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Mortgage Lending Improving, Better Rates, Better Ltv


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HOLA441
How do you feel?

Fecking great!!!!!!!!

My mortgage is with Lloyds, and I pay far more in tax than I should. I don't use the NHS, I have private medical, private dental, private pension, never claimed a day of unemployment (or any other) benefit in my life. All I do is subsidise the feckless. Nice to see taxpayers money being put to good use for once.

Edited by HAMISH_MCTAVISH
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HOLA442
That would be the most popular mortgage in history ever... probably

Historically mortgage rates have been in the region of 7-8%. We are not in normal times. The mania of 2002-2007 was not normal either.

I think most people would be pleased to fix at around 5% for 5 years.

I think your hopes for mortgage rates are too optimistic. Next winter, you should be able to get within 3% of base rate with a low deposit, less than 1.5% with a bigger deposit, and thats probably as good as it will get before prices and base rates start rising again consistently in Q2 2010. I wouldn't risk delaying purchase beyond then if I were you, as the rent you are paying will more than cancel out any savings you may make from delaying to save a bigger deposit, when prices and base rates are rising. (obviously it can work when they are falling, but not when flat or climbing)

Cheers guys, i didn't think a five year fix at 3% for a 90% LTV mortgage was terribly likely, but I was interested to hear if anyone thought it could happen. I think I would be relatively happy with 5% for five years.

Hamish - when interest rates start to rise again, don't you think it will kill any "green shoots" of recovery in the housing market? After all, it will push the affordability of FTB'rs like myself down, dragging down the value of the entire housing chain.

I can see the argument that anything I save in falling house prices may be hoovered up by increased interest on a mortgage, however regardless of this I would have thought that if FTB's can only borrow less and less then house prices will be pushed down across the board.

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HOLA443
Yeah but come on now, do you seriously ever expect houses in any decent part of Edinburgh to be regarded as "cheap"?

Question for the Bulls. I'm a prospective FTB who is saving a deposit right now, and it'll be a while til I break into five figures. However once I have a fair sum I would quite like a 90% LTV fixed for five year mortgage at 2 to 3%. In your opinion will products such as this be available in the next 12 months, or am I hoping for too much.

Regarding house price falls, I've seen around 25% come off where I am looking to buy and would be happy with another 10% if I could get the mortgage I have described. Obviously it would be nice if they fell more, but 35% off 2007 prices wouldn't be too bad.

This is crystal ball time but my opinion would be that in very general terms, the affordability/bank profit requirements drives the market. So at peak you could get 3% deals on a purchase valued at 300k for example, but you have to take into account that the banks made their money by the old Tesco addage of 'stack em high sell em cheap'. The product being the loaned '£'.

The 'stack em high' scenario has now definately gone so the banks need to generate the same profits (any profit would do!) from less units. Hence IF house prices drop by 50% across the board, interest rates will indeed be very high to balance this. One thing that wont happen, is very low rates (around your 2/3%) AND low valued houses. My advice is there is no need to rush out and buy... I think we are all agreed that whatever is happenening now, is a long painful drawn out scenario. Keep saving, and when it suits your life, consider your purchase. The 'affordability' factor will be close to what it has always been historically.

Answering TM re 'insuring' against inflation, again, not quite as extreme as your example, I work on the average 5% deals out there at the moment that ARE available (not the 60%LTVs that only a select few could afford to get). So to triple that means your hoping to insure against 15% IRs? I believe we will not get anything like 15% rates again and it was one lesson from history our banking sector did learn from. Doubling would be prudent (and extremly pessimistic), so if you can match your mortgage payment (interest portion only of course) with the same value saving, then youre on a winner. Personally I think rates will remain around the 5/6% for a long time, hence another reason why I believe that on the 'values' front, we are now bobbling along close to the bottom. Yes a possible further 10% declines in some areas, but up ticks in others.

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HOLA444
I really should resist getting into a conversation with you but...........

Whats the historical average BOE base rate? Let me save your brainpower, from 1970 to now its 8.49%. If we revert to the long term average and you add your Lloyds SVR (which I assume you are quoting because you think its a good deal) we are nearly at double digits.

Now, I dont know how much rates will rise. I wish I did. But I think its farily safe to say that 50bps (the lowest ever) is not a normal place to be.

The new mortgage deals are not what we have been used to over the last 5 years. I know someone who is on BOE -49bps. So switching from that to +250 will sting. Most new mortgage deals I am seeing is 250-500bps over bps when they revert after the fixed/teaser period. I dont think people have noticed yet because they compare it to the base rate plus 25 from three years ago. They will notice it when base rates go up again.

I used to think you guys were simply enthusiastic but now.......

Ahhhh, I'm irresistable really...... :lol:

Nice selective use of stats there. The long term average is 4.9%. The average if you pick the start point of the highest rates in history, ie, 1970 til today, is indeed 8.49%. But the time from 1970 to 2000 is a historical anomaly. Those absurdly high rates were a result of politicicians deciding rates rather than the MPC. A period of high inflation, ERM, etc etc etc. Very different from today indeed, where we have deflationary pressures, an independant monetary policy comittee with a clear mandate, etc.

We will not see double digit rates in the forseeable future. And whilst you may know a person or two on boe -.49, there are many more on fixed 5% plus taken out in 2007 rolling off now onto SVR's at half the rate. Swings and roundabouts really. Well under half of mortgages taken out in 2007 were trackers. The majority were fixed, and fixed quite high. The real benefits of low rates, for the majority, are only now begining to be felt.

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HOLA445
Hamish - when interest rates start to rise again, don't you think it will kill any "green shoots" of recovery in the housing market? After all, it will push the affordability of FTB'rs like myself down, dragging down the value of the entire housing chain.

No. Rate rises will lag an economic recovery. Nobody will be stupid enough to kill the economy by raising rates too soon. As Blancheflower pointed out, they should have cut rates much sooner, and much more aggressively going into this recession. He was proved right. Theres still a lot of egg on faces of those who disagreed with him, and they won't err towards higher rates and make the same mistake twice.

Besides, rates could rise by a factor of 10 and still only be where they were at peak prices.

I can see the argument that anything I save in falling house prices may be hoovered up by increased interest on a mortgage, however regardless of this I would have thought that if FTB's can only borrow less and less then house prices will be pushed down across the board.

The tide has turned in the mortgage market. Borrowers are now being given access to higher LTV', with better rates. This will continue to improve. The best bet for anyone thinking of buying, is to buy when rates are still low, and fix, and when prices are also close to their lowest. WHich should be at the end of this year. Leaving it a couple of years beyond that could be a very costly mistake.

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HOLA446
No. Rate rises will lag an economic recovery. Nobody will be stupid enough to kill the economy by raising rates too soon. As Blancheflower pointed out, they should have cut rates much sooner, and much more aggressively going into this recession. He was proved right. Theres still a lot of egg on faces of those who disagreed with him, and they won't err towards higher rates and make the same mistake twice.

It was cheap credit to the masses that got us into this mess in the first place you tool.

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HOLA447
Ahhhh, I'm irresistable really...... :lol:

Nice selective use of stats there. The long term average is 4.9%. The average if you pick the start point of the highest rates in history, ie, 1970 til today, is indeed 8.49%. But the time from 1970 to 2000 is a historical anomaly. Those absurdly high rates were a result of politicicians deciding rates rather than the MPC. A period of high inflation, ERM, etc etc etc. Very different from today indeed, where we have deflationary pressures, an independant monetary policy comittee with a clear mandate, etc.

We will not see double digit rates in the forseeable future. And whilst you may know a person or two on boe -.49, there are many more on fixed 5% plus taken out in 2007 rolling off now onto SVR's at half the rate. Swings and roundabouts really. Well under half of mortgages taken out in 2007 were trackers. The majority were fixed, and fixed quite high. The real benefits of low rates, for the majority, are only now begining to be felt.

As a 53 year old New Zealander who was on a normal repayment mortgage with an interest rate of over 10.5% last year I can easily see double digit rates in the forseeable future in a country like the UK which had unusually low rates while NZ rates reflected the inflationary realities of our time.

Mervyn King tells the world he had no powers to change events that have happened in the UK because he had the powers removed. Meanwhile back in 2005 his committee chose to cut interest rates to keep the whole shebang going a while longer. Had he had awareness of high leverage back then he could have done something back then.

Likewise the whole securitization 'thing' and fraudulently presented inflation statistics enabled interest rates to be kept lower than they should have been for the last 25 years.

I can though if i put on my other pair of glasses see this whole period in history differently.

Meanwhile there is the reality of the current financial mess which does not go away just because people can present plausible arguments and last minute financial saves to give 'prosperity in our time'

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HOLA448
Ahhhh, I'm irresistable really...... :lol:

Nice selective use of stats there. The long term average is 4.9%. The average if you pick the start point of the highest rates in history, ie, 1970 til today, is indeed 8.49%. But the time from 1970 to 2000 is a historical anomaly. Those absurdly high rates were a result of politicicians deciding rates rather than the MPC. A period of high inflation, ERM, etc etc etc. Very different from today indeed, where we have deflationary pressures, an independant monetary policy comittee with a clear mandate, etc.

We will not see double digit rates in the forseeable future. And whilst you may know a person or two on boe -.49, there are many more on fixed 5% plus taken out in 2007 rolling off now onto SVR's at half the rate. Swings and roundabouts really. Well under half of mortgages taken out in 2007 were trackers. The majority were fixed, and fixed quite high. The real benefits of low rates, for the majority, are only now begining to be felt.

Hamish,

You are right - I had chosen a period of higher interest rates, apologies. Although it wasnt deliberate, it was the default settings on the BOE website. I have now gone back to 1694 and the overall average is 5.992% (1694-1970 is 4.37%).

I guess the next stage of this double-digit debate would be inflation vs. deflation but in all honesty I cant be bothered (there is enough crap about this already on this site). Yes, I know you bulls with take it as an admission of defeat!

I think rates will go up, I think a lot of mortgage rates will hit double figures eventually (I guess its clear that I think we are going to inflate our way out of this - I cant see any other way out) and I dont think that the mortgage offers are that competitive at the moment when considering the margin. If base rates revert to the (corrected!) average plus new-mortgage-deal-SVR's then we will get double digits.

I guess the question for everyone on this anonymous site is wether we will bet our own money on our views. I am currently looking at 15 year fixes at the moment.............but have yet to sign. So no, I am not ready to bet my money on this view yet! Equally, if you think the only way it up for property, and you really believe it, you shouldnt be wasting your time on here. You should be out buying as much property as you can get your hands on.

Edited by SpiceWorld!
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HOLA4410
The tide has turned in the mortgage market. Borrowers are now being given access to higher LTV', with better rates. This will continue to improve. The best bet for anyone thinking of buying, is to buy when rates are still low, and fix, and when prices are also close to their lowest. WHich should be at the end of this year. Leaving it a couple of years beyond that could be a very costly mistake.

Hi Hamish

What is your take on the flow of money into the mortgage market?

Do you think the RMBS market has unfrozen now? do you have any data on this?

My understanding is that a lot of the money supporting the mortgage market is coming from QE. Once the current funds run out do you think the bond market will let us keep printing?

How long do you think it will be before the mortgage market is self supporting again? If this is without the help of the RMBS market what do you think the future is for interest rates if the banks have to rely on depositors?

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HOLA4411
No. Rate rises will lag an economic recovery. Nobody will be stupid enough to kill the economy by raising rates too soon. As Blancheflower pointed out, they should have cut rates much sooner, and much more aggressively going into this recession. He was proved right. Theres still a lot of egg on faces of those who disagreed with him, and they won't err towards higher rates and make the same mistake twice.

Besides, rates could rise by a factor of 10 and still only be where they were at peak prices.

I agree that the BoE will not want to raise interest rates until the economy has entered a fully fledged recovery. However don't you think there is a chance they might be forced to? Either to defend the value of the pound or to ensure foreigners will buy UK govt. debt?

I'll admit they haven't seemed too concerned with either of those issues over the last year, but who knows what the next twelve months will bring. I also seriously doubt an economic recovery will be well underway 12 months from now.

The tide has turned in the mortgage market. Borrowers are now being given access to higher LTV', with better rates. This will continue to improve. The best bet for anyone thinking of buying, is to buy when rates are still low, and fix, and when prices are also close to their lowest. WHich should be at the end of this year. Leaving it a couple of years beyond that could be a very costly mistake.

Waiting 6-9 months and assessing the market then certainly seems reasonable advice. The UK economy may indeed be on the road to recovery by then in which case it would be fair to say that the majority of house price falls were over. However if we have a "winter of discontent" with continuing wage deflation and rising unemployment I would say the housing market will continue to slide well into 2010.

Edited by Jie Bie
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HOLA4413
I agree that the BoE will not want to raise interest rates until the economy has entered a fully fledged recovery. However don't you think there is a chance they might be forced to? Either to defend the value of the pound or to ensure foreigners will buy UK govt. debt?

I'll admit they haven't seemed too concerned with either of those issues over the last year, but who knows what the next twelve months will bring. I also seriously doubt an economic recovery will be well underway 12 months from now.

Oh, I don't expect the pound value is causing them too many sleepless nights. Debasement can be a good thing, and besides, it's risen dramatically against the euro and dollar lately.

As for the debt, whilst rates may have to rise, it would be by a miniscule amount. UK debt isn't as attractive as some, but it's still more attractive than most. The simple fact ramains that countries with far lower ratings than the UK's current AAA, still have access to funds at not that much more expense. Even with a downgrade, we'd still be able to borrow realtively cheaply.

Waiting 6-9 months and assessing the market then certainly seems reasonable advice. The UK economy may indeed be on the road to recovery by then in which case it would be fair to say that the majority of house price falls were over. However if we have a "winter of discontent" with continuing wage deflation and rising unemployment I would say the housing market will continue to slide well into 2010.

As I said, we'll see soon enough which way the wind is blowing.

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HOLA4414
Hi Hamish

What is your take on the flow of money into the mortgage market?

Do you think the RMBS market has unfrozen now? do you have any data on this?

My understanding is that a lot of the money supporting the mortgage market is coming from QE. Once the current funds run out do you think the bond market will let us keep printing?

How long do you think it will be before the mortgage market is self supporting again? If this is without the help of the RMBS market what do you think the future is for interest rates if the banks have to rely on depositors?

Bump!

You missed mine Hamish :(

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HOLA4415
Oh, I don't expect the pound value is causing them too many sleepless nights. Debasement can be a good thing, and besides, it's risen dramatically against the euro and dollar lately.

As for the debt, whilst rates may have to rise, it would be by a miniscule amount. UK debt isn't as attractive as some, but it's still more attractive than most. The simple fact ramains that countries with far lower ratings than the UK's current AAA, still have access to funds at not that much more expense. Even with a downgrade, we'd still be able to borrow realtively cheaply.

As I said, we'll see soon enough which way the wind is blowing.

I dont think its the rating of the UK that is a problem, as far as funding is concerned.

ITS THE AMOUNT NEEDED thats a problem.

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HOLA4416
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HOLA4417
What is your take on the flow of money into the mortgage market?

It's still constrained.

Do you think the RMBS market has unfrozen now? do you have any data on this?

No. But it will. There is a vast pool of cash sloshing around looking for a decent return. As price falls slow and the market stabilises, that money will inevitably flow through the banks for lending again. Yes, there will be better controls this time (for a while, anyway) and yes the model will be slightly different in terms of risk ratings. But securitised lending will return. 50 Billion in Government "seed fund" guarantees have already been allocated to help in restarting this market. It's too early for this to happen yet, but it will.

My understanding is that a lot of the money supporting the mortgage market is coming from QE. Once the current funds run out do you think the bond market will let us keep printing?

QE doesn't have to support the market forever. It just has to stabilise it long enough for the money markets to regain their confidence. It is working. And they will.

How long do you think it will be before the mortgage market is self supporting again? If this is without the help of the RMBS market what do you think the future is for interest rates if the banks have to rely on depositors?

A while. Back to 4% or 5% in the mid term.

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HOLA4418

Thanks for responding.. I didn't think you would take the bear by the horns.

It's still constrained.

Ok, we agree :)

No. But it will. There is a vast pool of cash sloshing around looking for a decent return. As price falls slow and the market stabilises, that money will inevitably flow through the banks for lending again. Yes, there will be better controls this time (for a while, anyway) and yes the model will be slightly different in terms of risk ratings. But securitised lending will return. 50 Billion in Government "seed fund" guarantees have already been allocated to help in restarting this market. It's too early for this to happen yet, but it will.

Agreed that in the long term there is no reason why we should not have a happily functioning RMBS market.. obviously with appropriate risk factored in as you say. I would go further to predict that it will happen when the markets are confident that the worst is over and it is worth the risk premium (which they obviously consider that it isn't at the moment.

QE doesn't have to support the market forever. It just has to stabilise it long enough for the money markets to regain their confidence. It is working. And they will.

IMO this is what we are seeing at the moment.. and perhaps where you could elaborate a little further for me. We know from above that the RMBS markets are not working yet.. and we don't really know how long it will take for the market to regain confidence of low risk returns. (so far we agree). How are you so sure that we can print enough money for long enough for this to happen though? Surely at some point bond holders are going to want a higher yield for the risk?

A while. Back to 4% or 5% in the mid term.

We are already at 4-5% and that is with the QE support.. you really think lending rates wouldn't rise if we cut off life support right now?

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HOLA4419
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HOLA4420
No. But it will. There is a vast pool of cash sloshing around looking for a decent return. As price falls slow and the market stabilises, that money will inevitably flow through the banks for lending again. Yes, there will be better controls this time (for a while, anyway) and yes the model will be slightly different in terms of risk ratings. But securitised lending will return. 50 Billion in Government "seed fund" guarantees have already been allocated to help in restarting this market. It's too early for this to happen yet, but it will.

It's not the government's place to "restart markets". If the government followed its own so called free market mantra, it would allow the market to correct. This could not be allowed though, given the huge number of MPs with a vested interest in their tax-funded second homes and holiday cottages.

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HOLA4421
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HOLA4422

Is our Hamish still giving average interest rates since the 17th Century ? Strange that. I have pointed out to him, perhaps 5 times, why the average rate since 1971 is far more important.

Before that point a truly FIAT World monetary system did not exist. After that year it did.

I have made this point AT LEAST 5 times. Yet to have a reply from our Hamish....

Funny that. Some things I say get a reply from our Hamish in 0.0000465 seconds. :rolleyes:

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HOLA4423
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HOLA4424
Good grief. Wasn't it inevitable that the economy would stop freefalling at some point? That is all we are seeing. The economy of 2007 is long gone.

Yet this is the "recovery to" economy the resident bulls on here believe we are heading for and that in the grand scheme of things this HPC will look like a "blip".

It really makes you laugh doesn't it :rolleyes:

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HOLA4425

QUOTE (HAMISH_MCTAVISH @ Jun 3 2009, 01:43 PM)

I've been saying since last December that the sweet spot for buying will be the last quarter of this year, or the first quarter of next year. At that time, prices will be at the very bottom, which may not be much different from prices earlier this year if this bounce continues at current pace.
1- So, just for the record, what would be in your opinion the actual % drop, peak to trough in real terms?

Based on the above you predict the final bottom average price will not be much different from prices earlier this year, correct? that would be 20% peak to trough drop based on Nationwide. Can you confirm this is your prediction?

Note:

Nationwide real price data

Peak Q3 07 at 187,687

Q1 09 at 149,709

2- Are you planning accordingly to buy in Q4 09 or Q1 10?

Bumping this to see if Hamish would care to confirm his views for the record? or maybe chickening out now?

Edited by Old_Traveller
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