Unbelievable 40y mortgage

[spygirl]

Rules relaxed on who can take out a 40-year mortgage

https://www.telegraph.co.uk/personal-banking/mortgages/rules-relaxed-can-take-40-year-mortgage/

Eligible borrowers can now borrow seven times their income, compared with the usual five times

ByRachel Mortimer26 December 2021 • 5:00am

Home buyers who fix their mortgage for four decades can now borrow seven times their salary, including those earning below average salaries. 

Habito, a lender, has relaxed its borrowing rules for customers who earn more than £25,000 when applying for its long-term fixed-rate loan, which allows buyers to fix for up to 40 years. 

However, to qualify for a mortgage worth seven times their income, borrowers must work in a profession specified by the lender, including a nurse, firefighter, teacher, barrister and architect. Buyers who do not match this criteria must earn a minimum of £75,000 to qualify. Rates start from 2.99pc without an early repayment charges, or 2.79pc with penalties. 

The Habito One mortgage launched earlier this year as the first of its kind and lending is usually capped at five times a borrower's income. 

Daniel Hegarty, of Habito, said: "We believe extending affordability will be particularly attractive to those who want to buy a home with lots of future potential, or for people who are expecting pay-rises over their careers."

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If two borrowers apply for a joint mortgage and only one is eligible for seven times borrowing, the other's borrowing capacity will be capped at five times their income. If both buyers qualify, only the highest earner will be able to borrow seven times their salary. 

David Hollingworth, of mortgage broker L&C, said longer fixed mortgages allowed for more flexibility when it came to affordability. "Because the price is fixed for a long term it removes some if the worry about interest rates going up or down, so lenders can be more generous with their affordability testing. 

"Also, they have chosen careers with decent stability and likelihood of progression." All borrowers must have at least a 10pc deposit and self-employed borrowers are not eligible.

[spygirl]

Just as few to none have this mortgage -

 

https://www.thisismoney.co.uk/money/mortgageshome/article-10442887/amp/Habito-hikes-rates-7-times-income-lifetime-mortgages-adding-tens-thousands-interest.html

Mortgage lender Habito has hiked the rates on some of its mortgages by more than 0.7 per cent, including its seven-times income 'fixed for life' loans launched just a month ago. 

Rates have been increased on some of the market disruptor's Habito One products, which allow borrowers to fix their mortgage rate for between 10 and 40 years

[sarahbell]

On 27/01/2022 at 08:05, spygirl said:

Just as few to none have this mortgage -

 

https://www.thisismoney.co.uk/money/mortgageshome/article-10442887/amp/Habito-hikes-rates-7-times-income-lifetime-mortgages-adding-tens-thousands-interest.html

Mortgage lender Habito has hiked the rates on some of its mortgages by more than 0.7 per cent, including its seven-times income 'fixed for life' loans launched just a month ago. 

Rates have been increased on some of the market disruptor's Habito One products, which allow borrowers to fix their mortgage rate for between 10 and 40 years

Hike the fucking things up.

 

[spygirl]

On 13/12/2021 at 16:46, spygirl said:

Again - 

Mortgage lenders are preparing to launch a raft of new products with lower hurdles for borrowers and fixed-rate terms of up to 50 years, The Mail on Sunday has learned. 

The Bank of England is widely expected to dilute mortgage rules as soon as tomorrow. The loosening of affordability restrictions will make it easier for borrowers to take out larger home loans. 

The move would allow buyers to borrow more at an earlier stage, opening the market up to much younger buyers. But it is also likely to add fuel to house prices which are already soaring to record highs.

 

More lobbying BS. Appeared in various forms the last 2 weeks.

What exactly is the BoE proposing to do?

Lower the stress rate form 6%?

Is likely that rates are going up a lot next year.

Its possible the SVRs will be in 6%.

Once you get beyond 25 years, the money you save by extending the repayment terms shrinks to fuckall - the mortgage becomes just all IRs and ends up costing a fortune.

Even the US, which has the MACs and the worlds biggest bond market underwriting the mortgage debt doesn't do more than 30 years.

50 years is nuts.

 

 

Perenna aim to offer 30 year fixed-rate mortgages up to 95% LTV with flexibility to change at no extra cost after 5 years.

I cant make that work.

The key difference between a Perenna mortgage and a mortgage from a high street bank is the rate type over the length of the mortgage.

As the name suggests a fixed for life mortgage means the monthly payment over the whole life of the mortgage is fixed.

With Perenna, you never have to worry about refinancing dates or going onto higher interest rates. You can take your mortgage with you when moving to a new home or sell your home with the mortgage. You can pay back the loan without repayment charges after 5 years.

Again. I cant make that work.

Perenna is shaking up the mortgage market with our unique funding model. Our mortgages will be financed by issuing covered bonds on the London Stock Exchange.

The bonds are bought by investors who receive an interest payment for the loan term. Your monthly mortgage payment is passed through Perenna to the investors. You can even buy these covered bonds yourself.

As a borrower you’ll never have to think about the investors. In fact, you’ll never notice they exist.

 

OK, they are unregulated = expensive.

Theyll raise a pool of bonds to cover your mortgage,, say sell 50 bonds at 50th of the mortgage debt, which will be sold off. Not sure if theyll be pooled.

They'll have to get their model 110% correct. And theyll have to go big v quickly to get the volume to sell this stuff.

The sounds painfully like P2P, with the extra expensive of selling a bond.

As rates rise, the bond yield is going to go sky high.

2019 -

https://www.mortgagesolutions.co.uk/news/2019/04/15/pension-funded-intermediary-lender-perenna-plans-fixed-for-life-mortgage-launch-exclusive/

2020 -

https://www.mortgagestrategy.co.uk/news/new-lender-perenna-looks-to-offer-95-lending/

2021 -

https://www.thetimes.co.uk/article/bank-plans-30-year-fixed-mortgage-n8lqzg0b9

Still not mortgage. Theyve been fucking around for at least 3 years and not sold a single mortgage.

 

2008 - 

5D buys Interbay

InterBay Commercial has revealed that it had been purchased by the 5D Group.

By System Administrator 10^th September 2008 11:47 am

The company will be merged with commercial mortgage lender 5D and re-launched under the InterBay Commercial name.

InterBay Commercial chief executive Colin Bell says: “It is with great delight that I am able to announce an exciting new chapter for InterBay Commercial in the UK.

“We now have a great opportunity to merge with 5D and relaunch our company – all with the strong financial backing of our new parent.”

Bell says during the merger and planning phase Interbay will temporarily cease new business. He says there is no set time frame for a return but is confident Interbay will return when market conditions improve, with the help of the 5D funders.

Bell adds: “We have spoken with our intermediary partners and are working through our pipeline to ensure all brokers and potential borrowers are treated fairly during this period of change.

“I cannot reveal our future plans at this juncture but I will say that this initiative is good news for the business.”

5D ceased trading at the end of last year thanks to a lack of funding, but did promise to return to the mortgage lending market in the future. 5D were unavailable for comment.

 

(From the NW link)

https://www.cityam.com/exclusive-mortgage-guru-colin-bell-on-why-the-fiercely-competitive-market-is-ready-for-a-50-year-fixed-rate/

Still hawking this BS around - 

Sold as a massive lifestyle enabler and gives people much more security and certainty because their monthly repayments are set in stone, City A.M. sits down with Colin Bell, co-founder and COO, of the firm in question, Perenna, which recently applied for a bank license.

...

 

Long-term fixes are common in countries including the U.S. but less so in the UK – why is this?

UK lending still heavily relies on short term deposits to fund lending. The issue with this is that the lenders finance a 30 year loan with a deposit, which can be withdrawn at very short notice. For this reason the lenders offer mainly short term fixed rates, and high reversion rates to cover the risk should interest rates go up.

UK pension funds will be able to invest for the first time in the UK mortgage market in an efficient manner, which will create a better mortgage market, and improve housing affordability.

 

Im not sure how many 50y fixes are available. I doubt many, mainly as FICO filters by risk and USers tend to retire earlier than UKers.

Long term (20-30y) fixes are available in the US as they are supported by the Treasury, which prints vast amount of $ debt to fund global commerce.

Thats it. The risk/debt is carried bythe rest of the world.

If Col thinks he can turn the £ into the worlds reserve/trading currency then hes got a plan.

Otherwise he hasnt.

 

[spygirl]

On 13/12/2021 at 16:46, spygirl said:

Again - 

Mortgage lenders are preparing to launch a raft of new products with lower hurdles for borrowers and fixed-rate terms of up to 50 years, The Mail on Sunday has learned. 

The Bank of England is widely expected to dilute mortgage rules as soon as tomorrow. The loosening of affordability restrictions will make it easier for borrowers to take out larger home loans. 

The move would allow buyers to borrow more at an earlier stage, opening the market up to much younger buyers. But it is also likely to add fuel to house prices which are already soaring to record highs.

 

More lobbying BS. Appeared in various forms the last 2 weeks.

What exactly is the BoE proposing to do?

Lower the stress rate form 6%?

Is likely that rates are going up a lot next year.

Its possible the SVRs will be in 6%.

Once you get beyond 25 years, the money you save by extending the repayment terms shrinks to fuckall - the mortgage becomes just all IRs and ends up costing a fortune.

Even the US, which has the MACs and the worlds biggest bond market underwriting the mortgage debt doesn't do more than 30 years.

50 years is nuts.

 

 

Perenna aim to offer 30 year fixed-rate mortgages up to 95% LTV with flexibility to change at no extra cost after 5 years.

I cant make that work.

The key difference between a Perenna mortgage and a mortgage from a high street bank is the rate type over the length of the mortgage.

As the name suggests a fixed for life mortgage means the monthly payment over the whole life of the mortgage is fixed.

With Perenna, you never have to worry about refinancing dates or going onto higher interest rates. You can take your mortgage with you when moving to a new home or sell your home with the mortgage. You can pay back the loan without repayment charges after 5 years.

Again. I cant make that work.

Perenna is shaking up the mortgage market with our unique funding model. Our mortgages will be financed by issuing covered bonds on the London Stock Exchange.

The bonds are bought by investors who receive an interest payment for the loan term. Your monthly mortgage payment is passed through Perenna to the investors. You can even buy these covered bonds yourself.

As a borrower you’ll never have to think about the investors. In fact, you’ll never notice they exist.

 

OK, they are unregulated = expensive.

Theyll raise a pool of bonds to cover your mortgage,, say sell 50 bonds at 50th of the mortgage debt, which will be sold off. Not sure if theyll be pooled.

They'll have to get their model 110% correct. And theyll have to go big v quickly to get the volume to sell this stuff.

The sounds painfully like P2P, with the extra expensive of selling a bond.

As rates rise, the bond yield is going to go sky high.

2019 -

https://www.mortgagesolutions.co.uk/news/2019/04/15/pension-funded-intermediary-lender-perenna-plans-fixed-for-life-mortgage-launch-exclusive/

2020 -

https://www.mortgagestrategy.co.uk/news/new-lender-perenna-looks-to-offer-95-lending/

2021 -

https://www.thetimes.co.uk/article/bank-plans-30-year-fixed-mortgage-n8lqzg0b9

Still not mortgage. Theyve been fucking around for at least 3 years and not sold a single mortgage.

 

2008 - 

5D buys Interbay

InterBay Commercial has revealed that it had been purchased by the 5D Group.

By System Administrator 10^th September 2008 11:47 am

The company will be merged with commercial mortgage lender 5D and re-launched under the InterBay Commercial name.

InterBay Commercial chief executive Colin Bell says: “It is with great delight that I am able to announce an exciting new chapter for InterBay Commercial in the UK.

“We now have a great opportunity to merge with 5D and relaunch our company – all with the strong financial backing of our new parent.”

Bell says during the merger and planning phase Interbay will temporarily cease new business. He says there is no set time frame for a return but is confident Interbay will return when market conditions improve, with the help of the 5D funders.

Bell adds: “We have spoken with our intermediary partners and are working through our pipeline to ensure all brokers and potential borrowers are treated fairly during this period of change.

“I cannot reveal our future plans at this juncture but I will say that this initiative is good news for the business.”

5D ceased trading at the end of last year thanks to a lack of funding, but did promise to return to the mortgage lending market in the future. 5D were unavailable for comment.

 

Update.

New UK lender plans 50-year fixed rate mortgages

Perenna secures licence from regulators to issue long-term home loans as inflation soars

https://www.ft.com/content/281fbba6-28e2-42d4-b241-0f215995f0d1

A new lender has been granted a licence by UK financial regulators to offer mortgages with fixed rates of up to 50 years in a move aimed at helping borrowers manage soaring inflation.

Perenna, a UK-based specialist lender, is initially planning to provide home loans that lock in rates for 30 years, before rolling out products with even longer terms.

Its approval comes as the Bank of England raises interest rates in an attempt to tackle rapid inflation, which has reached a 40-year high of 9.4 per cent in Britain.

Longer-term mortgages have been mooted as a way to help younger people on to the housing ladder as property prices remain high.

Article - and TOS - get this tally wrong.

The BoE is looking at way for it to lend *LESS* on mortgages.

They want out of mortgage lending, to the levels theyve been ctive sicne the mid 70s when mortgages went mass mortgage.

Perenna (isnt that the bit of skin between your balls n cock?) are looking at using covered bonds.

Rest of the article is meh.

Comments are better -

 

Unlike banks, which fund much of their mortgage lending through customer deposits, Perenna will issue covered bonds to pension funds and insurers for longer-term financing.

I think you’ll find a significant proportion of UK mortgage lending is already funded through RMBS and covered bonds - what Perenna is doing is not exactly novel.

 

 

 

To be fair, the UK RMBS market has never securitised mortgages with resets beyond 10 years. Backing an RMBS with 50 year fixed rates requires investors to calculate prepayment risk. If they overestimate prepayment rates coupled with rising rates will leave pension funds holding big losses.

 

 

 

It’s a few years since I last covered this market but there was always keen, albeit materially small, investor appetite for 15 year N Covered Bonds. For the reasons you clearly set out, I suspect the 50 year market is going to be extremely niche or non-existent. On a related note, I suspect the longer-term issue will be the severity of any prepayment clauses and penalties, and whether these will ultimately be found to constitute unfair contractual terms hence voiding the underlying product.

Ignroe the 50y and the the BS about - Cons pumping up house prices.

This is a negative to HPI - BoE backing away from allowing mortgage finance to be drawn down from it.

The fixed bit of fixed mortgages is covered by a bond, which is sold on i..e not drawn from BoE or bank capital.

The BoE is looking at ways to get more private capital into the mortgage market.

There is no way on earth youll see stuff beyond 15y - I struggled to get 10y fixed mortgage.

Financing mortgages with private bonds is much more expensive than BoE draw down. And youll not get as much money.

This is a massive negative for UK housign finance.

 

 

[Bus Stop Boxer]

Totally expected behaviour.

[spygirl]

On 27/11/2021 at 12:49, spygirl said:

Following on from Habitos 40y fix, where I've not seen any blurb..... comes Kensingtons -

https://amp.theguardian.com/money/2021/nov/27/homebuyers-offered-40-year-fixed-rate-mortgage-by-uk-lender

The Kensington deal rates on a 60% loan-to-value (LTV) mortgage start at 2.83% for a 15-year term and go up to 3.34% for a 40-year fix.

The loan is available up to 95% LTV for new purchases or 85% for remortgages. Rates are higher on the larger LTVs.

...

No early repayment charges apply if you are moving home, selling, or a critical illness or death occurs

Kensington are a bank. Any money provided has to be raised.

Iirc they are partnered with a life co.

Now the buts I cannot wirk out is the fixes over 5-10 years and the no repayment charges, which is the biggy.

To raise miney for 40y of fixed mortgage youd need a massive pool of fixed debt. And youd need high exit penalties.

My guess is a fix for longer than 5-10 just doesnt exist and it's nothing more than a scam to get free ad space.

I did come back to have a look at this.

https://www.kensingtonmortgages.co.uk/blog/article/sale-of-kensingtonmortgages-to-barclays-bank-uk-plc-closes

Foiled!

https://www.ft.com/content/e3ff399c-ae7f-4641-ad97-d827dca35d55

Barclays to buy UK specialist lender Kensington Mortgages

Bank agrees £2.3bn deal after beating rivals such as Starling

[spygirl]

June 2022

What started to happen in Autumn 2022?

“Financially, we think the deal could make sense,” said Numis analyst Jonathan Pierce. “The book Barclays is buying will initially be quite small . . . but Kensington is targeting originations of £2.3bn per annum, so that book could grow to £6bn-£7bn within three years. That would imply income of £200mn.”

Comments -

Perfect timing! Arguably right at the inflection point for the UK housing market to go through a correction. Why does the cycle repeat itself time after time, banks just never seem to learn from past mistakes?

 

 

 

 

 

 

 

 

 

Market timing defo questionable, but seems to be a long value play. Mind you they could have waited and bought far cheaper.

 

 

 

 

 

 

 

 

 

But would have Kensington still sold?

 

 

 

 

 

 

 

 

 

Well that called the top of the market 😂

 

 

 

 

 

 

 

 

 

Kensington lend to the worst of the worse buyers that cannot usually obtain high street mortgages in return for extortionate rates and apalling service. The mortgagors are in luck though as Barclays rates are significantly more competitive than Kensington and will benefit from better rates than Kensington (however, this is offset by rapidly rising mortgage rates). Barclays have just made a very big and risky purchase with rates rising, these borrowers are going to struggle repaying and they are certianly not A1 profile.

 

 

 

 

 

 

 

 

 

any view on the mix of mortgages held in the book - fixed v variable?

 

 

 

 

 

 

 

 

 

 

They bought the whole operation, not just the book. I wouldn’t expect them to be offering these customers the usual Barclays products.

 

 

 

 

 

 

 

 

 

 

It’s a tiny deal. They have gown their mortgage book by a whopping 1.5%!

 

 

 

 

 

 

 

 

 

So Barclays spent £2bn on buying the book (assuming it was at par) and £300m on buying the platform which makes £0.5m a year. About right ?

 

Great purchase !

 

 

 

 

 

 

 

 

 

At least you understood the deal. The more pertinent question is can they grow profits to £100m 3-4 years out?

 

 

 

 

 

 

 

 

 

Barclays is to pay £2.3bn for a mortgage book of £2bn and a home loan book of £1.3bn? Seems very expensive for a sub-prime business!

 

 

 

 

 

 

 

 

 

Smart for them to sell now. Metrics are set to deteriorate drastically. Still, Barc is flushed with deposit, so wont need to go back to the securitisation market much. So even more of a dearth of UK RMBS deals - slowly killing off that asset class. (dont know if this is a good or bad thing tbh - I tend to think market works best when they are multiple types of business models)

 

But this is v bad news for Starling. They've issued UK gov guaranteed covid loans like there were no tomorrow so where desperate for some assets that produce actual interest income.

 

 

 

 

 

 

 

 

 

Starling should be sued by the UK Government for lack of checks and balances in giving out Covid loans. Lord Agnew is absolutely right, they just did it to grow their book and the valuation.

 

 

 

 

 

 

 

 

 

I cannot comment on Starling’s approach to Covid loans, but they simply did what the government asked: lend quickly and do not perform onerous checks. The fault is with the government for creating an exploitable scheme. They could after all, have capped exposure at a proportion of pre-Covid balance sheet to ensure lenders weren’t using it without proper underwriting resource.

 

 

 

 

 

 

 

 

 

yes, you're probably right.

 

 

 

 

 

 

 

 

 

 

The problem with Starling's approach was that they rushed the onboarding of new small business customers. They did not have the expertise to onboard those volumes.

 

 

 

 

 

 

 

 

This is my point. The scheme had lending limits, and the BBB who administered the scheme could have rejected applications for extension, but did not. If there were concerns with respect to Starling, then HMT could also have put a stop to it. What is more, the scheme was designed to get money out quickly with minimum possible oversight and checks. I’m not defending starling, just pointing out that if Starling are at fault, which they may well be, the government is equally so.

 

 

 

 

 

 

 

 

(Edited)

 

Seriously, do the Barclays management want to be thought of as retards?! What a transparently cack-handed deal

 

 

 

 

 

 

 

 

 

Knowing the culture of Barclays, I think the management already are thought of that way.

 

 

 

 

 

 

 

 

 

Yes, this quote struck me: "The portfolio has an average loan-to-value of 77 per cent."

No doubt soon to be an average loan-to-value of 125+ per cent!

 

 

 

 

 

 

 

 

 

Hopefully not a load of interest only mortgages!

 

 

 

 

 

 

 

 

 

 

You are really expecting a 48% fall in property prices?

 

 

 

 

 

 

 

 

 

I think you mean 38% ie 1-0.77/1.25

 

 

 

 

 

 

 

 

 

Another typical lazy management approach to growth.

 

They could have seeded a new venture, with half that invest in a new software platform and replicated that business in 3yr.

 

Anyone can lend to those who have been “left behind by high street lenders”.

 

Well done to the Kensington folks. They know their market and stuck to it

 

 

 

 

 

 

 

 

 

Not really.

 

As someone below pointed out it’s more about throttling the competition.

 

 

 

 

 

 

 

 

 

Starling have no idea how to value a prospective business or loan book, so no surprises they missed out. Their cutting edge technology (Microsoft Excel 2016) wasn't able to give them the edge.

 

 

 

 

 

 

 

 

 

Sadly I am old enough to remember HSBC buying Household because .. erm .. they could fund it more cheaply . It looked bad on the day they did it and so it subsequently proved .

 

 

 

 

 

 

 

 

 

So am I and so I can conclude this deal looks nothing like Household.

 

 

 

 

 

 

 

 

(Edited)

 

Well done Kennsington. Great brand recognition in the UK non conforming RMBS market.... that's not prime... What could possibly go wrong?

12bp and counting...

 

 

 

 

 

 

 

 

 

What could possibly go wrong?

 

 

 

 

 

 

 

 

 

Wow, top of the market.

 

 

 

 

 

 

 

 

 

Why not just buy OSB, c.£20bn book (avg LTV lower at 70%), same origination team, if not even better, £2.2bn market cap. Slap a 30% premium on there and it's only c.£2.8bn. What on earth are Barclay's playing at?

 

 

 

 

 

 

 

 

 

Because that would actually cost them tonnes in equity and good will.

 

This is a small deal which hardly moves the needle on equity.

 

 

 

 

 

 

 

 

 

But the only way for this deal to work out is to aggressively grow the loan book, which will have the same long term impact on equity needs. They must be keen to get into buy to let / subprime. Seems like a very expensive way to go about it.

 

 

 

 

 

 

 

(Edited)

 

 

Well Kensington will be £6bn in two years or 5% of loan book, while you are suggesting they pay for 14% for the loan book of OSB.

 

I get to 5% on the net £300m they are paying for Kensington and looking at the loan book two to three years out. One has to assume the origination channel can grown to £2bn as suggested in the article.

 

 

 

 

 

 

 

 

 

If the UK government is serious about competition in the market they will not allow this transaction go thru (the CMA) Lets see!

 

 

 

 

 

 

 

 

 

UK government is only serious about Pimms and Strawberries this time of the year!

 

 

 

 

 

 

 

 

 

 

Well the CMA is independent of Government and that needs maintained. In addition, from what I can see they are not active in the same segments of the market so it is a complementary play for a part of UK mortgages Barclays is not active in.

 

 

 

 

 

 

 

 

(Edited)

 

The comments below confirm the incredible negative bias towards banks.

 

Barclays appear to be buying a future interest income of up to £200m while diluting it’s tier 1 equity by 12 basis points.

 

 

 

 

 

 

 

 

 

Barclays trying to crush the start ups, nothing more.

 

 

 

 

 

 

 

Kensington has been around for over 20 years. Hardly a start up.

 

 

[spygirl]

Still cant get a numberof number of Habito One mortgages sold.

https://thepaypers.com/payments-general/habito-and-atom-bank-withdraw-their-mortgages--1258584

Fintech mortgage lenders Habito and Atom Bank pull their mortgages in the wake of Chancellor Kwasi Kwarteng’s mini budget that triggered turmoil.

 

With some 40% of available UK mortgages being withdrawn by lenders, thousands of borrowers are searching for options to avoid property sales and remortgages from falling through.

Habito had previously offered its Habito One long-term fixed-rate mortgage at terms of up to 40 years, Atom Bank on the other hand offered more traditional mortgages of up to five-year terms, but only via mortgage brokers.

Habito is currently warning customers on its website of call delays of up to 60 minutes.

Molo Finance, another fintech lender, had offered a FlexLife mortgage that was available on terms between 15 and 40 years, but paused its lending in Q2.

Before the withdrawal Molo had been offering rates of between 2.92% and 4.5% depending on duration.Following Wednesday’s Bank of England intervention to start buying some GBP 65 billionn worth of UK gilts, markets have started to settle and if the trend continues lenders might be able to start pricing new mortgages more accurately soon.

[spygirl]

Perenna. Again.

https://www.thisismoney.co.uk/money/mortgageshome/article-12779453/amp/New-mortgage-lender-allows-buyers-borrow-six-times-income-fix-40-years-good-idea.html

Home buyers could now borrow up to six times their annual income on a fixed rate of up to 40 years, with a new lender hoping to shake up the UK mortgage market. 

Lender Perenna has opened up its long-term fixed rate deals to home movers and first-time buyers, initially through a pilot scheme with the broker L&C Mortgages

[spygirl]

For example, on a two-year fix charging 5.5 per cent, a lender might stress test the borrowers' ability to pay 8.5 per cent, or on a five-year fixed rate it might stress test at 7.5 per cent.

After the initial fixed period, if the borrower does nothing and lapses onto the lender's higher standard variable rate (SVR), they should in theory be able to afford the higher monthly costs. 

However, as Perenna is offering a fixed rate for the whole life of the mortgage, it therefore doesn't need to stress test at a hypothetical higher rate.

Perenna's Colin Bell says: 'Because lenders stress test their affordability this constrains the multiple on the maximum loan they can offer.

'We don't stress for interest rate or interest rate risk as it never happens with our product.'

[spygirl]

The big question is whether they feel they can afford the monthly costs, particularly if they are borrowing at six times their annual income.

A debt-free couple earning £30,000 each might be able to borrow £355,000, according to Perenna. A £355,000 mortgage at 5.99 per cent with a fixed term of 40 years will cost £1,951 a month.

However, two people on £30,000 a year will be taking home £2,035 each month after income tax and national insurance is deducted. 

Combined together that's £4,070 after tax - and that's before any pension contributions are included.

After paying the mortgage they will have £2,119 a month left between them.

For many people that would likely be too high a cost. However, for some it may seem like a price worth paying, particularly if their rent was of a similar level.

[spygirl]

If they squally lend at that rate xnd, as you'd expect, the borrower defaults, then Perenna will be in so much shit with fsa.

I reckon theyll be shutdown.

And where does Perenna funding come from?

[Wight Flight]

2 hours ago, spygirl said:

For many people that would likely be too high a cost. However, for some it may seem like a price worth paying, particularly if their rent was of a similar level.

You would normally need a combined income of £72k to be considered for a rent of £2k per month.

[spygirl]

59 minutes ago, Wight Flight said:

You would normally need a combined income of £72k to be considered for a rent of £2k per month.

Yep,MMR does not wanting you spending more than 40% of your net take home.

Go over 30% and its twitchy.

This is that Charlie youtube persons point  - not the MMR limits, the fact tha mortgaged t sales have collapsed in London/SE.

You're more likely to get bareback off Princess Katie, round the back of Buck Palace, than you are a 4x+ mortgage.

 

 

 

[Covid19 and life to go]

20 hours ago, spygirl said:

If they squally lend at that rate xnd, as you'd expect, the borrower defaults, then Perenna will be in so much shit with fsa.

I reckon theyll be shutdown.

And where does Perenna funding come from?

Shut down😄 you know well enough that the sensible option won't happen spybo.... They'll be bailed out.

Surely this also puts the minimum wage rise floor for a couple at over 200k for a FTB. Possibly closer to 300.

Maybe @Stueyis right .. golden opportunity is now.

[JoeDavola]

6 minutes ago, Covid19 and life to go said:

Shut down😄 you know well enough that the sensible option won't happen spybo.... They'll be bailed out.

Surely this also puts the minimum wage rise floor for a couple at over 200k for a FTB. Possibly closer to 300.

Maybe @Stueyis right .. golden opportunity is now.

I won't be in the least bit surprised if 40 year mortgages are normalized.

I think you're right that we should all be mindful that the base price for any half decent house is probably going to be what two £30K earners mortgaged to the hilt for 35+ years can just about afford.

[spygirl]

https://www.mumsnet.com/talk/money-matters/4950960-50-year-mortgage-insanity

NeonSoda · Today 14:20

 

i would totally have taken this option. I’d love to free up more money now to enjoy myself and do things like improve my house.

 

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Doggymummar · Today 14:22

 

I would do it 54 and not bought a property cos it's £3k a month for a mortgage or £1200 to rent. My parents mortgage is till they are 100 too, taken out a couple of years ago when 75

 

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Lm1981 · Today 14:52

 

Seems the sensible option to me. People tend to try and hang on to the past when houses were cheaper - times have moved on and we have to accept houses cost 10x your salary on average. What’s more of a concern is people paying rent which is often the same cost as a mortgage all because they can’t get the deposit together.

[spygirl]

Ah, the good old days, when banks would not lend to women.

You might to try putting a mortgage 10x your salary into a calculator. Then seeing hiw much of your take home you'll be spending on it.

 

 

 

https://www.cityam.com/exclusive-mortgage-guru-colin-bell-on-why-the-fiercely-competitive-market-is-ready-for-a-50-year-fixed-rate/

 

[spygirl]

We are planning to launch with a 30-year fixed-rate product, with ambitions for 40- and 50-year fixes, as well as shorter loans. As we are applying to be a bank, we will still have restrictions around how much we can lend people over the four and a half times applicant income threshold. However, this is still significantly more than the three times multiple that first-time buyers are typically offered through short-term fixes

 

Ahh that's a No then.

They are still applying to be a bank ffs. This has been going on for years ffs.

Can't they take Notake an answer?

 

 

[spygirl]

Equally, as our products won’t have standard variable rates, consumers that choose them will not have to worry about interest rates rising, and we don’t need to check they can afford the mortgage as rates rise as they won’t. It would be irresponsible not to challenge the UK’s growing housing market bubble that’s turning homeownership into a pipe dream for a whole generation.”  

 

Standing up for the little guy....

 

 

[spygirl]

A long-term fix is a great option for anyone looking to cap their mortgage cost or reduce their concern around future rate rises, whatever level of the property ladder they are on. With the average price of a home now sitting at 8.6 times average earnings, first-time buyers will struggle to step onto the property ladder without significant help from the Bank of Mum and Dad, or a lender who is sympathetic to their cause, and willing to stretch their Loan to Income criteria. Long term fixes help to alleviate these barriers.

Assume I'm a bit slow.

Explain that to me, with numbers.

I’d encourage borrowers to keep an eye out for our launch, which is currently pencilled in for the second half of the year. In the meantime, look closely at the terms of the products you are signing up for. Don’t forget about mortgage fees as well, as they push up the real rate. More interest rate rises are also imminent, so factor these in before jumping straight into a short fixed product

Almost there lads....

 

 

[spygirl]

https://www.perenna.com/about

We’re a mission led company

We’re building the best mortgage bank in the world. We’re aligned with our customers interests and are laser focused on developing products and services that make homeowners happy.

We’re driving change in an antiquated industry. We believe in challenging consensus thinking. When you work at Perenna you question industry practices and ask yourself if there’s a better way to do things.

We believe in open minds, collaboration and experimentation. We’re always looking for talented, creative problem solvers. Please get in touch if you believe the mortgage market needs a shake up and have a desire to make it happen

[spygirl]

7 hours ago, Covid19 and life to go said:

Shut down😄 you know well enough that the sensible option won't happen spybo.... They'll be bailed out.

Surely this also puts the minimum wage rise floor for a couple at over 200k for a FTB. Possibly closer to 300.

Maybe @Stueyis right .. golden opportunity is now.

I've given this some thought.

There will be no Perenna mortgage product.

The company are just stringing dumb investors along.

Theyll go bust in 12-24 months.

 

[Covid19 and life to go]

16 hours ago, spygirl said:

I've given this some thought.

There will be no Perenna mortgage product.

The company are just stringing dumb investors along.

Theyll go bust in 12-24 months.

 

A bit of both I think.  Likely they'll rinse the investors but also I think it's likely there will be a product.  If not with them then someone else.

The whole think stinks of tell me how to get the obsolete sub prime mortgages without telling me they sub prime is obsolete.