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#31 Shotoflight

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Posted 29 March 2012 - 10:19 AM

Policy on the hoof.
Panic.
Unintended consequences.

And whilst there will always be risk taking lemmings where debt and houses are concerned, I think on this occasion and in this environment, the mainstream & majority are starting to wise up and see through this for what it is - dangerous.

There is a newsnight thread on main board. I caught a bit of it but missed the start - like Randall, some tough questions were asked, for a change. The I player could help - it was definitely worth a watch in my opinion.

It hasn't even been properly thought through by govt - weren't there other schemes of mortgage help which just helped a handful after a yr or so instead of the hundreds or thousands it was aimed at?

Schapps said it would be subject to review - which may happen sooner than he thinks.


NewBuy scheme is poorly constructed and lays no foundation for recovery

It's not just pasties that are causing George Osborne's Budget to prove problematic

http://www.telegraph...r-recovery.html

As we reveal today, its NewBuy scheme is in trouble, too. Planned for months, it is designed to help first-time buyers own a new home. But it's already unravelling.

Like VAT on pasties, it's an example of a Budget measure that's ill thought through with unintended consequences and of dubious benefit.

Increasing the supply of new homes on the market through an artificial scheme underwritten by the state is not obviously in the interest of house builders trying to regain profitability and protect margins. Similarly, it's not obvious why it's in the wider economy's interests for the Government to increase the number of young people with 95pc mortgages - condemning many of them to instant negative equity. Both lenders and house builders have good reasons for steering clear to protect their commercial interests.

Add in the complexity of the scheme and it has all the hallmarks of a disaster in waiting.

The Coalition is impatient for economic recovery and wants to fund a building boom through subsidised mortgages - the sort of madcap scheme that got us into the credit crisis in the first place.

Recovery from recession induced by banking crises is notoriously slow. But risky, highly leveraged quick fixes such as NewBuy are no solution. Consumers will spend to turn the engine of recovery only when they feel more confident. That largely comes from job security and job prospects. Granting house builders, and all other employers, a holiday on the National Insurance job tax would have been a more meaningful and less risky Budget measure than trying to rig the housing market short term

Says it all, really

NewBuy: Home Builders Federation executive chairman Stewart Baseley's letter

http://www.telegraph...eys-letter.html

Edited by Shotoflight, 29 March 2012 - 10:21 AM.


#32 Shotoflight

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Posted 16 April 2012 - 08:28 PM

UK - first buy scheme not applicable here - juicy interest rates though

Mortgage lending up 20% in February

Rise in first-time buyer numbers behind overall increase in lending for house purchases, CML figures suggest

http://www.guardian....up-february-cml

Mark Hollands, director of mortgage broker London Money, said he believed the rise in first-time buyer numbers would "almost certainly fizzle out" now the stamp duty holiday deadline had passed.

"While homes are marginally more affordable for some first-time buyers, for the majority of would-be homeowners property ownership remains a pipe dream. Lending criteria are too tough; the deposits required too large," he said.

The CML figures for remortgages show the number of loans fell by 3% in February and by 13% year-on-year at 25,500. However, just after the period covered by the figures several lenders announced increases to their standard variable rates, so it will be interesting to compare these figures with those for March.

Hollands added: "Clearly there is still a degree of interest rate inertia. Borrowers need to be extremely vigilant about the vagaries of the wholesale money markets which are driving up the cost of their loans."

Meanwhile, Halifax has released details of its mortgages for buyers who want help with their purchase through the government's NewBuy scheme.

The scheme offers lenders a guarantee to incentivise them to offer 95% mortgages on new-build properties. Halifax will be offering two deals: a two-year fixed rate at 5.99% with a £999 fee, and a fee-free deal with a two-year fixed rate of 6.39%.

#33 Shotoflight

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Posted 18 April 2012 - 09:19 AM

UK - New Buy

Basically a clusterf*ck.

New house price increase of 7.7pc fuels fear of a bubble

http://blogs.telegra...ar-of-a-bubble/

House prices increased by 7.7pc over the last year among newly built properties, raising fears that Government initiatives to help first-time buyers could be luring many to overpay their way into negative equity.

Office for National Statistics (ONS) figures show flat or falling prices across the housing market as a whole but include a surprise surge in new house prices. Government intervention to help first-time buyers may have had the unintended effect of inflating debts young homebuyers take on while the real beneficiaries are builders.

The ONS declined to comment on why newly-built homes are fetching so much more than a year ago but confirmed that the number of properties sold had increased by “about 20pc”.

Needless to say the CML and the building industry have welcomed taxpayer subsidies for house prices that remain an average of 4.4 years’ pre-tax average earnings across Britain as a whole and an eye-stretching 6.4 times gross earnings in London, according to Nationwide Building Society.

As pointed out in this space last November, when the subsidy was first aired with the more limited scope of affecting only first-time buyers, there are significant dangers in market intervention. Amid a credit crisis caused by excessive debt, much of it secured to overpriced property, the Government is encouraging laxer lending to people with no history of repaying debt so that they can buy overpriced property.

You really could not make it up. Government intervention in the housing market – ranging from running negative real interest rates to the Stamp Duty holiday and, most recently, the NewBuy Guarantee scheme – have helped to underpin and even increase house prices, as today’s figures from the ONS demonstrate.

In the short term, ‘generation rent’ or rising numbers of people fed up with renting rather than owning their home may welcome any help to get onto the housing ladder. But Government intervention is unlikely to be of lasting benefit to anyone encouraged to take on excessive debt before interest rates rise from their current historic low and more homebuyers find themselves in negative equity.


#34 BelfastVI

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Posted 18 April 2012 - 05:57 PM

UK - New Buy

Basically a clusterf*ck.

New house price increase of 7.7pc fuels fear of a bubble

http://blogs.telegra...ar-of-a-bubble/

House prices increased by 7.7pc over the last year among newly built properties, raising fears that Government initiatives to help first-time buyers could be luring many to overpay their way into negative equity.

Office for National Statistics (ONS) figures show flat or falling prices across the housing market as a whole but include a surprise surge in new house prices. Government intervention to help first-time buyers may have had the unintended effect of inflating debts young homebuyers take on while the real beneficiaries are builders.

The ONS declined to comment on why newly-built homes are fetching so much more than a year ago but confirmed that the number of properties sold had increased by "about 20pc".

Needless to say the CML and the building industry have welcomed taxpayer subsidies for house prices that remain an average of 4.4 years' pre-tax average earnings across Britain as a whole and an eye-stretching 6.4 times gross earnings in London, according to Nationwide Building Society.

As pointed out in this space last November, when the subsidy was first aired with the more limited scope of affecting only first-time buyers, there are significant dangers in market intervention. Amid a credit crisis caused by excessive debt, much of it secured to overpriced property, the Government is encouraging laxer lending to people with no history of repaying debt so that they can buy overpriced property.

You really could not make it up. Government intervention in the housing market – ranging from running negative real interest rates to the Stamp Duty holiday and, most recently, the NewBuy Guarantee scheme – have helped to underpin and even increase house prices, as today's figures from the ONS demonstrate.

In the short term, 'generation rent' or rising numbers of people fed up with renting rather than owning their home may welcome any help to get onto the housing ladder. But Government intervention is unlikely to be of lasting benefit to anyone encouraged to take on excessive debt before interest rates rise from their current historic low and more homebuyers find themselves in negative equity.

The only problem with this arguement is the mortgage guarantee scheme has not started yet so we cant blame it for any upward blip in houseprices. The end of the STAMP duty holiday had probably more to do with it. However it was the ending of the government intervention that triggered this increase rather than its introduction. If it was the cause then house prices should drop after its removal.

#35 Shotoflight

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Posted 18 April 2012 - 06:43 PM

The only problem with this arguement is the mortgage guarantee scheme has not started yet so we cant blame it for any upward blip in houseprices. The end of the STAMP duty holiday had probably more to do with it. However it was the ending of the government intervention that triggered this increase rather than its introduction. If it was the cause then house prices should drop after its removal.


I think you're right there. And typical IRs of 5.99 (profit taking or taking the p*ss?) quoted earlier may put some off.

http://www.guardian....-buyer-firstbuy

All the same Govt intervention of most sorts seems to be very stop start and sometimes at very short notice creating uneven 'blips', uncertainty and short termism - either pulling demand forward or benefitting certain sectors (new build, council buy, BTL, FTBs, Stamp duty tiers) perhaps at the expense of others (buyer types - movers and house types - resales). What I think all can agree on is that all govt intervention distorts. That's its purpose. And this current shower's record of thinking through is laughable.
What will they think of next?

#36 Shotoflight

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Posted 20 April 2012 - 11:51 AM

Mortgage lenders undermining NewBuy scheme by charging high rates, say builders

Mortgage lenders are undermining the Government's flagship housing scheme by charging excessively steep rates, Britain's biggest house builder has warned.

http://www.telegraph...y-builders.html


Under the NewBuy Guarantee, launched last month by David Cameron, the state and the builder underwrite 95pc loan-to-value mortgages on new build homes.

The aim is to boost the economy and kickstart the housing market, but there are growing concerns that the banks and building societies involved are pricing products too aggressively to allow the scheme to take off.

"The concept is right and the demand is there," said Mike Farley, Persimmon's chief executive. "What is hindering its take-off is the rates. We are finding the affordability is not right because the rates they [lenders] have launched at are around 6pc."

Mr Farley called for lower rates and more entrants to the market. His comments come after the latest lender to join, Halifax, launched NewBuy products with rates at about 6pc. Meanwhile, NatWest and Barclays, two of the other three lenders backing the scheme, have already raised their NewBuy rates from those on offer at launch. NatWest said its initial rates were promotiona,l while Barclays said it had acted in response to demand.

Roger Humber of the House Builders Association said the scheme "is beginning to look as if it could be very embarrassing" for the Government.

Questions had already been raised about NewBuy after the Telegraph revealed a letter in which the Home Builders Federation, which helped to develop the scheme, said it was "not at all what was envisaged".

A spokesman for the Council of Mortgage Lenders said the rates are "not unattractive" for 95pc loan-to-value mortgages and that, although indemnity protects lenders, their pricing still has to reflect the risks involved

#37 2buyornot2buy

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Posted 20 April 2012 - 11:57 AM

I wish the developers would make their minds up. Is it the deposit requirements or the rates FFS.

Just a few years ago SVR were at 7+% and 100+% LTV and everyone loved it.

Now they get 95% mortgages and 6% rates and it’s the end of the world.

NEWSFLASH - It's not rates or deposits - ITS PRICES.

Edited by 2buyornot2buy, 20 April 2012 - 11:57 AM.


#38 tinbin

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Posted 20 April 2012 - 12:26 PM

As much as it is good to see that 'affordability' is being recognised and talked about regarding housing. They are still missing the point.

Where prices are at now, particularly in N.Ireland, they are only scratching the surface of affordability. I wouldn't like to quote any specific figures because I couldn't back it up, but houses in the lower end of the market are 'probably' in some cases, just about within reach for a small percentage of first time buyers - I would guess perhaps 10% of FTBers. This somehow becomes a 'Eureka' moment for VI's to attach onto (a sign of their desperation) i.e The bottom is here, some FTBers can afford to buy with Bank of Mum and Dad or Co-Ownership!! Tell all your friends the market is going to kick start, houses will start selling themselves again and we are all going to live happily ever after!!

It is just not going to happen. It's all fine and dandy having these schemes to 'kick start' the market but they are doomed to fail because house prices are not within the mainstream public's affordability. Further up the chain in the middle of the market asking prices remain static, even though the industry accepts that the market is falling.

Its a bit like trying to sell platinum to someone who can only afford to go to the half priced jewellers. Until prices come down to a level that the mainstream/average FTBer can afford then nothing else will change. IMO this is the biggest hurdle the Housing market has, getting FTBers back onto the market. As 2buyornot2buy has stated, it is the pricing that needs to change, nothing else.

Edited by tinbin, 20 April 2012 - 12:32 PM.


#39 BelfastVI

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Posted 22 April 2012 - 09:53 PM

As much as it is good to see that 'affordability' is being recognised and talked about regarding housing. They are still missing the point.


Its a bit like trying to sell platinum to someone who can only afford to go to the half priced jewellers. Until prices come down to a level that the mainstream/average FTBer can afford then nothing else will change. IMO this is the biggest hurdle the Housing market has, getting FTBers back onto the market. As 2buyornot2buy has stated, it is the pricing that needs to change, nothing else.


I am naturally going to disagree. As for the vast majority of us the purchase of a house is not a cash transaction and credit is required. At the moment 80% of the transaction amount is paid in the form of a mortgage. The ability to avail of that credit and have the balance amount in cash is the main hurdle in purchasing the property. In a £130k house, dropping the price by £10k is of little help to someone who has a £10k deposit but requires £26k. The drop of £10k will mean he now needs a deposit of £24k.


When prices were rising to almost twice their current value there were twice as many, if not more people buying. Whilst a lot of this was the hype/fear/greed that goes with the boom none of it would have been possible without the abundant supply of credit. If fact the madness only stopped when the credit was withdrawn.

When something is predominately purchased on credit, then the availability of that credit is the predominate factor in the control of demand. Sentiment flows from the same fount. Unfortunately we still both collectively and individually (present company excluded) take the offer of credit as a blessing on our decision to purchase/borrow. Therefore 'we' see the banks decision to offer wholesale credit, as they did 6 years ago, as an wholesale approval of the asset they were funding. The removal of same has the opposite effect.




#40 Shotoflight

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Posted 22 April 2012 - 11:33 PM

I am naturally going to disagree. As for the vast majority of us the purchase of a house is not a cash transaction and credit is required. At the moment 80% of the transaction amount is paid in the form of a mortgage. The ability to avail of that credit and have the balance amount in cash is the main hurdle in purchasing the property. In a £130k house, dropping the price by £10k is of little help to someone who has a £10k deposit but requires £26k. The drop of £10k will mean he now needs a deposit of £24k.


When prices were rising to almost twice their current value there were twice as many, if not more people buying. Whilst a lot of this was the hype/fear/greed that goes with the boom none of it would have been possible without the abundant supply of credit. If fact the madness only stopped when the credit was withdrawn.

When something is predominately purchased on credit, then the availability of that credit is the predominate factor in the control of demand. Sentiment flows from the same fount. Unfortunately we still both collectively and individually (present company excluded) take the offer of credit as a blessing on our decision to purchase/borrow. Therefore 'we' see the banks decision to offer wholesale credit, as they did 6 years ago, as an wholesale approval of the asset they were funding. The removal of same has the opposite effect.



You raise several interesting and valid points

The availability of debt and the concept of affordability are not unconnected. I like the theory reproduced elsewhere that affordability also includes interest rates/deposit and income. One reason for the debt disaster, for that is what it was, is that interest rates were too low (ECB rates for Ireland and London rates for NI) and income multiples went out the window as did deposits. Competition with many new entrant lenders - building societies, sub prime, specialist and foreign - all wanted a piece of the action and much of it was comission based and the risk offloaded into impenetrable traded products. So easy debt was a main driver but it was also mad debt.

Banks also miscalculated with trackers, egged on by Brown's no more boom and bust and that cretin Ahern's famous suicide diatribe. It wasn't only mortgage credit though - store and credit cards flourished with the likes of credit unions and the PMS. Students lost grants long ago and were encouraged to see educational debt as an investment as was all government spending. As banks become comfortable with extreme risk, many housepurchasers become comfortable with risky debt - or credit as it came to be called and which became an entitlement irrespective of circumstances or prospects. Many 'developers' simply lost the run of themselves and showed themselves for the hick, bit playing cowboys they really were.

What we may agree on then (I think) that credit and lending during the boom was irrational (except in the eyes of the bank) in terms of volume, cost, the credit worthiness of the borrower and the asset to be leant against. Now the damage can be seen and felt as taxpayers bailed the banks out (whether they wanted to or not) and developers pop left right and centre. And although interest rates remain at emergency distressed and 'short term' levels mad lending has been reigned in.

But lending and debt now goes on affordability. On interest rates, currently unsustainable in the medium to long term (perhaps indeed the short term) Lenders are decoupling from the BOE, requiring what would have been considered normal deposits and eschewing interest only and risky loans on falling assets. Small businesses are also finding that the days of running an enterprise on the debt and risk of the bank have come to an end - you must put some skin in the game. Banks cannot show forebearance and pretend forever if they want to move forward as viable, profitable entities especially as things worsen rather than improve.

So the availability of debt is a main factor but affordability to access that debt through borrowing costs (interest rates/deposits) and income to service that debt are now key. This sets price limits for what the majority of people can get and therefore the price of assets they desire - if sellers must sell. Previously it had nothing really to do with how much it cost to build the house or how much the seller paid for it as the main question a mortagee asked a bank was - how much can I have. And misplaced confidence in 'investment' alongside greed, stupidity and in some cases necessity took care of the rest.

So mad debt was the driver but affordability now overrides access to debt - the banks get it and most people are starting to. A return to normal sensible lending. Except affordability is becoming harder and harder as the economy stagnates and inflation is stoked by the emergency rates and QE, unemployment, pay freeze, no growth, low confidence and negative sentiment.

For sellers to sell, they must follow this downward affordability trajectory. This is what the banks and ergo debt availibility are doing.

Sellers will have at least another 3-5 yrs to get used to this concept, novel as it may seem. And rising interest rates will speed this up.

In the mean time, potential buyers have other issues to be getting on with.

#41 talksalot81

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Posted 23 April 2012 - 07:48 AM

I am naturally going to disagree. As for the vast majority of us the purchase of a house is not a cash transaction and credit is required. At the moment 80% of the transaction amount is paid in the form of a mortgage. The ability to avail of that credit and have the balance amount in cash is the main hurdle in purchasing the property. In a £130k house, dropping the price by £10k is of little help to someone who has a £10k deposit but requires £26k. The drop of £10k will mean he now needs a deposit of £24k.


Mathematically your logic is impeccable but I wonder about the underlying philosophy. Yes, drops in prices are going to make minimal difference in your example but perhaps it is just time to tell this person that they cannot afford it and need to save for a few years instead of willing back times when they could borrow more heavily. I strongly believe it is time that we started to focus on actual ownership of a property as opposed to the abstract 'bank ownership'. Property became totally disconnected from reality because very few people were actually spending their own money. Yes, down the line they would have had to pay it back but a great many people went ahead on the promise of price inflation saving them. The whole mentality went wrong and I think we are now in a much healthier situation. The money is available if you want a mortgage, you simply have to prove that you are well enough organised and funded to be able to afford it - anything else seems a bit daft to me.

#42 yadayada

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Posted 23 April 2012 - 08:19 AM

I am naturally going to disagree. As for the vast majority of us the purchase of a house is not a cash transaction and credit is required. At the moment 80% of the transaction amount is paid in the form of a mortgage. The ability to avail of that credit and have the balance amount in cash is the main hurdle in purchasing the property. In a £130k house, dropping the price by £10k is of little help to someone who has a £10k deposit but requires £26k. The drop of £10k will mean he now needs a deposit of £24k.


When prices were rising to almost twice their current value there were twice as many, if not more people buying. Whilst a lot of this was the hype/fear/greed that goes with the boom none of it would have been possible without the abundant supply of credit. If fact the madness only stopped when the credit was withdrawn.

When something is predominately purchased on credit, then the availability of that credit is the predominate factor in the control of demand. Sentiment flows from the same fount. Unfortunately we still both collectively and individually (present company excluded) take the offer of credit as a blessing on our decision to purchase/borrow. Therefore 'we' see the banks decision to offer wholesale credit, as they did 6 years ago, as an wholesale approval of the asset they were funding. The removal of same has the opposite effect.


All right - so no mortgage, no deal. Your example could presumably afford the house if the price dropped to £100k, so that is the only way a sale will take place.

#43 2buyornot2buy

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Posted 23 April 2012 - 08:25 AM

From BVI's example I find it encouraging that banks now require a 20% deposit for new builds. Hopefully some developers make the obvious link, if they want to see an increase in sales volume they need to reduce the price substantially.

A large percentage of new build sales must be co-ownership and momentum sales. Not a healthy market long term.

#44 2buyornot2buy

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Posted 23 April 2012 - 08:27 AM

I think BVI you have trouble grasping that if your prices fell, the banks would price their risk of further falls accordingly. Realistic prices = realistic deposit and interest rates.

I suspect the majority of your sales are with a 20% deposit because banks think further falls are likely.

#45 tinbin

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Posted 24 April 2012 - 10:54 AM

I am naturally going to disagree. As for the vast majority of us the purchase of a house is not a cash transaction and credit is required. At the moment 80% of the transaction amount is paid in the form of a mortgage. The ability to avail of that credit and have the balance amount in cash is the main hurdle in purchasing the property. In a £130k house, dropping the price by £10k is of little help to someone who has a £10k deposit but requires £26k. The drop of £10k will mean he now needs a deposit of £24k.


When prices were rising to almost twice their current value there were twice as many, if not more people buying. Whilst a lot of this was the hype/fear/greed that goes with the boom none of it would have been possible without the abundant supply of credit. If fact the madness only stopped when the credit was withdrawn.

When something is predominately purchased on credit, then the availability of that credit is the predominate factor in the control of demand. Sentiment flows from the same fount. Unfortunately we still both collectively and individually (present company excluded) take the offer of credit as a blessing on our decision to purchase/borrow. Therefore 'we' see the banks decision to offer wholesale credit, as they did 6 years ago, as an wholesale approval of the asset they were funding. The removal of same has the opposite effect.


You make a valid point, large deposits are an obstacle for some to buy, but to me your point is VI 'blinkered'... you are detaching yourself from the true reality of the situation we are in. Developers don't have to assess affordability for loans, so I wouldn't expect them to look at anything other than what they see as an issue for them. Banks do however assess the ability of a borrower to repay. You have to seriously ask yourself why are the Banks declining loans, why are they asking for larger deposits?? ... the affordability is not evident and the risks involved are too high for them.It really is as simple as that. All opinions aside about who else is to blame for the credit crunch and property crashes, the root cause of this mess we find ourselves in is the free availability of credit to fund the stupidity, madness and greed of the boom years. The fact that this free availability of credit to every Tom, Dick & Harry has now been removed is seen by VI's as a negative thing because you see this removal as a barrier to homeownership ... and obviously sales. It is a hypocritical view to me however that the general Joe Public blames the Banks ... those damn 'Greedy Bankers' for the financial mess we are in and is calling for more and more regulation of the Financial industry. When they get it ... they complain??? I don't recall ever hearing a VI talk seriously about affordability based on the current economic enviroment. To be fair, what actually qualifies them to make such sweeping statements when they do anyway?

Most of the Banks who fell into the trap of fuelling the 'credit boom' lent out money they simply didn't have. This is a point that is overlooked by many. From a liquidity/funding point of view the Banks who done this are now in an absolute mess.... VI's funded their profits from essentially the 'tick man' round the corner with Monopoly money. The financial/housing markets have been built on false pretences basically from 2000/2001 onwards, others would argue for the last 30 years or so. The FSA (Financial Services Authority) who regulate the financial services industry have put minimum funding requirements in place so these Banks in particular have a long way to go to get back to anywhere near a sustainable level for the long term future of the financial world. They are propped up with tax payers money and the only way they can get depositors money in is to offer above average interest rates on savings, which is now also having a knock on effect to rates they are willing to offer on their lending.

It is worth pointing out that not every bank got themselves into this mess, it is an assumption that the Banking industry will not lend money and that they all require 20% deposits for MTG's. There may not be 100's of MTG lenders tripping over themselves to offer loans, but at the end of the day you only need one MTG from one MTG provider, so if these FTBers stack up as well as it is claimed then I don't see why it is such an issue as there are lenders out there willing to offer them a 90-95% loan.The reality is that affordability cannot be demonstrated, therefore applications are being declined. This is saving people from themselves to be quite frank. While I cannot predict the future, I would anticipate that these folk will look back and realise that they have had a lucky escape. IMO ... I think it is more accurate to accept that the majority of FTBers cannot afford to buy at current prices, those that can should be able to find a MTG deal somewhere. I dont believe the sentiment is there to buy as the vast majority accept that the market is in decline.

It really is time to start getting real, when Co-ownership & the Bank of Mum and Dad are the main drivers for FTBers to get onto the property market, the issue is with the pricing. If a VI's business plan is based on folk hanging themselves with debt then I think society & home ownership has a problem that isn't going to sort itself out soon. If prices dropped, more houses would sell.




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