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Quantitative Finance Collector is a blog on Quantitative finance analysis, financial engineering methods in mathematical finance focusing on derivative pricing, quantitative trading and quantitative risk management. Random thoughts on financial markets and personal staff are posted at the sub personal blog.

May 28
Consumer Credit awareness website, CreditChoices.co.uk reports that Major British lenders such as Abbey Mortgages will not be returning to the practice of issuing 100% mortgages in the near future. In fact most UK lenders are requiring as much as 20% deposits on home purchase loans. While on the surface this may seem an unfair adjustment, one must also consider that those generous loans were based upon inflated real estate values. Further the larger sum that one finances the larger the monthly payment will be. This latter statement illustrated by using the remortgage calculator found at Credit Choices. So we combine these two factors and arrive at a unique conclusion... we are better off without 100% mortgages and easy credit. Consider this, a house costing £200,000 just two years ago is selling for around £150,000 today. With a deposit of 20% or £30,000 there remains a principle due of £120,000 pounds. This results in a difference of over £500.00 monthly! Imagine the total cost over 25 years. Even factors such as mortgage protection are more costly on the larger loan. Yes many of us may not have the larger sum to place as deposit but that does not negate the data showing that 100% mortgages do no one any favour.
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