bostonbubble.com

balor123 · Joined: 08 Mar 2008 Posts: 1204

Survey Finds Nearly Half of Americans Can't Afford Large Down Payments on Mortgages

And that's for a $40k downpayment! The average home price in Boston is much higher than the national average of $200k. The average sales price is about $300k and I would think that's weighted towards those that people can afford right now, meaning that the average home price, if it could be sold, is probably considerably higher. I would venture maybe $400k (anyone know?)? Median probably makes more sense here than average to avoid the outliers. Anyway, the point is homes, even outside of FTHB, aren't being sold with 20% down loans.

Kaidran · Joined: 17 Mar 2010 Posts: 289

Wow, only 12% could come up the 20%. I just read an article about the UK, there 56% of new loans are with 25% or more down.

balor123 · Joined: 08 Mar 2008 Posts: 1204

I imagine it depends on what part of UK. The average price seems to be about 226k but in London it's 407k (both Pounds).

Kaidran · Joined: 17 Mar 2010 Posts: 289

This was the article, I was really surprised to see the UK down payments so high. Prices are still very high there and going higher. You are right that the London market is typically very different but it did not go into detail. It would still be reasonable to compare it to Massachusetts or possibly New England as a whole.

http://news.bbc.co.uk/2/hi/business/10202437.stm

balor123 · Joined: 08 Mar 2008 Posts: 1204

It also says that sales are sluggish so I think they just have a different lending market. A coworker of mine from there mentioned that fixed rate loans are unheard of there, which might provide more incentive for people to put large downpayments. I think it is mostly a smaller sample size combined with high lending standards and incentives to put down a large downpayment.

Kaidran · Joined: 17 Mar 2010 Posts: 289

Fixed rate is definitely not done.

They do have a more risky dual mortgage though. I forget the name but you borrow money at a variable rate, paying interest only. You then contribute to a savings plan at a variable return rate. This would be calculated to pay off your balance in 30 years at a return that is reasonable when you apply. If the market is doing well you can pay off you mortgage early or you end up with extra money at the end. I have not heard much about people that have these sorts of mortgages since the markets went so far downhill. This might be a looming problem to come soon. I actually had a mortgage like this 1999-2002 and it was seen as a very safe way of doing things. As I write this it does not seem so safe.

Kaidran · Joined: 17 Mar 2010 Posts: 289

The name was Endowment mortgages. Definitely dont seem so clever now, though I only actually borrowed ~$45k at the time.

http://www.mortgagesorter.co.uk/types_mortgages_endowment_problems.html

balor123 · Joined: 08 Mar 2008 Posts: 1204

I guess there's just a difference between the housing policies of the two states. In the US, the cost of unexpected inflation is expected to be borne by investors while in the UK it is the borrower. Our system is only possible because our government assumes that cost though, otherwise mortgage interest rates would be much, much higher. Are mortgages fully privatized in the UK?

Kaidran · Joined: 17 Mar 2010 Posts: 289

Yes, as far as I know there is no equivalent to Freddie or Fannie. I'm not sure how mortgages treated there, if they were resold and combined like here.

Boston ITer · Joined: 11 Jan 2010 Posts: 269

Is London the clubbing capital for the world's rich?

It seems that London's property markets are being propped up by the likes of western media starlets like Madonna and the newly minted multimillionaires to billionaires of Russia and Asia. So where do the average Britons live?

balor123 · Joined: 08 Mar 2008 Posts: 1204

Like Japan, 2 hours from the city and even then you still pay an arm and a leg. London is HUGE. Then number of rich people very small. I don't think rich people are causing prices for several million to go up. More likely it's being caused by easy lending. Like in Japan where you can get a mortgage for 1%.

Kaidran · Joined: 17 Mar 2010 Posts: 289

I'm from the north of England so I dont really know much about London, except as balor says it is huge. I think it has tended to operate on its own so what is happening in London is not necessarily a reflection of the rest of the country. It is so big though that it can skew statistics.