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Struggle To Get Mortgage Worsens As Bank Of England Toughens Up Criteria Rules

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http://www.dailymail.co.uk/news/article-1316593/Struggle-mortgage-worsens-Bank-England-toughens-criteria.html?ito=feeds-newsxml

The struggle to get a mortgage, which is already impossible for millions people, is going to get even worse, an official report from the Bank of England has warned.

In a deeply worrying development, Britain's lending giants admitted they are changing the rules which means even fewer people will be accepted for a mortgage.

It comes as the number of mortgages handed out to buy a house has already plunged to less than 50,000 a month, compared to up to 135,000 a month before the credit crunch.

If the country's 'mortgage drought' gets even worse, the outlook for house prices, which are already falling, is bleak

The 'Credit Conditions Survey' report, from the Bank, said lenders have 'tightened credit scoring criteria' over the last six months - and expect to tighten them again over the next three months.

'Credit scoring' is the tests which customers must pass in order to be approved for a mortgage.

It involves a range of questions from whether or not you have fallen behind on your credit card payments and the size of your student debts to the number of years you have lived at your address.

Banks and building societies admitted to the Bank's officials, which conduct the regular survey, that they are taking 'a more cautious approach' to certain types of customers.

They are particularly concerned about anybody who puts down a deposit of less than 25 per cent on a property, and people who are self-employed.

In a clear warning, the Bank's report stated clearly yesterday that mortgage lending, which is the lifeblood of the housing market, is set to drop.

It said many lenders predict 'the loan approval rate was expected to fall in Q4 [October-December] for the first time since early 2009.'

In a speech in London yesterday, the Bank's executive director Paul Fisher also said the country's lending crisis will not go away for some time.

He said: 'Despite various forms of support from the Bank of England and from Government, it is clear that the lending capacity of the banking system, in the UK and elsewhere, is impaired.

'And [it] will take some years to recover.'

Over the last week, the Skipton building society, has scrapped its 95 per cent repayment mortgages, and now offers a maximum of 90 per cent.

It has also introduced a new rule that interest-only mortgages are only available to customers who put down a minimum deposit of 75 per cent. It scrapped them for first-time buyers in February.

Other big lenders, such as Northern Rock, already say they will not hand out mortgages for more than 85 per cent of the property's value. Before the crisis, it offered up to 125 per cent.

David Hollingworth, from the independent mortgage broker London & Country, said: 'This is really bad news.

'It is a step back, making it even harder for people to get a mortgage.'

The biggest fear surrounds radical changes proposed by the regulator, Financial Services Authority, to how much people can borrow and what type of mortgage they can have.

The Council of Mortgage Lenders has slammed the proposals as 'fatally flawed', and warned people could become 'mortgage prisoners' because they will not be able to remortgage.

It is also feared that interest-only mortgages, which are cheaper and therefore popular with young people, could 'effectively vanish'.

Another worry surrounds the Bank of England's £185 'special liquidity scheme', which is being gradually withdrawn and will end completely in January 2012.

This scheme allowed lenders to package up their mortgages, and swap them for Treasury bills which they could sell - and use the money to hand out more mortgages.

As this scheme disappears, lenders could be facing a major funding gap which they will struggle to fill, a problem compounded by other funding pressures.

Mr Fisher said £57billion has now been repaid, but stated plainly yesterday in his speech that the scheme 'will not be extended or replaced.'

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"Skipton building society, has scrapped its 95 per cent repayment mortgages, and now offers a maximum of 90 per cent.

It has also introduced a new rule that interest-only mortgages are only available to customers who put down a minimum deposit of 75 per cent. It scrapped them for first-time buyers in February."

Gosh.

But how many other places are still offering them? The wimpy mob are still offering to accept borrowed deposits off relatives aren't they?

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It comes as the number of mortgages handed out to buy a house has already plunged to less than 50,000 a month, compared to up to 135,000 a month before the credit crunch

That's the closest you'll get to the MSM admitting the whole thing is a pyramid scheme - to the detriment of those at the bottom.

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The wimpy mob are still offering to accept borrowed deposits off relatives aren't they?

But not for much longer - so the relatives will now have to give the deposits. Not "the bank of Mum and Dad" but "the pot of gold at the end of the Mum and Dad rainbow." <sigh>

db

Edited by deeplyblue

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Thank you fellow. This is one of those articles that give me a warm glow :)

my favourite:

If the country's 'mortgage drought' gets even worse, the outlook for house prices, which are already falling, is bleak

Another worry surrounds the Bank of England's £185 'special liquidity scheme', which is being gradually withdrawn and will end completely in January 2012.

Blimey that was rather cheap!?

Mr Fisher said £57billion has now been repaid, but stated plainly yesterday in his speech that the scheme 'will not be extended or replaced

:lol:

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Thank you fellow. This is one of those articles that give me a warm glow :)

my favourite:

Blimey that was rather cheap!?

:lol:

Very much like the BBC News just now about Ireland with a subtle patronising tone with regards their property boom and its impact on the Irish banks. I couldn't help replacing 'Ireland' with Britain in my head and we would get exactly the same end result.

I think the masses are going to realise soon enough that the game enough and many right now are being saved from financial armageddon with these new lending restrictions.

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Very much like the BBC News just now about Ireland with a subtle patronising tone with regards their property boom and its impact on the Irish banks. I couldn't help replacing 'Ireland' with Britain in my head and we would get exactly the same end result.

I think the masses are going to realise soon enough that the game enough and many right now are being saved from financial armageddon with these new lending restrictions.

And they need saving, who is going to pay tax for the next 40 years? Not boomers sitting on wodges of unearned equity which may, or may not, be frittered away on luxurious retirements.

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Thank you fellow. This is one of those articles that give me a warm glow :)

I read The Daily Mail mainly for the comments section, as the readers seem to be firmly on our side. I'm sure some of you HPCers like to leave comments on there.

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I read The Daily Mail mainly for the comments section, as the readers seem to be firmly on our side. I'm sure some of you HPCers like to leave comments on there.

I don't comment there but I spend many a happy hour clicking red and green arrows. Every little helps!

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And they need saving, who is going to pay tax for the next 40 years? Not boomers sitting on wodges of unearned equity which may, or may not, be frittered away on luxurious retirements.

If the price you can get for a house falls as much as is being predicted here, then the boomers are not going to be sitting on "wodges of unearned equity" are they?

And for "luxurious retirements" - Gawd, for people who rail against sheeple believing everything they read in the papers about house prices, some people don't half swallow a lot of rubbish from the Daily Wail et al.

You see those advertisements showing couples enjoying their cruises, their skiing holidays, their fourth and fifth city breaks in Bruges or Rome. And you think - those jammy s0ds having all that fun at my expense! Perhaps I should take a look at all those advertisements showing people in the 20s or 30s driving very expensive cars across Europe to have dinner with the beautiful people and think - those jammy s0ds! when I was that age I was trying desperately to find the money for the kids' school shoes. Clearly youngsters have no money worries. They can all afford new big screen tellies and they all think they have to have a new mobile phone every year (I've seen that in the ads, so I know it must be true).

So if we all believe the images with which advertisers are trying to seduce us, we'll all end up hating each other.

The reality of retirement for many is that it is one long worry about either your money or your health, or more likely both. If you're a couple, then the chances are that one of you at least has, or will shortly develop, a health problem. That will tie both of you down. If you're unlucky, any many are, then one partner spends nearly all of the day in the house because the other partner can't be left alone. You can't go out because one of you is too frail, too frightened of walking, too confused by anywhere that isn't the three or four rooms they know to go anywhere. Respite care is very expensive - £1,000 a week if you go private, and council-run places are closing down and dingy and staffed by people who don't know you, and aren't paid enough to care whether you can feed yourself.

You see less of your friends - they're starting to die off, of course, but not all of them. Some are too embarrassed at the state you or your partner or your home have got into. Some of them can no longer drive, because their eyesight has deteriorated too far. Some of them can't come near you, for fear of giving you the nasty bug which they've got. Some of them can't afford the train fare any more, and find the coach journey just too long and tiring. Some of them know they won't be able to cope away from the special equipment they have at home. Your younger friends are now weary of your narrowed horizons, when they are at the stage where their horizons are still expanding.

The advertisements aimed at giving a jolly picture of retirement are about as realistic as those one showing happy gurgling babies who never throw up all over their beds at 3 a.m. or keep you awake all night because their gums hurt them. They don't show young mothers going "stir crazy" trapped by the need to watch a toddler whilst looking after a sick baby and keep the house beautiful clean and tidy at the same time.

Most of us "Boomers" worry about our kids too. The fact that the "kids" are now going grey and worried about the state of their marriages or their houses doesn't mean that your average parent stops being interested or concerned. The problem is remembering that they have been adults for a decade - or two decades - and can mostly make their own decisions - except that they need financial help. Some of us also have to worry about our parents too.

Are all those between 30 and 40 Yuppies? Living the good life and contemptuous of those who haven't made it? Designer babies and designer kitchens and not a care in the world except how to hide the first few grey hairs? No?

Then stop assuming that everyone between 50 and 70 is rolling in unearned luxury, without a care in the world or any thought for anyone but themselves.

db

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If the price you can get for a house falls as much as is being predicted here, then the boomers are not going to be sitting on "wodges of unearned equity" are they?

And for "luxurious retirements" - Gawd, for people who rail against sheeple believing everything they read in the papers about house prices, some people don't half swallow a lot of rubbish from the Daily Wail et al.

You see those advertisements showing couples enjoying their cruises, their skiing holidays, their fourth and fifth city breaks in Bruges or Rome. And you think - those jammy s0ds having all that fun at my expense! Perhaps I should take a look at all those advertisements showing people in the 20s or 30s driving very expensive cars across Europe to have dinner with the beautiful people and think - those jammy s0ds! when I was that age I was trying desperately to find the money for the kids' school shoes. Clearly youngsters have no money worries. They can all afford new big screen tellies and they all think they have to have a new mobile phone every year (I've seen that in the ads, so I know it must be true).

So if we all believe the images with which advertisers are trying to seduce us, we'll all end up hating each other.

The reality of retirement for many is that it is one long worry about either your money or your health, or more likely both. If you're a couple, then the chances are that one of you at least has, or will shortly develop, a health problem. That will tie both of you down. If you're unlucky, any many are, then one partner spends nearly all of the day in the house because the other partner can't be left alone. You can't go out because one of you is too frail, too frightened of walking, too confused by anywhere that isn't the three or four rooms they know to go anywhere. Respite care is very expensive - £1,000 a week if you go private, and council-run places are closing down and dingy and staffed by people who don't know you, and aren't paid enough to care whether you can feed yourself.

You see less of your friends - they're starting to die off, of course, but not all of them. Some are too embarrassed at the state you or your partner or your home have got into. Some of them can no longer drive, because their eyesight has deteriorated too far. Some of them can't come near you, for fear of giving you the nasty bug which they've got. Some of them can't afford the train fare any more, and find the coach journey just too long and tiring. Some of them know they won't be able to cope away from the special equipment they have at home. Your younger friends are now weary of your narrowed horizons, when they are at the stage where their horizons are still expanding.

The advertisements aimed at giving a jolly picture of retirement are about as realistic as those one showing happy gurgling babies who never throw up all over their beds at 3 a.m. or keep you awake all night because their gums hurt them. They don't show young mothers going "stir crazy" trapped by the need to watch a toddler whilst looking after a sick baby and keep the house beautiful clean and tidy at the same time.

Most of us "Boomers" worry about our kids too. The fact that the "kids" are now going grey and worried about the state of their marriages or their houses doesn't mean that your average parent stops being interested or concerned. The problem is remembering that they have been adults for a decade - or two decades - and can mostly make their own decisions - except that they need financial help. Some of us also have to worry about our parents too.

Are all those between 30 and 40 Yuppies? Living the good life and contemptuous of those who haven't made it? Designer babies and designer kitchens and not a care in the world except how to hide the first few grey hairs? No?

Then stop assuming that everyone between 50 and 70 is rolling in unearned luxury, without a care in the world or any thought for anyone but themselves.

db

Top post mate, good on yer :)

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If the price you can get for a house falls as much as is being predicted here, then the boomers are not going to be sitting on "wodges of unearned equity" are they?

And for "luxurious retirements" - Gawd, for people who rail against sheeple believing everything they read in the papers about house prices, some people don't half swallow a lot of rubbish from the Daily Wail et al.

You see those advertisements showing couples enjoying their cruises, their skiing holidays, their fourth and fifth city breaks in Bruges or Rome. And you think - those jammy s0ds having all that fun at my expense! Perhaps I should take a look at all those advertisements showing people in the 20s or 30s driving very expensive cars across Europe to have dinner with the beautiful people and think - those jammy s0ds! when I was that age I was trying desperately to find the money for the kids' school shoes. Clearly youngsters have no money worries. They can all afford new big screen tellies and they all think they have to have a new mobile phone every year (I've seen that in the ads, so I know it must be true).

So if we all believe the images with which advertisers are trying to seduce us, we'll all end up hating each other.

The reality of retirement for many is that it is one long worry about either your money or your health, or more likely both. If you're a couple, then the chances are that one of you at least has, or will shortly develop, a health problem. That will tie both of you down. If you're unlucky, any many are, then one partner spends nearly all of the day in the house because the other partner can't be left alone. You can't go out because one of you is too frail, too frightened of walking, too confused by anywhere that isn't the three or four rooms they know to go anywhere. Respite care is very expensive - £1,000 a week if you go private, and council-run places are closing down and dingy and staffed by people who don't know you, and aren't paid enough to care whether you can feed yourself.

You see less of your friends - they're starting to die off, of course, but not all of them. Some are too embarrassed at the state you or your partner or your home have got into. Some of them can no longer drive, because their eyesight has deteriorated too far. Some of them can't come near you, for fear of giving you the nasty bug which they've got. Some of them can't afford the train fare any more, and find the coach journey just too long and tiring. Some of them know they won't be able to cope away from the special equipment they have at home. Your younger friends are now weary of your narrowed horizons, when they are at the stage where their horizons are still expanding.

The advertisements aimed at giving a jolly picture of retirement are about as realistic as those one showing happy gurgling babies who never throw up all over their beds at 3 a.m. or keep you awake all night because their gums hurt them. They don't show young mothers going "stir crazy" trapped by the need to watch a toddler whilst looking after a sick baby and keep the house beautiful clean and tidy at the same time.

Most of us "Boomers" worry about our kids too. The fact that the "kids" are now going grey and worried about the state of their marriages or their houses doesn't mean that your average parent stops being interested or concerned. The problem is remembering that they have been adults for a decade - or two decades - and can mostly make their own decisions - except that they need financial help. Some of us also have to worry about our parents too.

Are all those between 30 and 40 Yuppies? Living the good life and contemptuous of those who haven't made it? Designer babies and designer kitchens and not a care in the world except how to hide the first few grey hairs? No?

Then stop assuming that everyone between 50 and 70 is rolling in unearned luxury, without a care in the world or any thought for anyone but themselves.

db

The reality you describe is an i mprovement on previous generation's retirements and certainly will be better than future generations'. Worries about health and money never go away, and I am sure previous generations probably had to worry more. The people you describe in your scenario won't miss their dwindling "wodges of equity" (which is exactly my point); gov needs revenue which can only be provided by current net taxpayers (put in more than they take out). It's tricky to increase taxes with living costs so high. My "gov can't let housing equity be frittered away on luxurious retirements" theory is certainly something you will not find in the daily wail. Crash houses and tax the increase in disposable income. Simples

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The Telegraph's front page article on this...even the VI's are now turning bearish.

Get those comments in, hpc'ers.

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/8035882/Bank-of-England-warns-of-tougher-curbs-on-mortgage-lending.html

Bank of England warns of tougher curbs on mortgage lending

The Bank of England has warned that obtaining a mortgage is about to become even more difficult.

Millions of people could be refused a mortgage or asked to find an even bigger deposit Photo: REX

After tightening their criteria during the credit crisis, banks are becoming even stricter about lending.

They are imposing tougher rules because of fears that higher unemployment will result in more home owners defaulting on loans.

It will make it even harder for first-time buyers to get on to the property ladder, while those who need to renew their mortgages are likely to be offered less attractive deals.

Thousands of people could be refused a mortgage or be required to find even larger deposits than previously. It will also underline fears that Britain's household budgets will be squeezed further, increasing the chances of a "double dip" recession.

The Bank of England warned yesterday in its Credit Conditions Survey report that lenders had "tightened credit scoring criteria" over the past six months, and expect to tighten them even further during the next three months. It said lenders had told them they were adopting a more "cautious approach".

Melanie Bien, of Private Finance, an independent mortgage broker, said: "Recently, rates have improved, making mortgage repayments more affordable. But the tougher criteria will mean that people won't be able to get a mortgage at all, or will only be offered higher rates when they remortgage. It is going to get really tough for borrowers."

Financial experts yesterday said the plans were based on flawed logic, as borrowers who were considered vulnerable would be lumped with higher costs. Andrew Montlake, of Coreco, the mortgage brokers, said: "Lenders are getting nervous that unemployment is going to see a rise in the number of borrowers who will experience difficulties meeting their mortgage payments.

"However, if lending criteria tighten and people are unable to remortgage on to attractive new rates, then this will just make the problem worse."

The tougher lending criteria coincide with suggestions from the Financial Services Authority that banks should be even stricter with borrowers and should carry out regular checks to ensure that they can afford interest-only mortgages.

The Council of Mortgage Lenders said yesterday that this would mean that interest-only mortgages would "effectively vanish".

Thousands of buyers took out interest-only mortgages as house prices rose, but the authority is concerned about their ability to repay them in the economic downturn.

Michael Coogan, the director-general of the lenders' council, said: "We do not want to see measures that would effectively regulate them out of the market, and we believe it is possible to address the FSA's concerns, without imposing costs and requirements on lenders and borrowers that are likely to prove to be unacceptable."

There are 3.57 million outstanding mortgages that are interest-only, worth £470 billion. Three quarters of them are understood not to include a planned way of paying off the loan.

Interest-only mortgages are one way borrowers can reduce their monthly mortgage repayments but they must pay off the entire loan in one lump sum at the end of a typical 25-year term.

These borrowers are considered a higher risk and banks have tightened their lending criteria much more on interest-only deals than repayment deals amid fears of defaulting.

Property experts warned that declining house prices were inevitable after Nationwide revealed its latest house price index yesterday.

It reported that typical values rose 0.1 per cent in September to £166,757. This was not enough to halt the drop in annual house price growth, which slid from 3.9 per cent in August, compared with the previous year, to 3.1 per cent in September.

Nick Hopkinson, director at Property Portfolio Rescue, said: "It seems almost inevitable that house prices will fall over the next few months."

Earlier this week Charles Bean, the deputy governor of the Bank of England suggested savers should stop complaining about poor returns and start spending to help the economy.

Analysts said his comments showed a blatant disregard for the financial reality facing households and warned this approach would build up problems for the country in the future.

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The reality of retirement for many is that it is one long worry about either your money or your health, or more likely both. If you're a couple, then the chances are that one of you at least has, or will shortly develop, a health problem. That will tie both of you down. If you're unlucky, any many are, then one partner spends nearly all of the day in the house because the other partner can't be left alone. You can't go out because one of you is too frail, too frightened of walking, too confused by anywhere that isn't the three or four rooms they know to go anywhere. Respite care is very expensive - £1,000 a week if you go private, and council-run places are closing down and dingy and staffed by people who don't know you, and aren't paid enough to care whether you can feed yourself.

You see less of your friends - they're starting to die off, of course, but not all of them. Some are too embarrassed at the state you or your partner or your home have got into. Some of them can no longer drive, because their eyesight has deteriorated too far. Some of them can't come near you, for fear of giving you the nasty bug which they've got. Some of them can't afford the train fare any more, and find the coach journey just too long and tiring. Some of them know they won't be able to cope away from the special equipment they have at home. Your younger friends are now weary of your narrowed horizons, when they are at the stage where their horizons are still expanding.

db

Shockingly reminiscent of my in-laws' decline and death. And this despite two excellent, index-linked pensions and tens of thousands in savings.

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I'm getting worried about this now. It's good that they're tightening the rules but I need to build a house in the new year (budget within 3x income and I've got roughly 25% in cash) and I've just started employment (previously contracting). The most worrying aspect is that we've moved around so many times in the last 5 years (different rentals plus living with parents). I hope I can get funding for it.

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The bankers have to be seen to be responsible. They are hoping it will pass and if they just lie low for a couple of years they can get back into shylock mode a bit later. These crooks will never learn--they don't have to--its our money they steal.

But in the meantime, we can all make straw while the moon is asleep and get some bargains as cash buyers (STRs and STMs) get rich pickins.

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Shockingly reminiscent of my in-laws' decline and death. And this despite two excellent, index-linked pensions and tens of thousands in savings.

I sympathise and do not look forward to this happening to my parents and in-laws, but it will and it is nothing new. The terminal decline due to old age has been happening for millenia.

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I'm getting worried about this now. It's good that they're tightening the rules but I need to build a house in the new year (budget within 3x income and I've got roughly 25% in cash) and I've just started employment (previously contracting). The most worrying aspect is that we've moved around so many times in the last 5 years (different rentals plus living with parents). I hope I can get funding for it.

I've been ignoring the potential effects this could have on me and just hoping it has our desired effect on the Market. But I need to borrow over 3.5 x joint income currently that's with a 60%LTV which should count in my favour. But I did get slightly concerned when I read in the mirror about coupled with big deposits and good salaries getting turned down. If prices don't fall again I might not be able to get credit.

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  • 153 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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