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http://www.bbc.co.uk/news/business-11468240

Mortgage borrowers to be 'sacrificed' lenders warn

Looking in an estate agent's window The housing market may slump under the new rules, the CML hints

The Council of Mortgage Lenders (CML) says plans by the City regulator to restrict mortgage lending would "sacrifice" many good borrowers.

The Financial Services Authority (FSA) wants to force lenders to be much more careful about to whom they lend.

It says the new rules are essential to "protect vulnerable customers".

But the CML says that if the suggested new rules had been in place from 2005 to 2009, about half of all mortgages would not have been granted.

It says most of them, 3.8 million, have in fact turned out to be good loans.

The CML has already warned that one part of the FSA's proposed forthcoming rules, insisting that lenders verify the income of all borrowers, would lead to house prices falling.

But it has turned its attention to other aspects of the proposed rules, such as:

* assessing an applicant's income and expenditure

* assessing their ability to repay on a full capital-and-interest basis

* assuming loans are for no longer than 25 years

* restricting the size of loans to people with past payment problems and

* assuming that interest rates might rise from their initial level.

'Sacrifice'

The CML believes that these rules would simply be far too strict and therefore unnecessary.

Taking all the new changes together, the CML concludes that 51% of all mortgages lent in the four years it examined would not have been made.

Continue reading the main story

“Start Quote

We believe the current proposals sacrifice far too many borrowers”

End Quote CML

But it calculates that only 151,000 arrears cases and 30,000 repossessions would have been prevented.

"We believe the current proposals sacrifice far too many borrowers," the CML said.

"Each additional element of the FSA's proposals would result in greater volumes of arrears and possessions cases prevented, and stress and financial loss avoided.

"But at the same time, ever greater numbers of borrowers [will be] denied credit without evidence of any payment problems."

The FSA said that the proposals were designed to affress the "major failures" that have occured in the mortgage market - failures that are still affecting customers today.

"Our evidence shows that 16% of borrowers are already financially overstretched and they are facing problems now as a result of their lenders' practices in the past," the regulator said in a statement.

"But for now borrowers are also benefiting from historically low interest rates and house price inflation - which cannot go on forever."

'No difficulties'

The CML was careful to stress that its analysis of the impact on past lending did not mean it was predicting a similar impact in the future.

But that is clearly the worry at the heart of the CML's analysis.

It said the new rules would particularly affect first-time buyers and new business.

"Around 730,000 first-time buyers over the period between the second quarter of 2005 and the first quarter of 2009 - 95% of the first-time buyers who would have been denied their mortgage under the rules as proposed - experienced no payment difficulties," it said.

The FSA is currently consulting on its new rules, which are scheduled to start early next year.

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From the BBC:

Mortgage plan will force house prices down, CML warns

Even more people will be shut out of home ownership, the CML warns House prices will fall if the City regulator gets its way and restricts mortgage lending, the Council of Mortgage Lenders (CML) has warned.

The Financial Services Authority (FSA) is currently consulting on ways to stop "excessive" mortgage lending.

Its aim is to stop lenders offering mortgages to people who cannot prove they can repay their loans.

But the CML says the FSA has admitted its plan will lead to house prices falling.

"This is just one of a number of unintended consequences of the FSA's well-meaning but misguided proposals that the CML believes the UK's existing 11 million mortgage borrowers have every right to be concerned about," said the CML's director general Michael Coogan.

'Significant falls'

Mr Coogan was citing a footnote in the FSA's consultation document, which was published in July.

This said that economic modelling of the consequences of its proposals "did project significant falls in house prices from the reduction in lending".

"In addition, the impact of a drop in lending on house prices was also modelled using the Oxford Economic Forecasting model, another model of the global macroeconomy," the FSA document said.

"This gave similar house price impacts to those from [the National Institute of Economic and Social Research]", the document added.

CML

The FSA is worried that despite the banking crisis and economic downturn, and the current severe rationing of mortgages, too many people are still being given home loans even though they cannot show that they can afford them.

In July it pointed out that so-called non-verified loans still made up 43% of all home loans granted in the first three months of 2010.

The regulator argued that this practice exposed the borrowers to debt in their eagerness to buy a home.

And the FSA said its own research had shown that almost half of households either had no money left, or had a shortfall, after they had paid their monthly mortgage bill and deducted living costs from their income.

"We are keen to ensure that people who can afford a mortgage can get one, and also to protect vulnerable consumers by making sure that anyone who does take on a mortgage can afford to pay it back," said Sheila Nicoll, director of conduct policy at the FSA.

"We have made it very clear that in introducing any new requirements and in developing appropriate transitional arrangements we will be sensitive to economic conditions and any potential impact on the mortgage market."

Golden age over?

Despite this the mortgage industry has been alarmed at the prospect of excessive new formal restrictions, such as being obliged to demand that borrowers prove they can pay.

"The unintended consequences of new mortgage regulation are likely to stifle innovation and opportunity," said Mr Coogan.

"Whether for first-time buyers, movers, borrowers who want to access their equity, those whose personal circumstances are different to the 'norm', private investors in residential property or funders of social housing," he said.

Mr Coogan argued that if prices fell again, undermining the security houses gave lenders for loans already made, then mortgage rationing would continue and many more people would be locked out of home ownership.

"The golden age of home-ownership is over, for the moment," he added.

Eric, anybody...?

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"The golden age of home-ownership is over, for the moment," he added.

Ah yes - the 'golden age' of unaffordable housing.

Michael Coogan. What a colossal twunt.

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Stopping these mortgages would have a huge impact on the housing market. It would basically take that entire 43% of the buyers right out of the market at these prices. Which would also rapidly have knock-on effects. Like many of those not needing these loans are people selling and upgrading. Selling to someone using a liar-loan to get in.

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Was it Coogan on Radio 5 Live at 6.50am this morning?

He got a bit of a pasting from Andrew Verity and Mickey Clarke. They put it to him that the mortgage lenders had lent far too much money to people who couldnt pay, and why should mortgage lenders lend to someone without verifying their income?

He in turn responded that a lot of people who hadnt had their income checked, were still paying their mortgages ok.

They asked him what he thought about getting lenders to 'stress test' borrowers, checking to see if they could repay if the Bank of England base rate goes up to the dizzy heights of 1 percent. I cant remember what Coogan said.

This is of course what I would like to know, what happens if the BoE base rises to five percent. What will happen to the housing market then?

I have an idea, and methinks that the FSA proposals wont seem so bad then, even to Mr Coogan.

I wonder what has got into the FSA though? Arent they supposed to be letting the crooks have a free hand and allow unfettered lending? At least they are keeping their policies the same with regards to letting fraud go unpunished, unless their are some ongoing prosecutions that I havent heard about?

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The Council of Mortgage Lenders (CML) says plans by the City regulator to restrict mortgage lending would "sacrifice" many good borrowers.

I love that quote, we will sacrifice many good borrowers who've overpaid for there houses. The fact that if house prices where cheaper these people wouldn't be sacrificed appears lost on the CML.

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http://www.bbc.co.uk/news/business-11468240

5 October 2010 Last updated at 00:02

Mortgage borrowers to be 'sacrificed' lenders warn

Plans by the City regulator to restrict mortgage lending would "sacrifice" many good borrowers, the Council of Mortgage Lenders (CML) says.

The Financial Services Authority (FSA) wants to force lenders to be much more careful about to whom they lend.

It says the new rules are essential to "protect vulnerable customers".

But the CML says that if the suggested new rules had been in place from 2005 to 2009, about half of all mortgages would not have been granted.

It says most of them, 3.8 million, have in fact turned out to be good loans.

The CML has already warned that one part of the FSA's proposed forthcoming rules, insisting that lenders verify the income of all borrowers, would lead to house prices falling.

But it has turned its attention to other aspects of the proposed rules, such as:

* assessing an applicant's income and expenditure

* assessing their ability to repay on a full capital-and-interest basis

* assuming loans are for no longer than 25 years

* restricting the size of loans to people with past payment problems and

* assuming that interest rates might rise from their initial level.

'Sacrifice'

The CML believes that these rules would simply be far too strict and therefore unnecessary.

Taking all the new changes together, the CML concludes that 51% of all mortgages lent in the four years it examined would not have been made.

But it calculates that only 151,000 arrears cases and 30,000 repossessions would have been prevented.

"We believe the current proposals sacrifice far too many borrowers," the CML said.

"Each additional element of the FSA's proposals would result in greater volumes of arrears and possessions cases prevented, and stress and financial loss avoided.

"But at the same time, ever greater numbers of borrowers [will be] denied credit without evidence of any payment problems."

The FSA said that the proposals were designed to affress the "major failures" that have occured in the mortgage market - failures that are still affecting customers today.

"Our evidence shows that 16% of borrowers are already financially overstretched and they are facing problems now as a result of their lenders' practices in the past," the regulator said in a statement.

"But for now borrowers are also benefiting from historically low interest rates and house price inflation - which cannot go on forever."

'No difficulties'

The CML was careful to stress that its analysis of the impact on past lending did not mean it was predicting a similar impact in the future.

But that is clearly the worry at the heart of the CML's analysis.

It said the new rules would particularly affect first-time buyers and new business.

"Around 730,000 first-time buyers over the period between the second quarter of 2005 and the first quarter of 2009 - 95% of the first-time buyers who would have been denied their mortgage under the rules as proposed - experienced no payment difficulties," it said.

The FSA is currently consulting on its new rules, which are scheduled to start early next year.

For some reason, when i read this on teletext this morning I thought of a well known hpc poster. Either HPC is taking over my life, or Eric has nailed it from day 1.

Take a bow Eric.

Edited by Caveat Mortgagor

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But the CML says that if the suggested new rules had been in place from 2005 to 2009, about half of all mortgages would not have been granted.

It says most of them, 3.8 million, have in fact turned out to be good loans.

Oh, that's ok then. But let's not bother considering the fact that for the last 18 months, the base rate has remained at an unprecedented 0.5% and having spent the 6 months previous to that tumbling too.

"Our evidence shows that 16% of borrowers are already financially overstretched and they are facing problems now as a result of their lenders' practices in the past," the regulator said in a statement.

"But for now borrowers are also benefiting from historically low interest rates and house price inflation - which cannot go on forever."

Oh, so you're not going to ignore the rate completely. Good oh. But yes, it's all the lenders' fault. Nothing to do with people over-stretching themselves and now suffering as a result.

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Oh, that's ok then. But let's not bother considering the fact that for the last 18 months, the base rate has remained at an unprecedented 0.5% and having spent the 6 months previous to that tumbling too.

Oh, so you're not going to ignore the rate completely. Good oh. But yes, it's all the lenders' fault. Nothing to do with people over-stretching themselves and now suffering as a result.

While you were ranting, you forgot to mention SMI, which means anyone who has a bit of trouble with their income gets to keep their home forever, so it is the taxpayer on the hook, not the buyer and the bank as would have occured in days of Yore.

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CML are so dumb aren't they?

If houses are £100k and max LTV is 50% per £1m of available funds lenders can do 20 mortgages

If houses are £200k and max loan is 100% per £1m of available funds lenders can do 5 mortgages

Look at all those arrangement fees lenders are missing out on wanting to ramp prices up and lend to anyone with a pulse! They are missing out on 15 just there not taking into account that with lower prices there will be more sales down the line. They need churn.

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But the CML says that if the suggested new rules had been in place from 2005 to 2009, about half of all mortgages would not have been granted....

....and the banking system wouldn't have imploded. :rolleyes:

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The housing market may slump under the new rules, the CML hints

...what they mean is the housing market may adjust and for many people lower prices mean better days ...thick VIs ...why do the financial press print their cowboy utterances ..... :rolleyes:

Edited by South Lorne

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I love that quote, we will sacrifice many good borrowers who've overpaid for there houses. The fact that if house prices where cheaper these people wouldn't be sacrificed appears lost on the CML.

That's because they're a bunch of COMPLETE **NTS.

They have fraudulently bloated the "price" of housing with their grossly corrupt LIAR LOANS -- and they are screaming their heads off and chucking their toys out of the pram - because they are being threatened with the prospect of being unable to carry on propping up the false "market" with their LIAR LOANS. This is an utterly pathetic sight.

Edited by eric pebble

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* assessing an applicant's income and expenditure

* assessing their ability to repay on a full capital-and-interest basis

* assuming loans are for no longer than 25 years

* restricting the size of loans to people with past payment problems and

* assuming that interest rates might rise from their initial level.

Clearly I'm an old fashioned fuddy-duddy, but if I were handing over a six figure sum I'd want the above as an absolute minimum.

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The CML’s press releases are always rubbish. They are only interested in protecting their member’s interests and sod the country. If there was a similar body for EAs they would do the same. Their member’s had a good few years and now they’re paying for their ineptitude, tough luck CML members.

Edited by Blod

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Clearly I'm an old fashioned fuddy-duddy, but if I were handing over a six figure sum I'd want the above as an absolute minimum.

...the problem is fiddling the system is a chosen culture for many ....these rules should be reinforced to eliminate some of the trash element in society..... :rolleyes:

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http://www.bbc.co.uk/news/business-11468240

5 October 2010 Last updated at 00:02

Mortgage borrowers to be 'sacrificed' lenders warn

Plans by the City regulator to restrict mortgage lending would "sacrifice" many good borrowers, the Council of Mortgage Lenders (CML) says.

The Financial Services Authority (FSA) wants to force lenders to be much more careful about to whom they lend.

It says the new rules are essential to "protect vulnerable customers".

But the CML says that if the suggested new rules had been in place from 2005 to 2009, about half of all mortgages would not have been granted.

It says most of them, 3.8 million, have in fact turned out to be good loans.

The CML has already warned that one part of the FSA's proposed forthcoming rules, insisting that lenders verify the income of all borrowers, would lead to house prices falling.

But it has turned its attention to other aspects of the proposed rules, such as:

* assessing an applicant's income and expenditure

* assessing their ability to repay on a full capital-and-interest basis

* assuming loans are for no longer than 25 years

* restricting the size of loans to people with past payment problems and

* assuming that interest rates might rise from their initial level.

'Sacrifice'

The CML believes that these rules would simply be far too strict and therefore unnecessary.

Taking all the new changes together, the CML concludes that 51% of all mortgages lent in the four years it examined would not have been made.

But it calculates that only 151,000 arrears cases and 30,000 repossessions would have been prevented.

"We believe the current proposals sacrifice far too many borrowers," the CML said.

"Each additional element of the FSA's proposals would result in greater volumes of arrears and possessions cases prevented, and stress and financial loss avoided.

"But at the same time, ever greater numbers of borrowers [will be] denied credit without evidence of any payment problems."

The FSA said that the proposals were designed to affress the "major failures" that have occured in the mortgage market - failures that are still affecting customers today.

"Our evidence shows that 16% of borrowers are already financially overstretched and they are facing problems now as a result of their lenders' practices in the past," the regulator said in a statement.

"But for now borrowers are also benefiting from historically low interest rates and house price inflation - which cannot go on forever."

'No difficulties'

The CML was careful to stress that its analysis of the impact on past lending did not mean it was predicting a similar impact in the future.

But that is clearly the worry at the heart of the CML's analysis.

It said the new rules would particularly affect first-time buyers and new business.

"Around 730,000 first-time buyers over the period between the second quarter of 2005 and the first quarter of 2009 - 95% of the first-time buyers who would have been denied their mortgage under the rules as proposed - experienced no payment difficulties," it said.

The FSA is currently consulting on its new rules, which are scheduled to start early next year.

For some reason, when i read this on teletext this morning I thought of a well known hpc poster. Either HPC is taking over my life, or Eric has nailed it from day 1.

Take a bow Eric.

The words stuck pig and screaming spring to mind

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http://www.thisislondon.co.uk/money/article-23884776-new-lending-rules-will-rule-out-half-of-all-mortgages.do

More than half of all mortgages taken out during the past four years would have been barred if proposed new lending regulations had been in force, a trade body warned today.

The Council of Mortgage Lenders said 3.8 million credit-worthy borrowers would have been unable to get a mortgage between the second quarter of 2005 and the first quarter of 2009 if the Financial Services Authority's affordability rules had been in place.

Overall, it estimates that 51% of all mortgages written during the period would have been affected by the tighter lending criteria banks and building societies may be forced to adopt under the Mortgage Market Review.

The group has already warned that the proposed rules on mortgage lending will lead to house price falls and create "mortgage prisoners" who are unable to remortgage when their current deal expires.

Its latest research shows that around 16% of mortgages taken out between 2005 and 2009 would not have gone ahead if borrowers had been restricted to spending no more than 35% of their post-tax income on repayments.

A further 16% of people would have been barred by rules stating that lenders must assess affordability on the basis of a 25-year repayment mortgage, even if the mortgage term is longer than this or it is an interest-only loan.

Another fifth of mortgages were likely to have been blocked if lenders had had to assess affordability not just on the rate the borrower was applying for, but also on one that was 2% higher.

The CML said that while the proposals would have reduced the number of arrears cases by around 151,000 and repossession ones by 38,000, 3.8 million people who had never suffered repayment problems would not have been given mortgages.

It added that the impact of the measures would have fallen most heavily on first-time buyers, with 730,000 people who have not gone on to have problems keeping up with their repayments kept off the property ladder.

Around 80% of people with impaired credit histories who took out a mortgage during the period were also likely to have been excluded under the new rules, although the CML said around 20% of these people had run into payment difficulties in 2009.

The CML said: "Ultimately, re-writing the mortgage rulebook requires regulators to make a judgment about what level of exclusion of credit-worthy borrowers is an acceptable sacrifice for making lending 'safer' and minimising systemic risk of instability.

"We believe the current proposals sacrifice far too many borrowers, and do not chime with our recent research on levels of consumer aspiration to become homeowners in the future."

The proportion of people the CML thinks would be impacted by the new rules is far higher than the 17% the FSA estimates would have been prevented from borrowing if the regulations had been in place.

But the CML said the difference was because the FSA had only looked at the impact of limiting repayments to 35% of borrower's post-tax income, and excluded the other measures.

The CML research also found that the FSA's proposals would have done little to dampen boom and bust cycles in the housing market.

It said rather than preventing excessive borrowing when the housing market reached its peak in 2006/2007, they would have had most impact in 2008, when lenders had already started to tighten their criteria.

The group said: "Even in 2009, when mortgage underwriting criteria had become extremely conservative by any historic comparison, the proposals would still have affected 45% of the small volume of transactions that did take place."

The CML said it was not against regulatory change, but wanted to make sure that the new rules were fair on consumers, lenders and intermediaries.

But it added that the mortgage market had already changed significantly, and the number of borrowers impacted by the new rules going forward was unlikely to be as high as in the past.

The Financial Services Authority said: "Our proposals are designed to address the major failures that have occurred in the mortgage market and we are actively consulting with all stakeholders to ensure we get the right solution.

"Our evidence shows that 16% of borrowers are already financially overstretched and they are facing problems now as a result of their lenders' practices in the past, not the Mortgage Market Review.

"This is why it is imperative that we take steps to protect vulnerable consumers and ensure lenders are making responsible decisions.

"We will continue to work with industry and consumers to establish a strong mortgage market where those who can afford mortgages are able to get them. It is in the interests of all that we get this right: both lenders and borrowers suffer from irresponsible lending."

Edited by cool_hand

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  • 244 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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