# Mortgages as high as 120pc!



## DOBBER22 (27 Jul 2005)

What the hell is going on? Banks soon to launch 120% mortgages this is just crazy and I have no doubt this will be a very popular product Imagine not having to scrimp n save for a deposit but also imagine having an extra 20% to kit out your house buyers will just spend, spend, spend and some may also use it to pay off other debts..

And it's coming soon to a bank near you
BANKS and building societies have been given the green light to bring in mortgages as high as 120pc. 

As the market comes to terms with the first home loans of 100pc, lenders were told yesterday that no obstacle would be put in their way if they wish to offer the super-mortgages which are popular in Britain and the USA. 

The Financial Regulator said it would not oppose the move. 

"I don't think the financial institution can stand in the way of a person's constitutional right to make mistakes," said the regulator's chief executive, Liam O'Reilly. 

In the end, borrowers and investors must make their own decisions and live with the consequences, he added.


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## CGorman (27 Jul 2005)

Be afraid. Be very afraid. Theres now the serious prospect of people ending up with negative equity should the market even decline marginally. And if that happens, things won't be nice.


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## jhegarty (27 Jul 2005)

CGorman said:
			
		

> Be afraid. Be very afraid. Theres now the serious prospect of people ending up with negative equity should the market even decline marginally. And if that happens, things won't be nice.



you don't need the market to decline...

120% mortgage - 100% price of house = 20% negative equity the day you buy


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## fobs (27 Jul 2005)

I know that people who are already on the property ladder like myself might be shocked at people getting 120% mortgages but at least this means that buyers are getting the loan at mortgage rates instead of high personal loans to kit out their houses. This might enable them to pay off a little more off the mortgage each month and so end up paying less interest than a personal loan.


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## Betsy Og (27 Jul 2005)

I'm inclined to think this is just regularisation of the "Credit Union shimmy" that went on whereby you borrowed your deposit of the credit union cos the banks couldnt check it as the Credit Unions werent on Irish Credit Bureau screens (isnt this due to change).

While I dont begrudge the newbies, the danger of never getting your head around saving for something is obviously there. Negative equity does probably kick in the day you buy but surely you confidently expect to be able to service the loan for the next 18 months at least (otherwise why are you buying and why are banks happy to lend), by that stage one would hope the market would have lifted you out of negative equity (your capital repayments probably fairly negligible at that point), or maybe (please God) you've been able to salt away a few shillings in the meantime.

For those borrowing to the pin of their collars without very secure prospects, then the 120% might be giving them rope to hang themselves.

...proceed with caution through the junction......


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## contemporary (27 Jul 2005)

negative equity only applies if you plan to sell it within a few years, if people want to buy a home to live in and raise a family a 120% mortgage will suit them. who this will not suit is property investors

Joe & Jane rent a house for €1200 a month, so cant really save for a deposit, now JOe and Jane can get a 120% mortgage that will cost them €1200, the net effect is that they are funding their own home.


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## DOBBER22 (27 Jul 2005)

contemporary said:
			
		

> negative equity only applies if you plan to sell it within a few years, if people want to buy a home to live in and raise a family a 120% mortgage will suit them. who this will not suit is property investors
> 
> Joe & Jane rent a house for €1200 a month, so cant really save for a deposit, now JOe and Jane can get a 120% mortgage that will cost them €1200, the net effect is that they are funding their own home.


 
And what of interest rate rises? Basically it comes down to how big your mortgage is the bigger it is the more financially stretched you will be when interest rates rise


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## ubiquitous (27 Jul 2005)

In the early stages of the current boom, lenders made much of the following self-imposed lending restrictions to argue that the boom wouldn't end in tears as the 80s boom in the UK did

- low multiples of income
- low loan/asset value ratios
- stress testing of loans

Slowly but surely these restrictions are being abandoned. The only one remaining is the stress testing, but how useful this can be when mortgages are 20% higher than the cost of the property remains to be seem. 

This is very, very worrying.


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## GreatDane (27 Jul 2005)

Hi

I agree with Betsy, regarding the comment on the credit unions, where many first time buyers etc are borrowing deposits, plus more on occassion, by credit union loans ... at higher interest rates, in return for lack of security

Think about it, by the time you buy your first home, pay the stamp duty, various professional fees etc ... then furnish it, your well over 120% and chances are, much of its borrowed (even if part of it is on the credit card, part from the family, part from a personal loan at the credit union etc)

Bring on the 120% mortgages, as long as people can prove they can service the debt & the rates are lower than those offered on personal loans, credit cards etc  (assuming no restriction on when you repay the debt etc)

Regards

G>
http://www.rpoints.com/newbie


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## contemporary (27 Jul 2005)

DOBBER22 said:
			
		

> And what of interest rate rises? Basically it comes down to how big your mortgage is the bigger it is the more financially stretched you will be when interest rates rise


 
plenty of people i know have borrowed from other sources to pay for the deposit or furtniture / solicitor etc. a jump in the rates will affect these people too, also the rates they borrow at are higher than mortgage rates. 

in any case wont these be stresses tested at +2% like the rest of them?


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## DOBBER22 (27 Jul 2005)

contemporary said:
			
		

> plenty of people i know have borrowed from other sources to pay for the deposit or furtniture / solicitor etc. a jump in the rates will affect these people too, also the rates they borrow at are higher than mortgage rates.
> 
> in any case wont these be stresses tested at +2% like the rest of them?


 
Do people really want to pay for the plasma screen and dining set over the life of their mortgage surely it will end up costing you a lot more over the life of a mortgage?


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## contemporary (27 Jul 2005)

Good idea or not (not me thinks), this is the reality of the situation. How many people do you know have re-mortgaged their house for home improvements, cars & holidays....


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## G7979 (27 Jul 2005)

I am a little comfused by this, I can be approved for 100K house and get 20K over the value, ie 120% mortgage which will probably be spent doing up my new home, but I can't get a 100% for a house worth 120K is this right? 

Would this mean with a 120% mortgage in effect what they are really doing is ignoring my car loan for example, and not taking it into account when telling me how much I can borrow? 

the additional 20% does seem a bit more like debt consolidation, ie car loan, furniture HP etc all on the mortgage so that there is only one payment each month, sounds great in theory but I don't want to pay for a couch over 35 years, seems a little silly, I would prefer to pay for it over 12 months or whatever the agreement would be 

As a FTB it is very tempting but what happens a few years down the line when it comes to trading up? I think I would be in serious trouble trying to find a deposit for the second house, from 120% mortgage on a first house to 92% on a second house, plus stamp duty, maybe I am being a bit simple but having to clear 30% of a mortgage in a couple of years seems like a task that most will not achieve (I know I have ignored any potential rise in value etc,)


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## G7979 (27 Jul 2005)

Just thought of something else, is 120% available to all or just FTB? 

If it is available to all then that really does away with all the banks that have launched 100% for FTB only!


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## contemporary (27 Jul 2005)

its not available at all yet, its a story because the consumers assocaition has asked irsfa to ban them, which they wont


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## oysterman (27 Jul 2005)

DOBBER22 said:
			
		

> The Financial Regulator said it would not oppose the move.
> 
> "I don't think the financial institution can stand in the way of a person's constitutional right to make mistakes," said the regulator's chief executive, Liam O'Reilly.


??????????????????

So what exactly is the point of a _regulator, _if not to prevent people and institutions making mistakes?


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## MOB (27 Jul 2005)

"So what exactly is the point of a regulator, if not to prevent people and institutions making mistakes?"

I think that the purpose of the Regulator in this context should be to ensure that people know what they are getting into.  I feel very sorry for anybody trying to buy a home in the greater Dublin area today, and if a 120% mortgage is what it takes to buy a home, then I think people should be free to make that choice.   I am not sure it is going to be the right choice, and I do foresee much weeping and gnashing of teeth if (when) the economy turns, but people must be free to make mistakes, as long as they are not misled, and as long as they are  put in the position of being able to make informed decisions.


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## Duplex (27 Jul 2005)

The announcement of 100 and 120% mortgages by some lenders is surely a move to make the existing free lending practices of banks more  transparent.  Lenders are putting their money where their mouths are suggesting that they are sure  that rising home values will erode the overhanging debt not secured by the present value of a property, purchased with a mortgage of this type.  While buyers should be wary they do have recourse to posting the keys through the banks letterbox and doing a runner if things go pear shaped. 



It seems the Irish  will be the most indebted nation in Europe next year at the current rate of debt formation. (quoting Eddie Hobbs) causing unease among some commentators  Fortunately concerns about the human consequences of financial ruin are dismissed by the banks as scaremongering, and with the option of bankruptcy open to those with financial difficulties they have a point.



If Irish lenders are willing to encourage indebtedness on a scale never witnessed in this country before, ( and seldom elsewhere)  maybe its time to revaluate the consequences of not being able to service ones debt.   It may be the case that reports that banks will  repossess homes in the case of nonperforming loans are more scaremongering for instance.


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## LDFerguson (27 Jul 2005)

Let's not forget the point that has been made earlier in this thread - the question to IFSRA was a hypothetical one by a journalist. 

To date, no lenders have indicated that they are launching a 120% product, or even thinking about doing so.


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## RainyDay (27 Jul 2005)

DOBBER22 said:
			
		

> Do people really want to pay for the plasma screen and dining set over the life of their mortgage surely it will end up costing you a lot more over the life of a mortgage?


If FTB's are borrowing from any source to buy new plasma screens and dining sets, then they deserve all the negative equity they can get. If you have to borrow for luxury items like this, you can't afford it.  Beg, steal, borrow 2nd hand items from family & friends until you can afford your own.


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## jhegarty (28 Jul 2005)

RainyDay said:
			
		

> If FTB's are borrowing from any source to buy new plasma screens and dining sets, then they deserve all the negative equity they can get. If you have to borrow for luxury items like this, you can't afford it. Beg, steal, borrow 2nd hand items from family & friends until you can afford your own.



the only place where that should be allowed is if the money is been spent on a capital project on the house (extensions..etc...) 

with an inpection 6 months later to make sure they are not after buying the plasma with it....


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## DOBBER22 (28 Jul 2005)

I see couples competing with each other all the time it seems to be all about who has the nicest house, nicest car, who goes on more holidays it just never ends and people are prepared to get themselves into masses of debt to keep up with the Jones's so to speak, the banks are loving it they have never had it so good and are happy to keep offering more and more credit what ever happened to people who were happy with that they have and thought they were lucky to have it


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## Betsy Og (28 Jul 2005)

DOBBER22 said:
			
		

> I see couples competing with each other all the time it seems to be all about who has the nicest house, nicest car, who goes on more holidays it just never ends and people are prepared to get themselves into masses of debt to keep up with the Jones's so to speak, the banks are loving it they have never had it so good and are happy to keep offering more and more credit what ever happened to people who were happy with that they have and thought they were lucky to have it


 
While I can see where you are coming from - especially in terms of cars which are a consistently poor divestment - it isnt unreasonable to want a decent house. Of course if its all about the Italian leather and the pool and the ...... and the ....... then you are right on that one as well.


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## CCOVICH (28 Jul 2005)

IFRSA have said that "Ratios higher than 100% are not on the agenda" (Liam O'Reilly in today's Irish Times).  FA, BoI and IIB have said that they have on plans to introduce mortgages of more than 100%.  Where did this story originate I wonder?


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## DOBBER22 (28 Jul 2005)

CCOVICH said:
			
		

> IFRSA have said that "Ratios higher than 100% are not on the agenda" (Liam O'Reilly in today's Irish Times). FA, BoI and IIB have said that they have on plans to introduce mortgages of more than 100%. Where did this story originate I wonder?


 
Dunno maybe this is a classic case of we shouldn't always believe what we read in the papers.


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## ubiquitous (28 Jul 2005)

especially in July & August.


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## DOBBER22 (28 Jul 2005)

Why July & August?


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## Betsy Og (28 Jul 2005)

DOBBER22 said:
			
		

> Why July & August?


 
its the traditional "silly season" where real news is thin on the ground so editors scraping the barrell to find stuff to fill the pages


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## DOBBER22 (28 Jul 2005)

Aha I see naughty editors


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## ubiquitous (28 Jul 2005)

anyone ever wonder why the IRA always time their ceasefire announcements in late July or August?


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## oysterman (28 Jul 2005)

Any chance of IFSRA announcing a ceasefire in July or August on laissez-faire idiocy?


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