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Sybil13

Which Is Better For The Economy 40% Deposits Or Realistic Valuations ?

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Rightmove's latest HPI said:

Confidence is up, stock is down, and the number of people searching is high. There are lots of positives but too few buyers can put down the 40% deposits that are needed in order to secure the best mortgage deals. Finance greases the wheels of the property market, and it is anybody’s guess when we might see the necessary level of competitive funding return. Frustrated homehunters should note the expected ten year timetable to wind up Lehman Brothers, giving a clear indication of the time required to rebuild the banking system.â€

My first Q is that if the market stabilised at 40% off peak or thereabouts would it be considered less risk to increase LTV's?

Currently it costs a lender 5x's more to lend 90% LTV than 60% LTV, I assume because everyone knows the market HAS to fall in line now with sensible and sustainable lending levels based on ACTUAL average wages, sensible LTV's ,increasing interest rates and a market not buoyed up by the RMBS market :

A lot of lending power has now left the market for good. Almost £300bn of UK mortgage debt was securitised, i.e. packaged up and sold off from bank balance sheets onto the bond markets, between 2005 and 2007.

"That represents more than 90% of the growth in mortgage debt over that period", says CreditSights. And "the world isn't exactly clamouring for British securitised mortgages anymore, and won't be for a long time", says Matthew Lynn on Bloomberg. "With less money coming into the market, there won't be the same kind of demand for houses".

What is being called RECOVERY is, as you all know, based on cash rich buyers and transactions and mortgage lending still frozen at extremely low levels. So wouldn't the best way to reduce risk whilst also getting the market moving be to, as Mr Fisher, the BOE official said in testimony to the Treasury Committee:

‘I think the most important thing for the housing market is that prices should be allowed to adjust to a level at which people can afford to buy houses.’

‘There is a danger that policy intervention in the housing market stops these sorts adjustments from happening.

‘We have to be very careful with policy intervention that we don’t actually make it worse.’

Property prices are still 40 per cent above their historic averages, suggesting further declines are unavoidable, the Organisation for Economic Co-operation and Development said earlier this month.

Analyst Vicky Redwood of Capital Economics said: ‘The housing market correction has to happen and we may as well get it over with sooner rather than later.

I understand the argument with regards banks deleveraging slowly , but who is really benefiting from the ramping when it must be obvious to EVERYONE that there cannot be a return to 2007 levels of lending and therefore house prices without a return to irresponsible / unsustainable lending levels fueled by the RMBS market

When will 2007 values and lending levels stop being seen as the definition of RECOVERY?

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They are 2 seperate things honestly. Even at "realistic" valuations I'm not sure that means banks can suddenly lend people money at 90% LTV. The issue is how much credit availability has been destroyed by the exit of the shadow banking system and certain foreign lenders. Unless the Gov't finds some way to plug this gap or securitisation returns, I'm not sure they can avert a further price slide or perhaps just a very long period of stagnation when the impact of the recent support starts to be withdrawn.

I would say in terms of housing mobility the two things are very similar in effect. They both crush mobility which is v bad for transaction volumes.

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When will 2007 values and lending levels stop being seen as the definition of RECOVERY?

You've hit the nail on the head right there. And the short answer is, a long time....

People have been so conditioned by the media and other VI's, that they beleive thats the way it's supposed to be.

It will take a long time to get over that, if we ever do.

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Course they can. The risk of loss is high at the moment, they are effectively costing in 20% falls from wherever their valuation sits. Once that comes back to 5% then everything will be happy happy.

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40% deposits is the way forward, if you do not have it then tough!

Realistic valuation as you call it...or a drop in the valuation can hit people hard and leave many homeless....I would rather people can keep there homes and save if they would like to buy a new home or stay where they are.

No need to have millions out on the street so a minority can get a cheap house....ie; those who STR.

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Course they can. The risk of loss is high at the moment, they are effectively costing in 20% falls from wherever their valuation sits. Once that comes back to 5% then everything will be happy happy.

So why isn't it happening?

I get VERY confused about what value lenders are putting on properties.

I read that valuations are coming in 20% below the offer price. I know that lenders are being criticised for their valuations on remortgages. Obviously more people would be moving if their lenders didn't tell them that they don't have the equity in their property to do so based I assume on the FACT that lenders are working on property being about 30% below peak currently.

I also assume, based on RM's last HPI, that EA's are telling sellers to accept lower cash offers rather than wait for a higher offer from someone who needs a mortgage, because they know that :

1. mortgages are hard to come by and you need a 40% deposit

2. valuations will come in nowhere near the asking price

Which brings me back to the original post and my Q , who is benefiting from a market in DENIAL of the facts, and those facts irrefutably confirm that there will be no return to 2007 lending levels as RM say, for at least 10 years if ever and therefore there can be no return to 2007 values.

Edited by Sybil13

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40% deposits is the way forward, if you do not have it then tough!

Realistic valuation as you call it...or a drop in the valuation can hit people hard and leave many homeless....I would rather people can keep there homes and save if they would like to buy a new home or stay where they are.

No need to have millions out on the street so a minority can get a cheap house....ie; those who STR.

The STR scum must die grrrrrrrrrrrrrr

Another troll. -_- Zzzzzzzzzzzzzzzzzzzz

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We'll have 40% deposits until we get realistic valuations - banks aren't going to lend higher LTV's until they are confident there aren't more losses to follow.

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LLoyds

Lloyds have just announced the reopening of the RMBS market.

That's a very positive move.

Almost £300bn of UK mortgage debt was securitised, i.e. packaged up and sold off from bank balance sheets onto the bond markets, between 2005 and 2007.
The Lloyds' issue comprises three tranches, which include one of 1.565 billion pounds and one of 1.25 billion pounds, which has already been placed with an investor, Lloyds said.

The total size of the deal has not yet been released.

Why House Prices Have Further to Fall

One reason for this boom in cheap home loans was the rise in 'residential mortgage-backed securities' (RMBS). These were bonds made up of parcels of mortgages which were sold to major investors, such as pension funds and insurance companies. Alas, as the US and UK housing markets started to slump, the value of these mortgage bonds dived and the market froze. The effective collapse of the RMBS market means that this one-off credit event may not return for years, if not decades.

Why US House Prices Will Keep Crashing

By now, we probably all know the story behind the banking crisis: how US sub-prime home loans, a vast number of which had been packaged up into supposedly top-notch AAA-rated securities, went sour as US house prices started crashing. And how that bashed huge holes in bank balance sheets round the world. Which meant that many of those banks couldn't continue to lend, but also that they needed some quick-fire bailing out with unimaginable sums of taxpayers' money. .....

"Virtually every investment manager I speak to says that until these [mortgage] securities can be properly valued, a floor cannot be put on the banks' losses", says the Guardian's Patrick Collinson. "And they can't be properly valued until US property prices stop falling". .......

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40% deposits is the way forward, if you do not have it then tough!

Realistic valuation as you call it...or a drop in the valuation can hit people hard and leave many homeless....I would rather people can keep there homes and save if they would like to buy a new home or stay where they are.

No need to have millions out on the street so a minority can get a cheap house....ie; those who STR.

the quote above - is by Jister 1 -but the quoted reply by young goat - which quotes him - comes up with the name Bruno Powroznik!!!

QUOTE (Bruno Powroznik @ Sep 21 2009, 02:58 PM)

40% deposits is the way forward, if you do not have it then tough!

Realistic valuation as you call it...or a drop in the valuation can hit people hard and leave many homeless....I would rather people can keep there homes and save if they would like to buy a new home or stay where they are.

No need to have millions out on the street so a minority can get a cheap house....ie; those who STR.

The STR scum must die grrrrrrrrrrrrrr

Another troll. Zzzzzzzzzzzzzzzzzzzz

Is Jister1 actually Bruno - the 'STR scum must die' would suggest it is.....

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Is Jister1 actually Bruno - the 'STR scum must die' would suggest it is.....

I think I might have added that bit myself. :unsure:

Edit to add: the original post was very Brunoesque in its obvious STR hatred so it's possible that Jister1 is a Bruno clone, probably not though

Edited by Young Goat

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40% deposits are just crazy, from a FTB perspective they almost defeat the purpose of having a mortgage in the first place. That the government is colluding with lenders and EAs in encouraging parents to MEW over a decade's worth of equity to give to their children is frankly disgusting. It's using parents' wish to help their children as a means to trick them into a very poor financial decision. And for what? To help recapitalise failed banks after they spunked all of their deposits on risky derivatives? Why are they letting this happen?

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LLoyds

Lloyds have just announced the reopening of the RMBS market.

That's a very positive move.

the RMBS market has always been open....investors just didnt want any. they have sold a bit of this one so they say....

course it wasnt RMBS that was the cause of the failure.... it was the OFF BALANCE sheet vehicles they used to hide the commitments.

Thats not allowed any more.

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LLoyds

Lloyds have just announced the reopening of the RMBS market.

That's a very positive move.

Oh goodie! Lets play pass the parcel with debt again! Bagsy not be the one holding when the music stops!

It looks like the banks and investors have learnt nothing.

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the RMBS market has always been open....investors just didnt want any. they have sold a bit of this one so they say....

course it wasnt RMBS that was the cause of the failure.... it was the OFF BALANCE sheet vehicles they used to hide the commitments.

Thats not allowed any more.

That's some consolation then, I suppose.

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The Lloyds' issue comprises three tranches, which include one of 1.565 billion pounds and one of 1.25 billion pounds, which has already been placed with an investor, Lloyds said.

I am fully confident they have got their sums right

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Realistic valuation as you call it...or a drop in the valuation can hit people hard and leave many homeless....I would rather people can keep there homes and save if they would like to buy a new home or stay where they are.

No need to have millions out on the street so a minority can get a cheap house....ie; those who STR.

How can drop in the valuation hit people hard leave many homeless? I tell you what hits people hard and leave many homeless. The only way people get hit hard and left homeless is when they take on the debt they can't service!

No need to have millions out on the street so a minority can get a cheap house....ie; those who STR.

Stop talking rubbish. If the houses were cheaper there would be less chance of millions on the street because, believe it or not, £75K debt is easier to pay back than £200K!

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Got quite a few friends trying to buy property. They have been putting in offers of 20 - 25 % from peak all year, it amazes me to be honest that I am still hearing from them that agents think the offer is insulting when the agents list on the Rightmove website and Rightmove's HPI today once again confirmed that lending will not return to anything like 2007 levels for a decade or more so how can property values remain at 2007 levels?

One friend put in an offer of 25% from peak on a small semi just outside Poole that needs the kitchen replacing etc and Connells phoned again in the past week to say "the offer is insulting" !! Don't they read RM's HPI? Is this really an insulting offer in today's market? Surely agents must get people putting in offers of 25% below peak all the time don't they? What would a lender value it at ?

Edited by Sybil13

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How can drop in the valuation hit people hard leave many homeless? I tell you what hits people hard and leave many homeless. The only way people get hit hard and left homeless is when they take on the debt they can't service!

Stop talking rubbish. If the houses were cheaper there would be less chance of millions on the street because, believe it or not, £75K debt is easier to pay back than £200K!

If prices dropped from 200k to 75k Interest rates would not be at the levels they are now. What would happen to all the people with interest only mortgaes?

thhink before you answer and stop talking rubbish.

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