Thought Id start this one going because its rather dead on this board at the moment and I suppose all my usual muckers are either at the Stella tennis event watching Dim Tim (lose again) or at Henly Regatta eating cucumber sandwiches (they wish,...NOT).

Anyway please feel free to just talk to yourself blast away and let it go on any company or subject you wish. Just wish Id thought of this one before.

cheers GF.

Nice speech from thingeye at the wotsit, eh?

Trump's full closing speech at Davos

The FCA are saying that borrowers are ignoring a mortgage timebomb with over 17% of all mortgages being on an interest only basis. The FCA ignore insider dealing, fraud, and give a pat on the back to the leaders of big banks and accountancy firms, pension funds etc, that act with immunity against the average family person that have little choice but get stuffed by these institutional giants.

Surely it is the homeowner that should take responsibility if a mortgage has been taken out on an interest only basis and the mortgage has not been progressively paid down. Why are the banks or building societies to blame? Damned if you do and damned if you don't.

Surely, it would only be 'a daft lender' who doesn't ask questions to the borrower about how the mortgage is eventually going to be settled? And if his curiosity isn't happily satisfied, then he isn't going to lend, don'tchafink?

Most were supposed to be covered by endowment policies Exec but most policies haven't performed as predicted at the time. Also , once you got the mortgage there was nothing stopping you cancelling the policy.

Dil, you were supposed to provide proof upon request, that the policies remained in place but of course it was common knowledge that they never would ask to see this proof once they had given the mortgage.

Most of these mortgages will be paid off when the owners sell and take profits before the day of reckoning, so I have no idea why anyone would be alarmed. It was always a method of living in a better home than you could afford if you had a capitol repayment mortgage, and one which leaves you more likely to have gained a much better profit upon, if you see before property prices fall.

You're ignoring inflation. If a lender loans £300k on a £400k property over 20 years representing 75% of the purchase price, then allowing for 3% annual inflation, that £400k property will be worth over £700k 20 years out, and over £2.5m at a more realistic 10% level of annual house price inflation.

As each year passes, the lender's risk of failing to make a debt recovery lessens in the event of a default. And at the end of the term, the buyer will easily be able to roll over the loan for a further few years (assuming he's still in work), or use the equity released from a sale to downsize. It's a win-win.

that assumes that you bought in the right place and at the right price in the first place
there's many examples of negative equity to disprove your cosy theory

Not over a 20 or 25 year term there aren't

Nothing to see here.

I just wanted post 80000 :-)

My first mortgage I had no deposit and borrowed 100% of the value of the house plus another 25% for improvements. My 5% deposit was deducted from the 25% that was for improvements which was retained by the lender until the work was completed.

In short I bought a house with no deposit and 120% mortgage ... try doing that these days.

If the time comes when the mortgage taker cannot pay, and home prices have dropped below the mortgage value, those that gave the loans will be carrying those loans with far greater than 120% mortgages - In effect another sub-prime market, as property is overvalued, in much the same way as commercial bricks have become of late in many towns.

As hils pointed out earlier , over any 20 to 25 year period it's almost impossible to have negative equity.

That first house I bought was worth about 7x the 120% mortgage after 20 years. It was not bought in a boom or trough year.

In what period would you have bought to have negative equity now clocktower ?

potentially one of the flash apartments along the river at battersea

and of course there have been plenty of people who have bought into the so-called win-win situation only to find that they have to chuck in the towel somewhere along the line

Dil,

Presumably your improvement works increased the open market value of the property by a similar amount to their cost, and by virtue of the fact that your lender wouldn't advance that tranch of the loan until the works were complete, I would argue that your mortgage didn't exceed 100% of the proprty's value.

Returning to the subject of interest-only versus repayment mortgage, I would argue that it's financially more sound to take out the highest affordable interest-only loan possible, and to not even bother with an endowment policy. In practice, the only people who care about you having an endowment policy are the army of mortgage brokers and financial advisors who take an introductory commission.

Taking a 20 year example, the FTSE100 index to which endowment policies tend to track finished 1997 at 5136, and 2017 at 7688. The average house price in 1997 was just over £60k (£104k inflation adjusted) and £226k in 2017.

It's a no-brainer that putting the endowment premiums on deposit and re-leveraging an interest-only mortgage to reflect salary/income increases every 6 or 7 years is the way to go imo.

Hils , so how did I pay the 5% deposit ? I take your point that in reality they lent me 100% although the paperwork said 95% of the total including the retention money but my main point was do they even consider lending you extra these days even on a retention basis.

Cynic , negative equity is just about impossible historically over a 20 year period.

I don't think lenders particularly care about what the percentage they lend, Dil, but rather on the borrower being able to afford the repayments as an income multiple.

Your average Joe on £27.6k a year will probably be able to borrow just under £100k, but, with house prices as they are nowadays, he'll have trouble finding a house that cheap on which he'll be able to borrow 100%. Conversely, someone earning £150k a year will invariably have enough saved for a decent deposit, and therefore have no need to borrow 100%.

Here you are Dil. 200 houses are going for 90p each. I hear you can get a 200% mortgage. And no, it is not in Llanfairpwllgwyngyllgogerychwyrndrobwllllantysiliogogogoch.