Wednesday, Sep 19, 2007
Truth is coming up in the mainstream press
Times: Turmoil in markets ‘has ended house prices boom in London’
What we have been knowing for a while is slowly being aknowledged in the press: "The turmoil in the financial markets in the past month has already taken its toll on asking prices in London. The higher cost of borrowing and an expected tightening of lending criteria for new mortgages could deter some smaller buy-to-let lenders from buying and force more potential first-time buyers into rented accommodation." ... sorry, what should a "lender" buy? and "Andy Wiggins, head of Bradford & Bingley’s buy-to-let division, predicted that one of the big fallouts from Northern Rock would be “fewer lenders stretching their lending criteria”.
Posted by confused76 @ 03:44 PM (636 views) Add Comment
7 Comments
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1. alan said...
Earlier this week Knight Frank told Bloomberg that prices in London would rise by 10% in 2008. I remember smiling as I read it.
http://www.bloomberg.com/apps/news?pid=20601206&sid=akie7p8mX7aE&refer=realestate
2. dugmug said...
"The higher cost of borrowing and an expected tightening of lending criteria for new mortgages could deter some smaller buy-to-let lenders from buying and force more potential first-time buyers into rented accommodation."
Err, where are those potential FTBs living now, pray tell? And therefore why can't they/won't they stay put? They keep pushing this to try to convince dumb BTLs that there will be some massive increase in rental demand and so rents, but it's a real crock of an argument.
"Kensington Group, a specialist lender to Britain’s sub-prime market, yesterday introduced a new cap on its lending so that new borrowers could only take out loans worth up to 75 per cent of the value of the property, compared with 90 per cent previously."
That's a big difference! That's £20k+ for even a relatively cheap property!! This is what's really important. There WILL be fewer buyers. You work out the rest.
3. alan said...
Other lenders like the Halifax have recently tweaked their capping arrangements too.
Try asking for a 95% loan now!
4. Tulipmania said...
Dugmug - I absolutely agree, it is the impact on lending criteria which I think will be the most significant impact of the credit crisis and Northern Rock's problems. This really doesn't seem to be getting picked up in the papers much.
Even if there are still plenty of people out there wanting to buy houses they won't be able to if they aren't able to get the same deals which pushed prices to this level in the first place. Lending criteria will be tightened in many ways, checks on self-certification, multiples of income, size of deposit etc ie a return to sensible lending practices. As soon as that happens many people will simply be unable to buy houses anymore even if they want to.
I don't think the bail out by the BoE or any cut in interest rates will stop lenders massively tightening their criteria. Northern Rock may have been bailed out but it is has still been destroyed as a viable commercial enterprise. The queues of pensioners are bound to bring the point home to the management of other lenders. Just a matter of sitting tight and waiting imo.
5. Rt said...
I think there is a problem with that right-move figure of -2.5% though. There's been a 41% fall in detached house instructions (due to hips). A lack of these higher priced properties will skew the average asking price down. Need some more months to see the trend.
6. Robert Mugabe said...
It has also ended Swervyn Mervyn's reputation... Watch Kennteh Clarke on Channel 4 today (19th September).
7. enuii said...
If you work in the city don't bank on your bonus to pay the mortgage!