Thursday, May 14, 2009
About time
Telegraph: Homebuyers face FSA limits on mortgage size to income
Lord Turner, FSA chairman, said: "A key choice in product regulation would be between LTV and LTI (loan-to-income) limits. There is a prima facie case that LTI limits are more likely to be appropriate given that it is the relationship between income and loan repayments which determines whether a household can service its debt."
It loos like the Financially Supine Authority is changing.
Posted by growler @ 07:11 AM (1016 views) Add Comment
25 Comments
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1. flashman said...
Weasel words. If this article is representative of the FSA's stance, then they have deliberately contrived a way of appearing to be tough, whilst encouraging the dubious practice of providing larger mortgages when interest rates are low. LTI should be based on the capital borrowed/income ratio but it looks like they are trying to change the emphasis to a repayments/income ratio. If this is not the case, then why did the article finish with:
"He added that because interest rates are now low "compared to the early 1990s, we are less likely to see mortgage repayment problems among the vast majority of people... even if the house price fall is more severe".
2. crunchy said...
If only house prices were pegged to interest rates.
Interest rates go up house prices follow. visa versa. lol
That would be interesting!
3. flashman said...
Crunchy, I think you might get your wish. Imagine what 10% mortgage rates would do to house prices in this economic climate.
Perhaps the FSA would like to see more fixed interest rate mortgages. They cant be crazy enough to impose a metric that causes misery when interest rates rise?? In the US the market was relatively stable until variable rate mortgages became popular.
4. crunchy said...
3. flashman
Fixed rates, fixed bank. No fun and games!
5. crunchy said...
We need a system that punishes bad politicial and central banking choices, not one that encourages the reckless public to follow suit in there follies.
6. Bobby9983 said...
A tiered approach, based on credit worthiness, level of income, and number of financial dependants is what is required, and in many cases, what is already being used lenders to assess mortgage affordability.
7. crunchy said...
We need CHANGE. lol
8. str 2007 said...
(Lord Turner said he wanted "to protect individual customers against the consequences of over-risky borrowing" and stressed the FSA is still debating the issues. )
Why do we need the FSA to protect the over indebted when we have a labour government to wrap them in cotton wool at the expense of those who bothered to put some savings by for retirement ?
9. Poppins said...
I simply cannot believe this article!! Does this really need a debate!!! dear dear dear!! Sack the lot of these people and let someone with a bit of "common" make up the rules! 90% LTI and 3.5 multiple to income should HAVE NEVER INCREASED! This is gross misconduct on Brown, his cronies and the "Never diid anything" FSA!!! It does NOT take a rocket scientist to realise that these loans were all going to be terribly bad and it is inconceivable to think that this now needs a debate!!
10. crunchy said...
7. str 2007
Last time..... Keeping the host alive!
11. sybil13 said...
Discussed at this thread yesterday:
http://www.housepricecrash.co.uk/forum/index.php?showtopic=114274&st=0
12. crunchy said...
He added that because interest rates are now low "compared to the early 1990s, we are less likely to see mortgage repayment problems among the vast majority of people... even if the house price fall is more severe".
crunchy... and there is the problem. They just don't get it! 25 years is a long time. CHANGE my ar8e.
13. crunchy said...
Correction.. won't get it!
14. happy mondays said...
@ 7 Crunchy, we shall have change, whether we want it or not... I take the taoist / Buddhist path and roll with it, going around the problems, flow like water ...Embrace the change, i am sure that being a trader these would be good for you, if you don't already, but judging by your past postings, i think you do..
15. mark wadsworth said...
@ Crunchy 2, "If only house prices were pegged to interest rates. Interest rates go up house prices follow. visa versa. lol. That would be interesting"
Nah. We should replace as many taxes as possible with Land Value Tax - if land values (i.e. house prices) go up then the LVT goes up and acts like a wonderful stabiliser (i.e. like a much higher interest rate, but only only the speculative i.e. land element). That will leave interest rates correspondingly lower which helps the productive economy.
16. crunchy said...
14. happy mondays
No option but to flow with the wind. Standing in front of 20 tonne juggernauts isn't for me.
I just find it frustrating when I see other people doing it, when I know that the driver eats road kill for breakfast.
crunchy indeed!
17. crunchy said...
15. mark wadsworth, Bang on mark. I was just trying to make a point.
LVT is the way to go. So if it's so obvious to us mere mortals, it does beg the question? of why that will not see the light of day.
18. buctootim said...
You cant blame Adair Turner for what has gone on before. He has been Chair of the FSA for only a short time. He is a very, very able guy and whatever he proposes to end the property markets inherent ability to bubble and crash repeatedly, I would listen very carefully to.
19. crunchy said...
18. buctootim... Tell me about it in five years time!
20. buctootim said...
crunchy......more like 15 years I reckon - when the next crash would be about due!
21. crunchy said...
15 years is too long to wait for pay day, unless we see some very "strange" movements in the stockmarket, precious metals, commodities.......
Agree it will happen again. You can bank on it if you are smart! A rear commodity.
22. str 2007 said...
buctootin
Are you Lord Adair or his wife ?
You seem to have a remakable insight to what may or may not happen
Surely the MP's will simply ignore everything he says unless it suits them and their portfolios.
If the will was ctually there (which I doubt it is) to stop the housing boom and bust then it can't be that difficult.
The answers are all over this website.
23. crunchy said...
A rare commodity. That's another site altogether. lol
24. flashman said...
buctoon: Adair is at best a chronic fence sitter. In his previous environmental capacity he backed coal-fired power but only for a few years. At the LSE he advocated free markets but with a bit of control. When he was Chairman of the Overseas Development Institute, he shuffled some papers for a while and failed in his brief to get more funding from the private sector.
He even took a lucrative role with Merrill lynch during their worst periods of excess. Does this bode well for his regulatory roe?
This worthless plank has been at the FSA almost a year and achieved nothing. How long does it take to write: 3.5 X income. 90% max LTV?
25. mander said...
LTI (loan-to-income) is what makes sense and 90% max LTV but 90% max LTV alone will indebt the person even higher because they will borrow the 10% deposit easily and keep on bubbling...
Self-certified mortgages and other future inventions should be banned. That will not create bureaucracy but plain transparency.
Limited companies/PLC should not be allowed to buy already built residential property I think.