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Original poster

FTB speculating on 95% mortgages

24 replies

FivePercentDeposit · 19/12/2020 00:01

Hi,

I know this is purely speculation and nobody really knows, but do you think 95% mortgages will make a return?

I’d read that Boris was raising this with banks, but we know he talks cobblers, particularly with all the uncertainty for next year. If they do come back I guess the interest rate will be a lot higher too.

OP posts:
ElGuardiandenoche · 19/12/2020 00:53

Martin Lewis was talking about new deals for FTB on his money programme on ITV last night. It's on catch up if you have that facility.

Original poster
FivePercentDeposit · 19/12/2020 00:59

That’s interesting - yes, we have the ITV hub. Never watched his show. Thanks I’ll give it a watch.

OP posts:
ElGuardiandenoche · 19/12/2020 03:40

It’s a good show to watch. He was brilliant during lockdown. Also check out his website.

lockdownguru · 19/12/2020 11:55

I noticed some banks already started giving 90% LTV mortgages last week, where max has been 85% for a while now. So, why not..

ParkingFeud · 20/12/2020 13:28

Some articles said the 95% was for new build houses only...which most buyers lose money on and have service charges plus council tax so once again screwing over the young.

optimisticpessimist01 · 20/12/2020 16:50

Just seconding the comment about Money Saving Expert, his website is really useful for FTB's too.

PresentingPercy · 20/12/2020 20:59

All houses have council tax but new ones don’t have service charges if they are freehold. They might if residents contribute to the upkeep of lawned areas. Yes new builds tend to be mire expensive but don’t need much maintenance and can be a lot cheaper to run. Swings and roundabouts. Defaulting on a 95% mortgage isn’t great for anyone and if money for lending is tight, it’s inevitable there are restrictions on loans. When we bought our first house, in 1979, Interest rates were 15%. But that was on £15,000. The remaining £3,000 was 18% on a top up loan. 90% mortgage. Be careful what you wish for. We did get mortgage tax relief though. It’s rarely felt easy when you are young.

Smallgoon · 20/12/2020 22:23

I can't see them returning any time soon. There's a no deal brexit looming remember. Not to mention we're on our way to another national lockdown.

Original poster
FivePercentDeposit · 20/12/2020 23:05

Thanks all. I’ve lived by the MSE website for a long time but hadn’t realised he had a show too - come to think of it I don’t think I really watch anything on ITV anymore!

My annoyance is I am 35 (partner is 42), we have two kids and two lots of nursery fees for the next few years. Never thought I would not have bought a house by now - it’s not just young people not being able to get on to the ladder, but people my age, with good careers and salaries who are struggling to save due to high rents and childcare. My choice, I get that, but it’s frustrating!!

At the start of March we would have been able to get a 95% mortgage with decent rates, obviously that’s changed a lot. I won’t have a choice but to continue to save up for a large deposit and do hope for a slight adjustment on house prices. It’s gone crazy locally to me, but appreciate that may change due to the uncertainty and likely no deal Brexit.

Just need to see what happens next with the UK...

OP posts:
Smallgoon · 20/12/2020 23:08

Are you based in London?

StephenBelafonte · 20/12/2020 23:08

When we leave the EU British banks will no longer be subject to the stringent affordability rules that were introduced by the EU so i can see a return to 95% mortgages quite soon.

PresentingPercy · 20/12/2020 23:53

The stress tests for banks won’t change. We need banks to lend sensibly. Brexit won’t magic up funds for the banks. Far from it. So I think the mortgage lenders will remain cautious.

People do choose cheaper areas to live to buy a property. Very common for people to commute from cheaper housing areas to where they work. Or one person does it. Depends on jobs but lots of teachers and nurses move to areas with cheaper housing whilst not sacrificing salary.

Original poster
FivePercentDeposit · 21/12/2020 06:19

@Smallgoon nope, in Manchester.

@PresentingPercy completely understand that. I WFH (always did) and need a space for an office - had one before DD2 arrived but that’s now their room. We were looking to move this year and had viewings lined up, but then the world went mad. I’m sat in the kitchen- is not a massive space and really not a long term solution. It’s made more difficult, like everyone else, but DH also home too. So we can’t just buy a typical starter home as we aren’t at that stage of our lives. It’s just an expensive time at the moment and we can’t do anything about it.

Keeping my fingers crossed, but may need to rent a larger place before we can buy.

OP posts:
RiverMeadow · 21/12/2020 06:30

I'm a mortgage adviser and I can't see it returning for a long time. Even the 90% mortgages have such strict criteria!!

Smallgoon · 21/12/2020 10:52

@StephenBelafonte

When we leave the EU British banks will no longer be subject to the stringent affordability rules that were introduced by the EU so i can see a return to 95% mortgages quite soon.
I'd personally find it negligent in the extreme for banks to lend in this way (in the current climate), not to mention it inflates property price to unrealistic levels, as we've seen with HTB.

Property price is still too high, which is why people like OP require a 95% mortgage in the first place.

OP, the last thing you want in this climate, is to take on a 95% mortgage, only for the market to crash in a year's time (or sooner), which is a possibility. We're on the verge of a no-deal brexit, off the back of a global pandemic, and are likely to see another national lockdown soon to tackle this new mutant strain. I'd wait this one out for now, but can't seen 95% mortgages returning any time soon.

optimisticpessimist01 · 21/12/2020 11:26

We're lucky that we are looking to a more affordable area of the UK (South Yorkshire) and even an 85% deposit for us is £30k minimum, we've just about managed to scrape it together but it hasn't been easy with paying for rent. You have the double whammy of childcare and living in Manchester which I know has ridiculous house prices at the minute! I wouldn't rely on 95% mortgages but I have noticed more and more 90% beginning to appear back on the scene, maybe try and aim for this instead?

I realise that isn't useful advice but I do empathise with you, it's hard enough to save as it is without childcare and a Manchester housing bubble added to the mix!

Arboria · 21/12/2020 11:32

What’s wrong with a 95% mortgage if you’re not planning to move for a good few years?

So many people are in OP’s position. Pushing 40 yet haven’t been able to get on the housing ladder. And now with 15% deposits required it’s even harder.

They truly are the lost generation when it comes to housing.

Arboria · 21/12/2020 11:34

Also in Manchester the monthly rent is much more expensive than the monthly mortgage. It’s a catch 22 for this generation.

Smallgoon · 21/12/2020 13:52

@Arboria

What’s wrong with a 95% mortgage if you’re not planning to move for a good few years?

So many people are in OP’s position. Pushing 40 yet haven’t been able to get on the housing ladder. And now with 15% deposits required it’s even harder.

They truly are the lost generation when it comes to housing.

Because if a crash happens, those that purchased at the very top with a 95% mortgage will find themselves in negative equity, circa 2008.

The fact that somebody plans to live in their home for years is irrelevant, unless it was their forever home - first homes usually are not this. People usually take on a mortgage on a fixed rate for say 2-5 yrs. That may not be long enough for the property market to recover. I have a friend who recently remortgaged as they'd come to end of their fixed term - the bank valued their flat at less than what they'd paid for it 2yrs ago.

I don't have a problem with 95% mortgages per se, but i'd steer clear when the market conditions are as uncertain as they are in this moment in time. The exception being if you were to find an absolute bargain that was worth the risk (that said, I wouldn't consider something to be a bargain if it meant I had to borrow up to my eyeballs in order to buy) or if you have job security, and know you'll still be able to afford payments even if one of you lost your job.

Smallgoon · 21/12/2020 13:57

@Arboria

Also in Manchester the monthly rent is much more expensive than the monthly mortgage. It’s a catch 22 for this generation.
Same issue in London. It's why I got out of the rat-race and purchased my own place. I bought this year (pre-lockdown) after two years of hesitation, wondering what Brexit would mean for the property market.

I don't regret my purchase as even now, I know I got a good price for it (my seller was desperate to sell) and my quality of life vastly improved. However, I'd be reluctant to purchase in this current climate as a result of this pandemic, and without knowing the effects of a no-deal brexit. I don't think the property market is doomed, but I'd be curious to see how this all pans out, and not brave enough to take the risk just yet.

Saz12 · 21/12/2020 17:00

But if rent is higher overall than mortgage interest + cost of owning, then you’re much better buying. Because you have to pay to live somewhere. You can’t just say “house cost £100k, now worth £90k a year later, so I’ve lost £10k plus purchase costs”, because the alternative “loss” is 12 months rent at £1.5k per month. Obviously I’m making up figures here!

In the early part of having a mortgage you pay off almost none of the capital, but all the same many people would find the cost of renting is STILL more than “mortgage interest + ownership costs + fall in property price”.

Smallgoon · 21/12/2020 17:36

@Saz12 I guess it's whether you want to risk potentially losing the deposit you spent years saving for. The market is uncertain right now. There's a new covid strain which will cause further disruption and a no deal brexit looming. In my opinion it would be a risky move to take on a property with a 95% mortgage. If it were a 75% LTV, I'd be telling you to crack on (providing the property was priced to sell).

Saz12 · 21/12/2020 17:45

I guess psychologically losing a deposit feels worse than spending more overall. Financially you could still be no worse off....
However, the big disincentive would be if you have negative equity you can’t really move house, whereas if renting you can just go! So if you loose a job, you can’t move to where the work is if you’ve negative equity.

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