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Boe To Cap Mortgages Says Telegraph

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Has this been posted yet?

It's the headline in the Telegraph

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/7831323/Bank-of-England-to-cap-mortgages.html

The Bank and its Governor, Mervyn King, would be able to prevent banks from lending too much, or to over-extended customers, if they judge that this would destabilise the economy.

The precise details of the controls the Bank is to be given will be detailed fully at a later date.

However, they are likely to include restrictions on the loan-to-value ratios offered to customers. For instance, families could be prevented from taking out a mortgage for anything more than 75 per cent of the value of their home.

The collapse of Northern Rock was widely attributed to its policy of lending customers up to 125 per cent of the value of their homes – despite the inability of many to repay the loans.

It is hoped that the restrictions will also curb house price booms stimulated by excessive lending.

Mr Osborne's "toolkit" is also likely to include broader restrictions on lending to businesses.

The controls, which could be applied either to specific institutions or to the entire mortgage industry, will vary over time as the economy ebbs and flows.

Critics will suggest it marks a significant shift from free market policies towards 1970s-style controls on financial institutions. They bear some resemblance to the rules in place in Hong Kong and China, where regulators have been credited with using them to prevent housing bubbles.

Under Mr Osborne's scheme, the Bank of England will become a significantly more powerful body than it was under Gordon Brown.

The Governor will have the power to impose specific restrictions on banks if he deems it necessary, though his main role will be to warn when he fears the economy is becoming overheated or at risk of collapse.

Whereas previously the only power at the Bank's disposal was to move interest rates, the new tools will provide an extra level of control over the financial system.

The Financial Services Authority, which is currently in charge of regulating the financial system, will become focused on individual banks, deciding how to impose the Bank's rules on lending.

Although the Conservatives pledged before the election to dismantle the FSA entirely and give the Bank of England full responsibility for monitoring financial stability, they have retreated slightly from this position.

In tonight's speech, however, the Chancellor will explain that much of the work previously done by the FSA will be done by the Bank of England and by a new consumer protection agency.

He will also set out his plans for a new commission that will examine whether to split up Britain's biggest banks into smaller institutions that are no longer judged "too big to fail".

Among the proposals the commission will consider is one lodged recently by Mr King: that all banks should be obliged to offer their customers new "bombproof" accounts, which would be protected if the rest of the bank collapsed.

The Chancellor will also repeat his pledge to introduce a new tax on the banking system, although he will leave the full details of this proposal until next week's emergency Budget. The Government intends to set up a new levy on bank assets, putting this money towards fixing the budget deficit.

Treasury insiders believe they could make significantly more than the "cautious" £1 billion a year they originally promised the levy could generate. Tax experts have warned that any plan to introduce the tax without international approval would risk driving business out of Britain.

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Bring. It. On.

The chorus of squeals will be deafening.

This would also resolve the CGT issue. There won't be any gains to apply the 18% rate to, only massive losses. :)

Perhaps the Tories are trying to get the HPC out of the way, while they can still blame it on Labour?

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I think the key point is..."families could be prevented...". There is a bit of a jump from this to an outright ban on any LTV greater than 75%.

It is a promising start though.

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Everything is being geared to not rising BoE base rate. They know that with the debt the country has that raising BoE base rate to cool inflation in general and HPI mean we as a country just pay more to our creditors.

So they will cull inflation with tax rises and cuts and kill HPI by limiting mortgages. Makes sense.

Now I think BoE base rate will be between .5 and 1% for the next ten years.

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Everything is being geared to not rising BoE base rate. They know that with the debt the country has that raising BoE base rate to cool inflation in general and HPI mean we as a country just pay more to our creditors.

So they will cull inflation with tax rises and cuts and kill HPI by limiting mortgages. Makes sense....

i suppose it does.

stamp out HPI's ruinous impact without hitting business.

but i kind of think they're only saying they want it 'in their toolkit' for if HPI gets totally out of control [say if average prices go past peak levels]

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Everything is being geared to not rising BoE base rate. They know that with the debt the country has that raising BoE base rate to cool inflation in general and HPI mean we as a country just pay more to our creditors.

So they will cull inflation with tax rises and cuts and kill HPI by limiting mortgages. Makes sense.

Now I think BoE base rate will be between .5 and 1% for the next ten years.

Yes, I think they will keep IRs are near zero for a decade and savers will be wiped out.

There will be no point to save because your savings will go so people will put the money into housing and into shares. I think they want to keep the housing bubble going though.

It is obvious now that they intend to inflate those with housing debts out of it so watch your savings disappear.

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Must be expecting a 25% HPC then.

no.

a 10k deposit at 5% may enable 200k mortgage

under 25% deposit, enables 40k mortgage

very big difference, forces people to plan

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no.

a 10k deposit at 5% may enable 200k mortgage

under 25% deposit, enables 40k mortgage

very big difference, forces people to plan

Run that by me again please

if so then... why even consider capping LTVs???

+1

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I think 75% LTV cap is extremely unlikely, as wonderful as that would be

Last year DC was talking about a possilbe 90% cap, which would still be good and a lot more likely

Also, only last week Grant Shapps was talking about a plan to free up mortgage lending

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Average UK savings £2,205 as of Jan 2010. So I make the *new* average UK house price 2205x4 = (drum roll) ...... £8,820 :unsure:

Source

Dutch Bank Reveals Average UK Savings

Fri, 29 Jan 2010

A new survey by Dutch bank ING direct has found that the average Brit had readily available cash savings of £2,205 at the end of 2009. The median figure indicates only a very slight increase from the start of the year, when Brits were said to have an average of £2,167 readily available to them in savings accounts . The increase is surprisingly small given that the official household savings ratio is at its highest level in over a decade.

The modest figures contrast with Bank of England aggregate data which suggests that the mean level of savings stands at £23,500 for the average Brit. Unlike the Bank of England data, the figures from ING are less influenced by the wealthiest 5 per cent of Brits, who hold a third of all savings.

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Run that by me again please

I really have no idea how to as I thi9nk it is quite obvious - can you describe what you don't understand?

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I think 75% LTV cap is extremely unlikely, as wonderful as that would be

Last year DC was talking about a possilbe 90% cap, which would still be good and a lot more likely

Also, only last week Grant Shapps was talking about a plan to free up mortgage lending

what did this plan involve?

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Waffle

"Falling prices are bad for homeowners and builders alike, whilst soaring prices freeze out first time buyers.

"So, we need to build more homes and entrench sensible lending practices so that, in the long run, houses will become more affordable.

"That's our aim: a stable housing market that gives both home buyers and builders a solid base to invest for the future.

"Homeownership has provided personal and financial security to millions of people in the UK, including (I am almost certain) the majority of this audience.

"I do not believe that it is right to deny the benefits of homeownership, that we have enjoyed, to the next generation.

"And this new Government is not in the business of pouring cold water on people's aspirations.

"Of course I know many analysts predict further short or medium-term falls in homeownership.

"And given the appalling financial legacy left to us - they could be right.

"But it is not good enough to simply say "this may be a good thing."

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what did this plan involve?

He didn't give details, just said it would involve "structural changes", it was only mentioned very briefly (in one of the broadsheet articles posted on here.)

My worry is that they'll put a cap at 90% LTV but provide some sort of guarantee to get banks to lower their 90% LTV rates

Edited by newdman

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I really have no idea how to as I thi9nk it is quite obvious - can you describe what you don't understand?

Sorry I have it now, being thik I'm afraid.

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no.

a 10k deposit at 5% may enable 200k mortgage

under 25% deposit, enables 40k mortgage

very big difference, forces people to plan

Run that by me again please

+1

He just means that if you have £10,000 in the bank, then the amount of mortgage you could get would be surprisingly affected by the percentage deposit required.

If you only need 5% deposit, then you can borrow a further £195k to make £200k of which your £10k is a 5% deposit.

But if you need 25% deposit, then you can only borrow a further £30k to make £40k of which your £10k is a 25% deposit.

So if implemented, 25% deposits across the board would imply something in the region of a 75% crash.

Personally, I think they would be unlikely to implement such a policy at the moment.

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Average UK savings £2,205 as of Jan 2010. So I make the *new* average UK house price 2205x4 = (drum roll) ...... £8,820 :unsure:

Source

You're only talking of cash savings here... how much have people got "saved" in shares, bricks&mortar, shiny coins, etc? ;)

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He didn't give details, just said it would involve "structural changes", it was only mentioned very briefly (in one of the broadsheet articles posted on here.)

My worry is that they'll put a cap at 90% LTV but provide some sort of guarantee to get banks to lower their 90% LTV rates

LTV at 75% would be a "structural change" that eventually frees up lending as house prices drop gradually, is that the plan? They know the lending to prop prices will never come back?

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He just means that if you have £10,000 in the bank, then the amount of mortgage you could get would be surprisingly affected by the percentage deposit required.

If you only need 5% deposit, then you can borrow a further £195k to make £200k of which your £10k is a 5% deposit.

But if you need 25% deposit, then you can only borrow a further £30k to make £40k of which your £10k is a 25% deposit.

So if implemented, 25% deposits across the board would imply something in the region of a 75% crash.

Personally, I think they would be unlikely to implement such a policy at the moment.

Thanks, so check out the effect of gearing on house prices.

Maybe the 75% crash in the above scenario is correct in a low inflation / [wage] deflationary environment.

Wow !

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LTV at 75% would be a "structural change" that eventually frees up lending as house prices drop gradually, is that the plan? They know the lending to prop prices will never come back?

that would be excellent

I've found the quote, it's very lacking in detail, but would fit in with that scenario

"To help them we need to get the deficit under control in order to give confidence to mortgage lenders to lend again," he said, adding that responsible lending and responsible borrowing were two sides of the same coin. "Borrowers will need to demonstrate financial responsibility and lenders will need to support creditworthy homeowners."

He would not be drawn on the specifics of how lenders would be encouraged to lend more, but said part of the solution was a "structural change" in how supply meets demand.

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He just means that if you have £10,000 in the bank, then the amount of mortgage you could get would be surprisingly affected by the percentage deposit required.

If you only need 5% deposit, then you can borrow a further £195k to make £200k of which your £10k is a 5% deposit.

But if you need 25% deposit, then you can only borrow a further £30k to make £40k of which your £10k is a 25% deposit.

So if implemented, 25% deposits across the board would imply something in the region of a 75% crash.

Personally, I think they would be unlikely to implement such a policy at the moment.

Surely it already has been implemented, because lending has collapsed, millions are not getting the amounts of loans they would have expected a few years ago? Without securitization the banks are still taking a risk at 75%? This is just the government "going official" that there is feck all they can do about the crash?

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  • 140 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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