Tuesday, Nov 25, 2008
Short but very sweet!
Daily Mail: Banks 'to freeze mortgages' as Treasury reveals house prices will plummet by a QUARTER next year
Mortgage lending could dry up completely next year leaving no-one able to afford to buy a new home, according to a devastating report.
In a huge blow to Alistair Darling's plans for keeping Britain in tact through a crippling recession, experts predict banks could stop giving any loans to aspiring homeowners.
Former HBOS chief Sir James Crosby believes net lending will drop to below zero for the first time on record as people pay more money back to banks than they take out.
The freeze on new loans will see house prices collapse by a quarter next year, according to the small print of Mr Darling's own Pre-Budget Report.
Posted by pdprav @ 02:15 PM (499 views) Add Comment
13 Comments
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1. Cheekie Charlie said...
Looks like it's cash only.
2. alan said...
If this happens the government will not be popular. How much have they put into the banking system already?
I can't think Darling will want to see this statistic which the Tories will use to beat him with.
Lending is drying up, as Mervyn says. If it drops further so, inevitably will house prices. Nobody will be able to buy.
Maybe Darling could get Northern Rock to lend again?
3. sceneclub68 said...
"Mortgage lending could dry up completely next year leaving no-one able to afford to buy a new home, according to a devastating report.
In a huge blow to Alistair Darling's plans for keeping Britain in tact through a crippling recession, experts predict banks could stop giving any loans to aspiring homeowners.Former HBOS chief Sir James Crosby believes net lending will drop to below zero for the first time on record as people pay more money back to banks than they take out. The freeze on new loans will see house prices collapse by a quarter next year, according to the small print of Mr Darling's own Pre-Budget Report."
Classic Daily Mail. You have to wonder whether this journalist is extremely thick or deliberately mendacious. Perhaps both. Because of course 'net lending' is not the same as 'total lending'.
This said, it would be fun in theory (messy in practice) if mortgage lending did dry up completely. I have often thought that an outright ban on lending against houses (and other non productive assets) would be a good way to control house prices and tie them more closely to people's earning capacity/ willingness to save. And no more interest payments. Clearly such a radical step would have to be accompanied by restrictions on the number of residential properties an individual could own and/or very strong protections for tenants. But which banker or politician would agree with me?
4. last_days_of_disco said...
No, houses will drop in price to a level where people will be able to afford them. Doh. Mortgages will be give to people with enough saved up to afford the deposit and prices will be determined by that. I reckon people can afford on average between 10k and 20k and that combined with the LTV will determine prices. So if the LTV is 75%, then houses will come down to between roughly 40K and 80K.
5. amjidk said...
LDOD, between 40k and 80k sounds good to me....
6. justwatching said...
Read some of the comments though.
Why is a contraction of lending (ie people paying off loans) such a bad thing??
We are in the sh*t due to the debt mountain. Its not a CREDIT CRUNCH, its a DEBT CRUNCH.
7. Vstor said...
At least the Government are admitting what everyone knows. I just recon 25% is their best possible scenario, likely to be at least 35% though
8. planning4acrash said...
Yes, I was just discussing this on the tube. Its a debt crunch, credit crunch is a symptom of too much debt, but by calling a credit crunch, they can propose more debt as solution, more ramping, get out of debt, put your savings in physical gold bullion.
9. japanese uncle said...
I would like to depost the following (originally posted sometime earlier this year)
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As I mentioned earlier, some of the banks and BSs will have to ask borrowers to raise 40-50% deposit as prerequisite to any mortgage arrangement. And ultimately buyers won't be able to secure any mortgage deal at all. Then house prices will have to come down to the level at which buyers can afford only in cash. It's now becoming the reality at a frightening pace, providing yet another case to endorse the scenario of 25% HPC in 2008 alone. Things are entirely different, I mean worse than the 1990 housing collapse in Japan, due to the presence of debts and deficits of all kinds that surround the UK, let alone massive financial crisis in nearly all asset markets and that in nearly all advanced economies. Compared to this, 1990 Japan was a case of soft landing, looking back from now.
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Any artificial rigging will end up in more misery. So just stop and go with the flow.Meanwhie heavily tax the property capital gain during the bubble era on retroactive basis.
10. jackas said...
Contraction of debt is not a bad thing.
Prices falling is not a bad thing.
The media is full of government puppets and useful idiots saying that both are bad things.
Wait for the currency to really start to collapse- then the people will realise what this govt is up to. Oh, hang on...its a GLOBAL problem isn't it...sorry yeah, global. ahem.
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