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JohnG

Given That 75% Ltv Seems To Be The Current Maximum Actual Ltv Offered....

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I've been thinking about this for a while now.

Although it's theoretically possible to get more than 75%, this figure seems to be the norm. So -

Currently 200k property, lending 150k = 75% LTV...

6 months time, identical prop down to 180k, lending 150k = 83% LTV, Borrowing Is Getting Easier...

This time next year identical prop down to 160k, lending 150k = 94% LTV Business As Usual (excluding the Northern Crock Factor).

So, my hypothesis is that lending will be 'back to normal' by this time next year. <_<

Comments from People Who Know Much Better Than I do most welcome. :)

Edited by JohnG

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I've been thinking about this for a while now.

Although it's theoretically possible to get more than 75%, this figure seems to be the norm. So -

Currently 200k property, lending 150k = 75% LTV...

6 months time, identical prop down to 180k, lending 150k = 83% LTV, Borrowing Is Getting Easier...

This time next year identical prop down to 160k, lending 150k = 94% LTV Business As Usual (excluding the Northern Crock Factor).

So, my hypothesis is that lending will be 'back to normal' by this time next year. <_<

Comments from People Who Know Much Better Than I do most welcome. :)

They are pricing in AT LEAST another 25% fall.

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They are not PRICING IN falls, they are actively trying to CREATE falls so they can lend at sensible levels.

300k flat, person paying 3% interest on mortgage = not bad deal for the bank? until the person loses their job and can`t pay back, now the bank have to repo because that is the only big stick they posses to get people to stick to their repayment schedule? The problem for the bank is that the asset is plumeting in value.

Fast forward - base rates at 7%, flats, good ones, 100k. 100k flat, person paying 9% interest on mortgage = not bad deal for the bank?

Ramping the market with cheap mortgage deals only worked for the banks when they were getting shot of the risk almost immediately through securitization? Now that is gone what most benefits the banks? - IMO a stabilized housing market where the bank can easily re-coup their loan if they have to reposess, in other words, a massive crash is beneficial to the banks.

In their three step plan they will 1/ Get as much taxpayers money as possible to shore up their balance sheets 2/ Co-operate in the setting up of a " Toxic Bank" to get rid of all their bad loans, and 3/ Crash the market by refusing to loan the silly money needed to buy at todays prices so they can get back to lending in a less risky manner.

I`m not saying this is all straighforward, there might be too much toxic stuff, there might be some banks that have to go down, who knows, but the ONLY outcome which helps the banks now is one Muthaf*cker of a crash. The people bleating that "Gordon will re-inflate house prices" are deluded. The main players now need a crash, and a crash there will be, I`m talking 1997 prices.

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They are not PRICING IN falls, they are actively trying to CREATE falls so they can lend at sensible levels.

300k flat, person paying 3% interest on mortgage = not bad deal for the bank? until the person loses their job and can`t pay back, now the bank have to repo because that is the only big stick they posses to get people to stick to their repayment schedule? The problem for the bank is that the asset is plumeting in value.

Fast forward - base rates at 7%, flats, good ones, 100k. 100k flat, person paying 9% interest on mortgage = not bad deal for the bank?

Ramping the market with cheap mortgage deals only worked for the banks when they were getting shot of the risk almost immediately through securitization? Now that is gone what most benefits the banks? - IMO a stabilized housing market where the bank can easily re-coup their loan if they have to reposess, in other words, a massive crash is beneficial to the banks.

In their three step plan they will 1/ Get as much taxpayers money as possible to shore up their balance sheets 2/ Co-operate in the setting up of a " Toxic Bank" to get rid of all their bad loans, and 3/ Crash the market by refusing to loan the silly money needed to buy at todays prices so they can get back to lending in a less risky manner.

I`m not saying this is all straighforward, there might be too much toxic stuff, there might be some banks that have to go down, who knows, but the ONLY outcome which helps the banks now is one Muthaf*cker of a crash. The people bleating that "Gordon will re-inflate house prices" are deluded. The main players now need a crash, and a crash there will be, I`m talking 1997 prices.

At last...somebody that talks some sense...spot on old boy

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Also, the rates on 75% mortgages are pretty dire at the moment, compared to the base rate.

60% mortgages on the other hand... nice and rosy, there's dirt cheap 3% ones knocking around.

Seems quite clear that they're looking for at least another 20-40% fall from today's prices.

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Halifax bank are offering ftb`rs 90% mortgages. http://www.halifax.co.uk/mortgages/ftbchoices.asp

Also,there is a scheme called Gifted Seller Deposit.

If the potential buyer cannot raise the 10% deposit then the seller (already having factored it into the selling price) offers the buyer cash towards the deposit.This money go round all takes place on exchange of contracts.

So in effect at the moment its possible to buy a house with less than 10% deposit.There is a stipulation that the buyer must have or open a Halifax account and have their wages paid into it,before they can take out the Halifax mortgage.

ps I`m not drawing any conclusions from this.

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They are not PRICING IN falls, they are actively trying to CREATE falls so they can lend at sensible levels.

300k flat, person paying 3% interest on mortgage = not bad deal for the bank? until the person loses their job and can`t pay back, now the bank have to repo because that is the only big stick they posses to get people to stick to their repayment schedule? The problem for the bank is that the asset is plumeting in value.

Fast forward - base rates at 7%, flats, good ones, 100k. 100k flat, person paying 9% interest on mortgage = not bad deal for the bank?

Ramping the market with cheap mortgage deals only worked for the banks when they were getting shot of the risk almost immediately through securitization? Now that is gone what most benefits the banks? - IMO a stabilized housing market where the bank can easily re-coup their loan if they have to reposess, in other words, a massive crash is beneficial to the banks.

In their three step plan they will 1/ Get as much taxpayers money as possible to shore up their balance sheets 2/ Co-operate in the setting up of a " Toxic Bank" to get rid of all their bad loans, and 3/ Crash the market by refusing to loan the silly money needed to buy at todays prices so they can get back to lending in a less risky manner.

I`m not saying this is all straighforward, there might be too much toxic stuff, there might be some banks that have to go down, who knows, but the ONLY outcome which helps the banks now is one Muthaf*cker of a crash. The people bleating that "Gordon will re-inflate house prices" are deluded. The main players now need a crash, and a crash there will be, I`m talking 1997 prices.

Inspirational stuff....but would a 'toxic bank' also absorb losses from reduced market value of repossessed assets?

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I've been thinking about this for a while now.

Although it's theoretically possible to get more than 75%, this figure seems to be the norm. So -

Currently 200k property, lending 150k = 75% LTV...

6 months time, identical prop down to 180k, lending 150k = 83% LTV, Borrowing Is Getting Easier...

This time next year identical prop down to 160k, lending 150k = 94% LTV Business As Usual (excluding the Northern Crock Factor).

So, my hypothesis is that lending will be 'back to normal' by this time next year. <_<

Comments from People Who Know Much Better Than I do most welcome. :)

Huh?

Why in 6 months time is the new LTV 83% then in one year 94%? Surely it is 75% now, in 6 months still 75% and in a year still 75%?

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Huh?

Why in 6 months time is the new LTV 83% then in one year 94%? Surely it is 75% now, in 6 months still 75% and in a year still 75%?

I would agree with this.

LTVs are about recovery and costs.

As asset values fall, the amount of recovery cost will rise in relation to the new values.

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Inspirational stuff....but would a 'toxic bank' also absorb losses from reduced market value of repossessed assets?

I`m sure a "Toxic Bank" will absorb anything that makes the balance sheet look less than perfect? I think repossession will be used only so far as it is effective in keeping people keen to pay back, hence the liberal media coverage? and the need for repossesion should decrease as prices tumble? The fly in the ointment is of course unemployment, hence all the B.S from Beckett and other VI`s about jumping into the market before it takes off again, they want the sheeple fully primed to start taking up loans as soon as the multiples become more normal IMO. Can you imagine if 60% came off house prices and the sheeple said "Nah, not buying, I don`t believe all that rubbish about bricks and mortar anymore" the banks would be doubly f*cked, all that toxic stuff, and no new lending to speak of!

I`m guessing, but I think the repo`s going on at the moment will be people who never had a chance of making the payments anyway? they are really only a part of the "homeowning" and "want to be homeowning" population? there are many people who bought long enough ago to make it, and others that will be able to make deals with the banks? I think the big VI fear at the moment is people going cold on buying property, but the greater fear for everyone must be that the damage is already too great, the debt model is no use anymore, and we are going to be swallowed up in some sort of Great Depression?

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Consider the logic of lending. If you have some money you can either buy an asset yourself, or you can lend it out to someone else for interest. If you believe assets will rise by 10%, then you will want more than this in interest. If you cannot get this you will buy the asset yourself instead of lending to the other guy to do so. Thus you are each placing a bet. You are betting that assets will rise less than what you charge in interest, so make the loan. He is betting that assets will rise more than the interest so takes the loan. There are utility values with houses, but these can be worked in. Its much simpler with something like gold prices where there is neither utility nor dividend.

But now consider what happens if you think you are going to have deflation instead of inflation. You will not want the asset yourself, because you will lose money on it. So you just hold onto your cash getting zero return. If someone wants a loan, they are still playing the betting game. Any money you get as interest is a bonus, but you have a new risk. Whereas in the inflation environment, you could always sell the asset to cover a default, now the price obtained will not cover the loan. Thus you respond by asking for a large deposit.

As you can see from the real world we are in the second scenario. There is no shortage of money to lend, the government bond market is supercharged with deposits. You will have no problems getting a loan at these super low rates if you have the deposit. But the banks are saying that they think you will pay for it via falling asset prices.

Its why printing money is the wrong solution. The lenders have not stopped lending due to lack of funds but due to credit risk. The recent announcement to guarantee mortgages is to address this risk. They hope they wont have to pay out, since if they can start the lending/inflation cycle again there is no cost. Of course if they don't, then they lose out.

The question arises if prices can ever be too high, or if they should be allowed to fall. Consider a hypothetical world where house prices have risen to a trillion pounds each, yet interest rates have fallen likewise, so they can still just about be afforded. You would pay your interest only mortgage, but you would have no change of ever paying off the principle. Thus your position would be no different to that of the perpetual renter. You would have two classes of people in society. The renters/mortgagees and the ones, through inheritance that own outright. Since prices are so high you cannot ever change your class by buying. You have some people that must pay a tariff, called a mortgage payment, for the rest of their lives, and others that do not. Those that are born into the slave class work to make the payments, whilst others do not. Its not so different to the feudal system where the lord owned all the land and peasant handed over a proportion of their crops in rent.

The next question you should ask is if we have all these people owing all these trillions, then who is it owed to. There is far more debt owed than there are savings. You will meet far more people with mortgages than people who have those sums in assets.

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  • 284 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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