No deposit 100% mortgages and 10 X income borrowing are back!
No deposit 100% mortgages and 10 X income borrowing are back
Prior to the 2008 financial crash lenders were routinely giving out 100% and even 125% mortgages, self-certification mortgages with no income checks and up to 10 times income multiples.
This all changed after 2008 when several lenders went bust and the government had to bail out High Street banks in the UK such as Lloyds and RBS, which owned NatWest.
But it was not 100% or even self-certification mortgages that got lenders into trouble. Lenders such as northern rock decided to expand into commercial lending which was outside of their experience and comfort zone.
Subprime lending, or giving mortgages to people with poor credit history, previous arrears and even bankruptcy, also cause massive problems for American investment banks who sold derivatives of these products as triple AAA security.
The vast majority of the actual loans were still being paid in the UK.
Lenders also branched out into buying up estate agencies and other businesses which was a big mistake since they paid far too much for these businesses.
But could we be witnessing a return to more adventurous lending?
Well, that remains to be seen. There has been talk of new lenders, like Propertunity, coming into the market offering 100% no deposit mortgages, but so far they have not launched any product on the market.
We also need to find out more details about the loan terms and the interest rates.
It appears to be some kind of 90% initial loan with a top up loan, similar to a help to buy loan that was offered by the government.
What we don’t know is whether this loan is just an interest only loan or involves a share of the equity in the property.
There are also schemes out there offering 10 times income and minimal credit checks, but these appear to be rent-to-own schemes rather than traditional mortgages.
As always, take legal independent financial advice before entering into any credit agreement
Inflation rises to 9.4%, the ninth monthly rise in a row.
Inflation will peak at 11% in the autumn say the Bank of England, which is inside an imminent 0.5% interest rate rise.
The ECB have just hiked interest rates for the first time in over a decade.
Public sector workers are threatening strikes, with unions complaining that a 5% pay rise will not keep pace with rising costs.
Overall, figures show that pay is falling behind the cost of living making the average person poorer.
Mortgages rates have gone up by around 300%.
Whilst most people are on fixed rates, those rates will eventually expire.
The problem for borrowers at the lower income scale is that they may not qualify for certain rates due to affordability tests.
I wish I could give a less gloomy outlook on the economy, but it is not looking too rosy at the moment.
When the country in recession or downturn property prices fall. However, I have seen high inflationary times when properties went up in line with inflation. Right now property is rising faster than the official inflation rate (13% annually), but how long can this continue in the current financial squeeze?
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