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Why New Rules On Mortgage Lending Are Necessary

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http://www.guardian.co.uk/money/blog/2010/jul/17/mortgage-lending-loans-banks

Yes, it means that many, especially the self-employed, will find it harder to get a large loan. But that can only be good news. The lesson from the credit crunch is the price of a house is not a function of demand, rather the amount of cash a lender will throw at it. Caps on lending will, thankfully, see house prices slide to more sensible levels.

Apologies if already posted but here's Pat talking sense again - one of the only sane hacks out there who doesn't greet price rises with a fanfare...

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Slowly and surely the thumbscrews are tightening.

Not enough for my liking but any step in the right direction is a good one.

If the usually-impotent FSA stick to their guns and actually implement these restrictions - no more IO loans, no more self-cert, PROPER affordability tests based on ability to pay (factoring in IR rises of +3%) - then we'll see an enormous ratcheting down of prices.

As Patrick quite rightly says, the boom wasn't caused by supply & demand, but by people's ability to get hold of more and more money.

Edited by red

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If the usually-impotent FSA stick to their guns and actually implement these restrictions - no more IO loans, no more self-cert, PROPER affordability tests based on ability to pay (factoring in IR rises of +3%) - then we'll see an enormous ratcheting down of prices.

As Patrick quite rightly says, the boom wasn't caused by supply & demand, but by people's ability to get hold of more and more money.

Are you sure the FSA tactic isn't engineered to scare people into gettingt heir liar loan now, before they "miss the boat"...?

A bit like the car scrappage scheme.

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If the usually-impotent FSA stick to their guns and actually implement these restrictions - no more IO loans, no more self-cert, PROPER affordability tests based on ability to pay (factoring in IR rises of +3%) - then we'll see an enormous ratcheting down of prices.

As Patrick quite rightly says, the boom wasn't caused by supply & demand, but by people's ability to get hold of more and more money.

Absolutely right. Self employed people will have to actually produce evidence of an income. There will be specialist loans in time to deal with their up/down income situation. But they will hopefully be stopping pure self-cert.

Speaking to a range of people today at a large meeting, where many admitted they could not afford to buy their own house, if they were buying now. Just as I suspected. You know there is something wrong if you are making more out of your house than going to work.

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Will the unintended consequence be that only public sector workers will be able to secure a mortgage and they will hoover up all the properties for knock down prices?

Exaggeration - but you see what I mean.

That is what worries me. In the process of setting up a new business, and worried that if even if we are making good profits in 18 - 24 months when we might want to buy, we will be unable to find a lender willing or able to lend us the money.

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If the usually-impotent FSA stick to their guns and actually implement these restrictions - no more IO loans, no more self-cert, PROPER affordability tests based on ability to pay (factoring in IR rises of +3%) - then we'll see an enormous ratcheting down of prices.

As Patrick quite rightly says, the boom wasn't caused by supply & demand, but by people's ability to get hold of more and more money.

Hey, when I get a mortgage I want a flexible repayment, IO mortgage.

Some of us prefer to use the money for capital repayments to be invested elsewhere. We can manage our money, and we understand what we are doing.

So lay of the IO mortgage ban please.

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Hey, when I get a mortgage I want a flexible repayment, IO mortgage.

Some of us prefer to use the money for capital repayments to be invested elsewhere. We can manage our money, and we understand what we are doing.

So lay of the IO mortgage ban please.

And 'some' people can't. They simply take out IO mortgages on the never-never without thinking how they're going to pay back the capital.

I respect the fact that you say that you can manage your money - and I appreciate the many pros and cons of regulation - but unfortunately, there are way too many people who don't know how to manage their money and given the state we are in, I think tighter regulation are the only way forward. Without it, we get another bubble.

This is what happens when restrictions are looser:

The FSA found that:

• 46% of households either had no money left, or had a shortfall after mortgage payments and living costs were deducted from their income;

• Almost half of new mortgages between 2007 and the first quarter of 2010 were provided without a customer having to verify their income;

• The share of interest-only mortgages has been increasing. At the peak of the market, over 30% of all mortgages were interest-only;

• Many consumers with no repayment vehicle count on future house price rises or uncertain life events to repay their mortgage and some have no plan at all;

http://www.guardian.co.uk/money/2010/jul/13/mortgages-fsa-fast-track-self-certified

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Hey, when I get a mortgage I want a flexible repayment, IO mortgage.

Some of us prefer to use the money for capital repayments to be invested elsewhere. We can manage our money, and we understand what we are doing.

So lay of the IO mortgage ban please.

something tells me that concerns around millions of idiots using IO cos it's cheaper, thereby risking bankrupting both themselves & the banks, will weigh more heavily with decision makers than concerns around a handful of niche borrowers such as your good self using IO to suit their particular circumstances. i'm sure there's a place for niche/specialist financial products [i.e. not "30% of all mortgages"] for special cases?

Edited by the flying pig

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Hey, when I get a mortgage I want a flexible repayment, IO mortgage.

Some of us prefer to use the money for capital repayments to be invested elsewhere. We can manage our money, and we understand what we are doing.

So lay of the IO mortgage ban please.

I would say most would be using the capital repayments to pay the council tax, other loans, bills and living costs....they are relying on continued property price rises to make them money for nothing, that I would suggest is their sole future investment. ;)

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Hey, I've an idea - why not just let the banks do what the hell they like, let people borrow what the hell they like. It's not my, or your, perogative to stop two people entering into a contract of their own choosing.

Just don't come to me asking for a bailout when it all goes wrong.

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  • 146 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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