough savings for a deposit and earn a decent amount of money and I am not buying my first house yet - I know a lot of people my age 25ish who are in a similar situation as its too much of a risk now. I am not rich by any means but I would say I am in a far better position than a lot of people my age and I would be pushing my finances to buy anywhere realistically in London. Any big change in interest rates which is bound to happen when the real inflation figure in this country is taken into account would put my mortgage payments out of reach (contracting so would have to go self cert)

As soon as demand goes down for the lower end of the market then the rest will have to follow IMHO

Also IMHO the vast amounts of percieved money that some have made of property in the last few years have added to the buy at all costs mentality, everybody wanting a piece of the pie - it can only be sustained for so long

Andy

FlightMan

Dont think you'll find anything in my original post that says otherwise.

speedking

Not if you took out a sensible mortgage. You don't have to obtain the maximum possible you know. Whatever happened to restraint.

A lot of FTB's seem to think that they'll lose out if they don't max out their mortgage because they won't get an equal increase on the cash they withhold.

B9GLY

northern rock offer 120% at the moment already!!!!

davegtt

I think its more to do with standards of where the FTB expects to live. Everyone wants a nice estate with at least 3 beds etc. People growing up 30 years ago would live anywhere with a roof and build up the ladder rather than expecting it all now.

BlkKnight

The house prices won't crash any time soon - not with all these immigrants coming in from the "New EU" keeping rental prices high.

Just my 2c

lightning101

If people are so worried about rates rising, do they realise they can take 'full term' mortgages fixed for the life of the mortgage ?

EddScott

125% Mortgage

5 X Salary

Excellent news. Borrow to the hilt, buy a shed and spend the rest on a new scooby.

Tomorrow? nah....... today for the win!

Huw Jorgan

125% mortgages have been around for years. Borrowers need to earn enough to cover the loan which is usually set up as 100% mortgage & 25% secured loan.

The biggest problem, IMO, is that a lot of people today want everything now & aren't prepared to wait & save for it. Secured loans are a real issue, people rightly seem to pay there mortgage before anyhting else & don't pay the secured loan, which then leads to the property being reposessed. Of the eight repo's I attended last month, seven had defaulted on the secured loan & only one hadn't paid the mortgage.

lozgti

Financial advisor was telling me he is arranging 300k mortgages for some houses in London....the properties are apparantly ex council houses.

Next person from darn sarf who boasts about their 300k house I will know how mansion like it really is

KiwiGTI

£300k in London would buy you a nice 1-2 bedroom flat or a ****hole of a house.

davegtt

I wouldnt even consider a flat or ****hole of a house for £300k. travel on the main line every day and buy this 30seconds away from my house

UK Estate agents with homes, houses & property for sale on rightmove.co.uk

KiwiGTI

For example :

UK Estate agents with homes, houses & property for sale on rightmove.co.uk

Ted Maul

If we have healthy inflation then surely even if interest rates go up, salaries etc will be going up to, so in effect the payment affordability is the same? or am I talking b*ll*cks?

john banks

If you bought a 200K house on a 40K joint income at 4.75% (with RPI at 3.6%) then your interest only payment would be 23.8% of your gross income. If RPI after a year was 5.6% and the interest rate went up to 6.85% then your interest only payment would be 32.4% of your gross income assuming that your income moves with RPI. However, over years, high inflation does erode the effects of debt. After ten years of inflation at 5.6 and interest at 6.85% you would only be paying 19.9% of your gross income on your interest. After ten years of inflation at 3.6 and interest at 4.75 you would be paying 16.7%. Assumptions vary the end result. Interesting or not depending on your view

KiwiGTI

Well i don't know about the calculations, I just see the real world. For example I'm earning less than I was 6 years ago, when i could have bought a house and paid £400-£500 a month for a mortgage, now the same house would be £1500pm.

Has the average salary tripled?

Petem95

I cant believe all these people who come on and claim "it was just as tough back in our day". It wasnt.

Now you might just about be able to afford a starter home with 2 good incomes, and a huuge mortgage, a massive deposit and a big lump sum from parents, but then what happens when you want to sell the starter home and buy a family house? Unless you've both had massive salary increases, then theres a good chance you wont be able to afford it.

Theres no point for young professionals who have a good earning potential staying in this country if prices remain so high - the fact you can barely afford an ex-council flat in many area's means you might as well emmigrate, and as the figures show a **** load of professional brits are doing just that, and being replaced by unskilled 3rd world immigrants.

UK has a bright future doesnt it

106rallye

What do you class a sensible mortgage for me on my own? I contract therfore have to self cert so would prob say approx £30k earnings a year + my 10-15% deposit (which i have) even at 4 times earnings isn't going to get me much when i have to take into consideration commuting etc as well a year that coupled with the fact that interest rates are bound to change for the worse = stretching myself as far as i can see. I don't claim to be an expert by any means If you can give me some good suggestions then i am open to them!

Andy

106rallye

Do you know how much a 3 bed costs in London?! It is certainly not what I am considering!

I seriously couldn't afford some covered car parking spaces in London and that is no joke!

Andy

106rallye

House price inflation is on somewhere between 8 and 10% at the moment conveniently left out of the governments 2.5% figures that they quote 'proving' boom and bust is a thing of the past.

Hands up who got a 8-10% pay rise in the last year?

Link explains it a bit better than me!
Telegraph | Money | King attacks inflation index for excluding housing boom

Andy