Topic ID 4934
This must be some government joke. My son is looking at a newbuild flat in Hertford 40% shared equity, and the only lender available who will accept a 10% deposit wants a fixed rate of 7.89% for 3 years!!!! Other lenders want a 25% deposit, who has that kind of money as a first time buyer? Government base rate is still 0.5% so how can these guys charge so much, is there any local broker who can do better?
Reply ID 70236
Affordale Homes, are they a local company? [;)]
quote:What have the government got to do with it? There's no such thing as Government Base Rate. The rate is set independently by The Bank Of England. Even then, lending by banks has more to do with the LIBOR than base rate.
Originally posted by Hugh
This must be some government joke.... Government base rate is still 0.5%...
Reply ID 70237
quote:If they were, they'd clearly be in breach of the Trades Description Act.
Originally posted by Steve
Affordale Homes, are they a local company? [;)]
Reply ID 70238
OK Steve, you know what I mean and anyway LIBOR according to the BBA is "bbalibor is the benchmark used by banks, securities houses and investors to gauge the cost of unsecured borrowing in the money markets". This is a loan secured against a property and does anyone know of any better rate than 7.89% which is the main purpose of my post.
Reply ID 70239
there are more than one lender who will do a 10% deposit. Nationwide, for example, do a 3-year fixed for first time buyers with 10% deposit of 6.03% and a 5-year fixed of 6.73%
Reply ID 70246
I understand the Nationwide will actually accept 5% on a shared equity purchase, however its not clear to me what percentage your son needs to borrow. i.e. is the 40% the amount your son needs to raise or the amount the Equity Share Holder is puttiing in? If he fits the criteria, he should get a decent rate. This type of mortgage can be confusing as each lender can have very differing criteria, so it is best to seek the advise of a good broker. I'm sure this forum has recommeded a few before. Perhaps Steve could provide the link?!
Reply ID 70248
quote:To my mind there are a several alarm bells ringing in this situation. 1 Your son can't afford to buy a whole flat he also seems to be struggling to buy 60% of one. 2 If lenders want 25% up front they are implying that they are accounting for a risk of the flat being worth 25% less than the asking price. If not now, then in the foreseeable future. Remember when 110% mortgages were on offer? What did that imply? 3 If lenders are charging a huge mark up on the rate they are pricing in the risk of lending to someone who can't afford a whole house. Or trying to put them off. 4 Putting aside issues of affordability, this deal stinks of rotten value. New build, shared equity, high interest rate and poor terms. That's not allowing for ground rent, service charges on a flat arrangement fees, tied solicitors etc. It's not as if he's really going to be owning anything either. He'll be renting 40% from the housing association, then he'll be renting 50% from the mortgage company and if the lenders assessment is correct he'll be losing the 10% and more in depreciation. Perhaps it's just me though.
Originally posted by Hugh
This must be some government joke. My son is looking at a newbuild flat in Hertford 40% shared equity, and the only lender available who will accept a 10% deposit wants a fixed rate of 7.89% for 3 years!!!! Other lenders want a 25% deposit, who has that kind of money as a first time buyer? Government base rate is still 0.5% so how can these guys charge so much, is there any local broker who can do better?
Reply ID 70249
May I enquire where this bargain property is?
Reply ID 70255
He can buy 40%, and rent 60%, he can staircase later to buy more as he hopefully earns more. As it is a development in Hertford, I would imagine the value would escalate as property prices in Hertford have hardly fallen and property is in short supply. Nationwide don't offer a newbuild shared ownership mortgage for a flat, unless he puts up a 25% deposit (of the 40%) which is a countrywide deal (he had an appointment with the Nationwide mortgage adviser today). I think it's a better deal than renting as that is just dead money, but buying on your own , I can't see any other option. We know the pitfalls, and realise property selling price will always be stacked at the higher end as it is a newbuild, and governed by the seller, (there has been a huge demand) but will only go up eventually due to its Hertford locality, but is there a better rate out there?
Reply ID 70256
With respect your son is a big risk to lenders if he only has a 10% deposit - they are pricing in the risk *and* the higher lending charge which is part of his mortgage if he defaults, the property is repossessed and there is a shortfall. My partner and I earn nearly 80 grand gross together, and we are still not in the position to buy a decent place in Hertford. As it is a new build, the lender will want a significant deposit, to safe guard themselves if prices go down further (I think they will personally). He needs to cut his cloth accordingly, stop buying expensive clothes and going out on the piss (if that's his thing) and save everything he can and eat baked beans - or go to his old dad and ask him for a few quid. Or rent. Or buy down the road in Harlow/Stevenage. I would also recommend him to look at the small print. I suspect if the value of the flat goes down, it will come out of his share, and his share only - which really would leave him snookered - thats without planning for a large service charge bill, which I assume he doesnt have the cash to pay. Nothing wrong with wanting to better himself and buy his own place - but it will take sacrifice and hard work to do so - the first stage of that is building up a desposit and a nest egg - because it is unlikely he will get redundancy/mortgage protection insurance...
Reply ID 70258
quote:Is it I wonder, a peculiarly British mass delusion that, with a few brief pauses, property only ever goes up in value? After all, since the war by and large, it only ever has appreciated. That's a period that covers almost all living memory. So who would be brave or stupid enough to question the received wisdom? To what evidence could one point? I've had a few pointed out to me but one struck me hardest. So obvious I felt foolish and naive for not noticing myself and realising its significance. The unprecedented recent expansion of availability of credit. Property prices could never have got to such heights without borrowed money and as the borrowing got easier more people could borrow and existing borrowers could borrow more. The prices got higher. BUT THINGS HAVE CHANGED, even in Hertford. Borrowing is not easy any more. Some of those who could borrow now cannot and those that can borrow can't borrow as much. That means there are fewer buyers and less money. Almost no one alive has any experience of this new economic world. Little wonder we are taking time to come to terms with it, some quicker than others. We are now at the point where half the people, generally buyers, have accepted the new situation and have stopped buying hence prices have stopped rising. The other half, the sellers generally have not accepted the new world because as yet there is no pressure on them to so do. Unless they die or get divorced or lose the ability to pay the mortgage. As and when people have to sell it will be to people with less money. Then prices will fall. It's no wonder, after such a long period of upward property prices that some self-reinforcing idioms have come unchallengable into common usage. "Renting is dead money" is one, although the alternative to it is to pay mortgage interest which is just as dead. If you don't have cash to buy a home outright then you either rent a house or rent the money. In order to stop paying interest the mortgagee has to pay more each month to reduce the capital. An equal sum which a renter could save and invest which over time would become sizeable, perhaps enough to buy a house? Enough to buy a house? how ridiculous!! anyone who bought a house since 1960 might quite rightly sneer, but will a first time buyer in 2010 be so dismissive in 2030? Things have changed.
Originally posted by Hugh
As it is a development in Hertford, I would imagine the value would escalate as property prices in Hertford have hardly fallen and property is in short supply. I think it's a better deal than renting as that is just dead money, but buying on your own , I can't see any other option. We know the pitfalls, and realise property selling price will always be stacked at the higher end as it is a newbuild, and governed by the seller, (there has been a huge demand) but will only go up eventually due to its Hertford locality, but is there a better rate out there?
Reply ID 70263
quote:You need to be certain and understand which scheme your son is applying for. There is a difference between shared equity and shared ownership.
Originally posted by Hugh
He can buy 40%, and rent 60%, he can staircase later to buy more as he hopefully earns more. As it is a development in Hertford, I would imagine the value would escalate as property prices in Hertford have hardly fallen and property is in short supply. Nationwide don't offer a newbuild shared ownership mortgage for a flat, unless he puts up a 25% deposit (of the 40%) which is a countrywide deal (he had an appointment with the Nationwide mortgage adviser today). I think it's a better deal than renting as that is just dead money, but buying on your own , I can't see any other option. We know the pitfalls, and realise property selling price will always be stacked at the higher end as it is a newbuild, and governed by the seller, (there has been a huge demand) but will only go up eventually due to its Hertford locality, but is there a better rate out there?
Reply ID 70318
Thanks for all your replies, he has decided not to go ahead with the scheme, and save a thumping deposit for later next year as suggested, for a flat/small house. Cheers