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I think you misunderstand the nature of mortgage deals. There is no compulsion to refinance at the end of a fixed rate period, nor can the bank pull the mortgage if they don't like the LTV. In a professional capacity I work for a firm that purchases high volumes of sub performing and non performing mortgages so I have some experience of this. One of the biggest problems we have is with borrowers that continue to pay but are seriously underwater on LtV - we can't do anything to get our hands on the property and have to wait!
I bought my own property in 2013, I paid almost 50% more than the previous owner paid for it in 2005. However, when my mortgage is paid off (in 2038!) I could sell the property for half what I paid (the true value?) away and still be up versus having rented the same property for 25 years.
House prices and the value of your equity in the property are highly volatile, we know this. But you can always just live in it, as long as you can afford the monthly repayments at any probable level of interest rates. Your point on margin calls is plain wrong for PDH docs.
NickCJ-
there may not be a compulsion to refinance at the end of a fixed rate period, but you would have to be mentally retarded to go from a 1.59pc deal to a 3.99pc SVR and want to do nothing about it.
the problem Donald Loin is going to have, is he is spending 800k on a house which may well be worth 100k less than that in 3 years time. He will get stiffed on his valuation and he will get stiffed on the deal he can get which is critical when you are talking about a mortgage balance which I presume will be at or around the 500k mark.
we aren't talking about shitty 50k houses in leeds or wherever which is probably what you deal with - this is big boys stuff.
still whatever, its your life, and his.
user49934
it is entirely relevant. it is highly unlikely that the bank would wish to revalue their security midway through say a 2 year fix (although I would imagine if I read your mortgage terms and conditions there is probably a clause in there which would allow them to do so). However he will get stiffed by a bloke with a clipboard at the end of his 2 year deal and a valuation in a bubble will not stack up against a valuation undertaken in a more stable and sensible market. I suspect the only reason he can even consider spending that sort of money on a house is because rates are low - but how long will that continue for? no one know? could he service a 500 grand mortgage at 4pc? 5pc? good luck with that.
my last point is not confused at all. you say - don't worry about loan to values or anything like that, just get a deal which means you can roll over onto a good rate if things do go pear shaped. I say, don't be a d1ck and overspend on the property in the first place. its pretty simple stuff. if he wants to waste nearly 800 large on a terraced house which was 300k less than he is proposing to spend only 3.5-4 years ago, then that's his funeral (and yours as well if that's what you've done as well).
you sound like someone who has overpaid for property in the recent past? do you really think that this situation is sustainable?