Why 'irresponsible Lending' Helped Me And Millions Of Others

[eric pebble]

GUYS!!! Get out there NOW - Register at the Daily Telegraph - and

NAIL THIS MORON IAN COWIE -- SEND YOUR COMMENTS NOW!!!

" - Why 'irresponsible lending' helped me and millions of others "

http://blogs.telegraph.co.uk/finance/ianmcowie/100006262/why-irresponsible-lending-helped-me-and-millions-of-others/#dPostComment

Edited June 16, 2010 by eric pebble

[stuckmojo]

It's not the first time that this muppet goes on about how good the 125% mortgages were.

Shame I can't add a comment from this computer.

Please HPCrs, do nail this moron.

[the flying pig]

I've read this exact same kidney stone of wisdom, gushed by the exact same idiotic writer, once before within the last 18 months or so.

It's too stupid for words [especially where it starts talking about 'wealth creation'] and as such not really worthy of comment.

[Executive Sadman]

Ahh, hes one of the "£1000 will buy me 1000 tins of beans, but with money printing £1200 will by my 2 tins of beans."

But im richer because £1200 is more than £1000.

[Riedquat]

Not much agreement there. Are all the comments from HPCers or is the general population (well, Telegraph readers, which isn't quite the same thing) actually starting to realise that high house prices are not good for anyone other than banks (as long as they don't get too many defaults) and a few people who were in the right place at the right time? Anyone who thinks that helping people get into huge amounts of debt is preferable to lower prices deserves a thorough kicking. It makes my blood boil.

[dances with sheeple]

GUYS!!! Get out there NOW - Register at the Daily Telegraph - and

NAIL THIS MORON IAN COWIE -- SEND YOUR COMMENTS NOW!!!

" - Why 'irresponsible lending' helped me and millions of others "

http://blogs.telegra...s/#dPostComment

Mr. Cowie is obviously a thicko of the highest order, probably "owns' a few BTL`s? You can tell by the photo that he is mucking himself. You are going down son, it`s over.

[Si1]

he's just another lucky boomer who thinks he got to where he is thru skill, judgement and leverage

why are all "personal finance" journos economic dunces anyway?

[dances with sheeple]

Easy to spot your reply Eric, the links are good, maybe get a few brains out there turning over about the causes of this almighty f*uck up. And if it gets a few bright sparks to switch on about ***DROPPING THE PRICE *** all the better.

[the_austrian]

It's a remarkable article. It might even be a classic of the genre.

[eric pebble]

I don't necessarily think he's saying anything wrong. What he's saying is that most people when they start out need a pretty high LTV mortgage, in the range of 90%+. Most young people can't save £40-50k. My parents started with a 100% mortgage in 1975.

The problem is that house prices are too high. I don't know whether 100% mortgages have contributed to it, but I don't think they're bad, per se.

Er..... Look 'MikeSouthwest': I can see you joined us very recently.

Please don't take it the wrong way, but - can I make a suggestion?

READ the links below in my signature; [they're the same ones I allude to in my comment to that article]. READ them carefully....... one by one. Watch the video too.

THEN - come back here and show us if you've been able to join up the dots.

I'll give you a clue: Lend money like confetti to all and sundry over several years to buy their 'dream houses': Lend them MORE and MORE money as time goes on: Don't even bother to check if they can REALLY afford to borrow that much. Lend out vast sums based on fraudulent applications declaring fictional incomes...

Result: Property prices go up more and more. Geddit?

Edited June 16, 2010 by eric pebble

[tomandlu]

My parents started with a 100% mortgage in 1975.

Really? I didn't think 100% mortgages were available then...

[Brave New World]

Eric, looks like someone needs a bit of the ‘Pebble dashing’ on the comments section - ‘ftb’.

Sort him Eric!

[tomandlu]

Er..... Look 'MikeSouthwest': I can see you joined us very recently.

He has a point - the problem (HPI) isn't caused by high LTV per se, it's lending too much to people who will not be able to pay it back. If people were only lent what they could reasonably pay back (and NOT based on an assumption of HPI, but on actual earnings), then house prices would, inevitably, be affordable...

[porca misèria]

Yes, really, they had a 100% mortgage from the council in 1975

Oh right. Taxpayers money channeled to a privileged class based on opaque criteria. Not open-market money available to ordinary people.

You had me worried there: thought I must've missed a trick in the 1980s.

[non frog]

I CANNOT believer this MORON is a "Personal Finance Editor" on a national newspaper like the D Telegraph.

HE IS SO THICK - it makes me BOIL with anger. :angry: :angry: :angry: :angry:

He is neither thick nor a moron. He is a well paid journalist that writes for a "newspaper" that has no interest in news but in propaganda that suits its publisher. This is the case for virtually all "newspapers".

The thickies are the people paying a pound to read this tripe. The morons are the ones that believe it.

[eric pebble]

I will have a look at those links, but before I do, I'll just make one comment. In the article in the OP, he isn't talking about liar loans, which is what your links seem to be about. He's talking about high LTV loans, which most people need when they're starting out.

Mike: They only 'NEED' them because - at the start - SOME OTHER people took them out. AND SO - THEY have to MATCH what OTHERS have irresponsibly taken out to stay in the ''market''.

i.e. They were [quite deliberately] persuaded to STRETCH as FAR as they could [amd more] by ''friendly'' little Moneylenders who sat behind the desk when they were 'applying' for their mortgage - and told to sign the dotted line.....

These people were thinking ''Aw, shucks, this Moneylender guy is SO kind and nice! He's letting me ''borrow'' more money!! BUT THIS IS THE BIG LIE. THIS IS THE FRAUD. THIS IS THE WAY THOSE MONEYLENDERS and all their friends have DELIBERATELY and IRRESPONSIBLY - and FRAUDULENTLY - HIKED UP the ''market'' for many, many years now... THEY ARE NOT YOUR FRIEND AT ALL. THEY ARE YOUR ENEMY.

THEY DELIBERATLY ''let'' you borrow MORE ''money'' -- this drives the price up - makes them MORE profit..... [etc etc.] It also drives up the ''value'' of their nice little [or large] ''Property Portflios'' they've got up and running over the course of their lifetime....

SO: Re: LIAR LOANS:

Liar loans - as far as I am concerend - and as far as those who THINK and WORK THINGS OUT are concerned - are ALL ''loans'' which require you to borrow MORE than you can ACTUALLY afford;

THUS - Liar Loans include Interest Only Loans; Stupid Multiples' Loans [i.e. all those over a max of 3.5 x your REAL, NON-LIAR income]. They also include all loans with ''teaser'' rates.... and all those other ''loans'' which are a Great Big

LIE.

A LIE, because they require you to LIE - whether to yourself or to the bank - about what you can REALLY afford - and LIVE IN THE REAL WORLD at the same time....

SO - a NON-LIAR LOAN/Mortgage is a very simple thing: It is one which is, very simply, and VERY straightforwardly, NOT OVER 3.5 x your REAL, NON-LIAR INCOME.

PERIOD. SIMPLE. END OF STORY.

Edited June 16, 2010 by eric pebble

[DeepLurker]

He has a point - the problem (HPI) isn't caused by high LTV per se, it's lending too much to people who will not be able to pay it back. If people were only lent what they could reasonably pay back (and NOT based on an assumption of HPI, but on actual earnings), then house prices would, inevitably, be affordable...

Or, alternatively, if lenders who lent too freely were not bailed out, there would be no need for LTV limits.

[eric pebble]

If everyone had stuck to good old sustainable and sensible borrowing - house prices today would, quite naturally, reflect that: i.e. a starter home would be about GBP 35-50k. The next step up would be a bit more. The ''average'' house price would be around GBP 60-80k.

Alas, it is more than double that.

Edited June 16, 2010 by eric pebble

[porca misèria]

I'm not sure my parents were part of some privileged class. It was back in the days when councils were concerned with helping young people buy houses. No doubt they got a good mortgage rate, but it certainly was money offered to ordinary people.

So what did you have to dobe to qualify for it?

[MrB]

Yup all good. But none of that has anything to do with high LTV mortgages per se, which was my point. 3.5 times your salary, is still 3.5 times your salary, no matter whether you have a zero deposit, or a 50k deposit.

Mike -lowering LTV requirements (margin) is per se why house prices go up.

Halve the margin requirement and we can magically now buy double the number of houses as before - with the same money!! WOot.

Your point is totally wrong. You really miss the point.

[eric pebble]

OK everyone: This is how it's been done - many, many hundreds of thousands of times over - to a greater or lesser degree. Right across the land - and beyond... [e.g. Ireland, Spain...]

Yorkshire Post: Mortgage cheats got millions from 'lax' banks.

http://www.yorkshirepost.co.uk/news/Mortgage-cheats-got-millions-from.6364237.jp

NOTE: These guys firstly drove up ALL property prices in the whole neighbourhood, and this spread right accross the country as the years went by. EVERYONE who bought after them HAD TO MATCH THE FRAUDULENTLY INFLATED PRICES.

THAT IS WHAT HAPENNED TO THIS COUNTRY FROM 2000/1 ONWARDS.

END OF STORY.

Edited June 16, 2010 by eric pebble

[Ash4781]

What's his worst financial decision ever ?

[libspero]

Wow.. gob smacked!

He might just as well have written:

Lax Lending Is Good And Here's Why!

Everybody deserves to be able to speculate with 100% of other people's money, and the government shouldn't interfere with that.

A lack of lending standards will allow everybody to get rich (just like we all did for the last 10 years) and frankly you can't deny people their right to get into more debt than they can handle. When it becomes a problem again we can just bail out the banks and drop interest rates to zero.. because that's the way that a good economy functions.

Everybody deserves the right to speculate in property.. even if it means 150% mortgages over 120 years.. because we're worth it!!

Frickin' idiot

[SMAC67]

I'm not sure I follow your point. It may well hold for the buy to let investor looking to rent the one property out. But for the first time buyer, he's not buying two houses if the LTV goes from 90% to 95%. He's just using a slightly smaller deposit.

I would point out here, I'm not using talking of 125% mortgages, which I don't favour.

As I see it, lowering the max LTV value reduces the number of first time buyers, and I haven't seen so far that reducing the number of FTBs has had much of an effect on lowering house prices. Please, explain though. I'm happy to admit I'm wrong

Mike, you don't understand because like the majority of people (and I include Financial Advisors writing in the Torygraph) are simply innumerate, and regardless of how Eric explains the reality of the situation you will NEVER be able to figure it out. It's like trying to explain spelling to someone who is dyslexic or colour to someone born blind. But don't worry, you have the same level of understanding as most economists and George Osbourne, so you are not alone.

Also, re your previous comment, put simply, you couldn't afford your first house.................you are classic sub-prime......................

[libspero]

As I see it, lowering the max LTV value reduces the number of first time buyers, and I haven't seen so far that reducing the number of FTBs has had much of an effect on lowering house prices. Please, explain though. I'm happy to admit I'm wrong.

Low LTV also helped BTLers. You didn't need a lot of equity in your first house before you could take out a second mortgage against the equity to fund the second, then a third, then a fourth etc.

If we are not going to let the market regulate itself (by allowing banks to fail and price risk correctly), then we need the following:

Enforced LTV limits (perhaps 15%-20%)

Enforced limits on lending multiples

Tax disincentives to help prevent speculation (High capital gains on second homes / BTL, perhaps offset by reductions in council tax for those who rent to help them save up for a deposit)

All IMHO of course.