Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
22 February 2009
10:1515860This is revealed in todays Sunday Times. Gordon Brown is asking the FSA to ban providers from offering 100% mortgages.
Mortgages have always been only a small part of my business and in a full year, even at their peak, I have done no more than about a dozen. But I have been doing this professionally for 20 years now. I have never recommended a 125% loan but a few times I have recommended a 100% mortgage, though I have to say it was a long time ago and well before the price boom that has now 'busted'.
100% mortgages are expensive and relatively risky and should be avoided whenever possible. But there are cases where a 100% mortgage (or even the dreadful 125% mortgage) is justified. There are many properties that are run down and in poor repair/decor that need money spent on them and by doing so you can dramatically improve their value. Indeed it has been a traditional step for first time buyers to get onto the housing ladder, buy a cheap property and to do it up while living in it, raise its value and sell it on. In these cases 100% mortgages can be justified and in extreme cases 125% loans as well.
The present market is very difficult and such mortgages are even more risky as a result but this wont last forever, one day the housing market will turn around and prices will rise making for some people 100% loans a workable way forward.
Is it right therefore for Gordon Brown to step in and ban such loans? This shouts of shutting the stable door after the horse has bolted. It is once again an attempt to dictate too much from the centre with a blanket ban. These things should be left to the market and should be a matter of professional advice based on what suits an individual's need.
If there is a problem here it is perhaps one of the regulation of that advice. The FSA have conducted a review and there are a range of changes coming to how advice is delivered, most of which I personally support.
There are still shortcomings and ways that this can be improved further in respect or mortgages. For instance the seperation of interests between the agent selling the property and the company providing the mortgage advice. To have both provided by the same company seems to me like a conflict of interest as indeed is a 'kickback' between the two where they are seperate.
Brown is dealing with this the wrong way round as has so often been the case over the last 11/12 years.
howard mcsweeney1- Location: Dover
- Registered: 12 Mar 2008
- Posts: 62,352
22 February 2009
11:3315869i rather liked the old system where we saved through a building society, built up anough for a deposit, then went and saw the manager about a mortgage.
the manager knew all about you by your savings habit, thereby a responsible decision was made about how much would be lent.
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
22 February 2009
12:1415875Far better Bern to seek the most appropriate mortgage rate and terms on the market for you and that may not be what is offered by the bank/building society with your savings.
I too liked the old system where you had a bank manager who knew you and could make decisions based on that knowledge and that is of particular importance to businesses. Another example of where too much power is devolved back to the centre.
Ross Miller
- Location: London Road, Dover
- Registered: 17 Sep 2008
- Posts: 3,696
22 February 2009
12:5015876The authorities need to consider the best way to control the mortgage market.
My preference is the system in use in Belgium and Holland where you can only be granted a mortgage where the repayments do not exceed 1/3rd of your disposable income, thus ensuring affordability, also all mortgages are fixed rate for the term of the mortgage so as a borrower you always know what your repayments will be
"Dream as if you'll live forever. Live as if you'll die today." - James Dean
"Being deeply loved by someone gives you strength,
While loving someone deeply gives you courage" - Laozi
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
22 February 2009
12:5415878You can be far too restrictive Ross. You cannot 'control' the mortgage market and should not seek to do so. What we must have is better availablility to quality advice with access to a full range of mortgage products so all reasonable personal and purchase situations can be dealt with.
Ross Miller- Location: London Road, Dover
- Registered: 17 Sep 2008
- Posts: 3,696
22 February 2009
13:1915880Mmm - doesn't seem to create problems on the continent, other than avoiding the sort of overheating we have seen in the UK housing market
I do agree with you about the need for quality advice though
"Dream as if you'll live forever. Live as if you'll die today." - James Dean
"Being deeply loved by someone gives you strength,
While loving someone deeply gives you courage" - Laozi
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
23 February 2009
09:4715922Ross - on the continent there is also a much lower level of home ownership than over here. It is a very different market and their economies would benefit from a more flexible lending approach, though without some of the madness we have seen on the fringes.
There is another argument in favour of 100% mortgage that arose in 1990 when we had a (lesser) housing crash. Millions were trapped in negative equity and with the economic downturn many people needed to trade down to reduce their debt. 'Let to Buys' combined with 100% loans became a popular option.
The latest estimate I have seen is that with an expected contraction in the economy we will get 4 million unemployed by 2011. Indeed if as some say we get a 10% economic contraction this will reach 5 million unemployed. Many people hit by negative equity will need to move home for jobs. By banning 100% loans you risk damaging the labour market and an even bigger economic contraction with a longer period to recover.
Once again it seems that Gordon Brown in his desperation to be seen to do something, anything, is going down the wrong road.
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
24 February 2009
12:1216001A significant revelation from Guido that I had totally forgotten about and I quote:
""""Who offered 100% mortgages to low income-earners in the first place? Gordon did. He had a sub-prime lending scheme of his own called Home Buy Direct. No deposit was required, and it didn't matter if you could not afford to repay the full cost of a mortgage for the property you want. Low-income earners were effectively encouraged by the government to buy over-priced new builds. Repossessions are now running higher than in the 1990s, with low income earners are trapped in negative equity as unemployment heads towards 1980s levels...""""
Well, well, yet another misjudgement from Gordon. If I had done what he did I would be in serious trouble with the FSA and would certainly get fined and would need to pay compensation.
There is no way I could possible recommend such a mortgage under those circumstances.
Brian Dixon
- Location: Dover
- Registered: 23 Sep 2008
- Posts: 23,940
24 February 2009
12:5316005well what can one say,a millstone round ones neck for life no actull benifits for anyone and with the banks/building sociatys rubbing there hands with glee.it all so benifits the courts,givs them somthing to do.
Guest 653- Registered: 13 Mar 2008
- Posts: 10,540
25 February 2009
08:1816066The point you seem to be missing Brian, is that Gordon oversaw this, it was his baby, no one else's.
The blame for many of our ills is Gordon, people need to accept this, before we can move on.
Roger
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
25 February 2009
08:3916067Roger, more importantly its Gordon who needs to accept his share of the responsibility before he can move on. Right now he is just compounding his previous mistakes.