Wednesday, Feb 25, 2009
Economy saved
Telegraph: RBS and Lloyds 'will pledge to increase mortgage lending by £40bn'
The two banks have agreed to increase loans to .... £40 billion ... in return for about £500 billion of taxpayers' assistance.
Is this not what got us into trouble in the first place - disconnection between those arranging finance and those accepting the risks
Posted by matt_the_hat @ 07:52 AM (324 views) Add Comment
3 Comments
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1. Old_traveller said...
Too many details are still unclear... 40 billion over how long? is this really going to make a dent?, at what general LTV conditions? deposits required? the government may be helping increase credit supply but the demand side is still another matter. Why on earth would an indicidual or a corporation up to their ears in debt would want to ask for more?
Although I believe transactions need to pick up to actually firm lower prices and confirm the trend into the panic phase, I still need to see facts that show demand side picking up substantially.
2. need-a-crash said...
As you mention above, it's possible increased lending will help our cause. More buyers with approved mortgages who keep chipping away at asking prices will increase house price falls.
At present if a vendor receives no offers at all, far from lowering their asking price they may decide to just wait until "banks start lending again" a phrase we keep hearing.
3. Liddiard said...
What are buyers supposed to do, just as it looks like things are going to be forced to fall and Mr Brown and the BOE want to return to "old fashioned sensible lending" here we have Mr Brown press ganging and bribeing lenders to go back to lending at 2007 levels. Of course what this means depends, as I keep saying, on what Mr Brown / the BOE / and the FSA consider IS "sensible lending". I would have thought sensible lending was what the lenders are currently lending at, 75% or less , but at how much income? Mr Brown said at the weekend we could not continue lending 6x's income, but surely he is NOT saying 5 1/2 x's will be fine, is he? The median I believe is 3.25, IF we are returning to sensible lending and old fashioned banking then are we returning to 3.25 income? But come on, how can ANYONE say we are returning to sensible lending and old fashioned banking whilst lending this week alone 500 Billion (? is that right ) to the RBS and Lloyds and 19 billion more to Northern Rock just for mortgage lending? WHERE IS THIS MONEY COMING FROM certainly NOT savings and all to support an ailing property market that the UK can't afford to prop up now that overseas investors don't want to do so anymore. We borrowed I believe over 700 billion from overseas in 2007 for mortgage lending, how will we be able to continue to do this every year and more and more if house prices contd to go up and up and up .....