Double Trouble For Uk House Prices?

[The Masked Tulip]

http://ftalphaville.ft.com/blog/2010/10/25/381611/double-trouble-for-uk-house-prices/

There is evidence that banks are becoming even tougher in their mortgage lending criteria. In Building magazine on Friday October 15, Redrow chairman, Steve Morgan, said the volume of mortgage lending had deteriorated rapidly in the last few weeks, with lenders refusing to fund buyers they previously would have accepted.

[Wahoo]

Errrr....

Perhaps they know something (they think) we don't, about the state of the economy?

Perhaps they are worried about massive looming unemployment?

(We're not going to get out of this sh1te hole one way or the other - there's gonna be blood and gore, me thinks)

[Pent Up]

I read this earlier. Very very bearish

Edited October 25, 2010 by Pent Up

[The Masked Tulip]

Of course they know far more than we do - they have up to date info on how the shops are doing, what we are selling internally and externally. They know what is coming.

[moonriver]

..."the number of deposits on new homes during the first four weeks of the autumn were 14 per cent below the corresponding period in 2008, when the market was badly hit, and only half 2007 levels."...

...In Building magazine on Friday October 15, Redrow chairman, Steve Morgan, said the volume of mortgage lending had deteriorated rapidly in the last few weeks, with lenders refusing to fund buyers they previously would have accepted.

Sounds like it has become even clearer in the last few weeks, how rapidly things are getting worse all round, in the housing market.

[Tired of Waiting]

Of course they know far more than we do - they have up to date info on how the shops are doing, what we are selling internally and externally. They know what is coming.

Great news.

I think it is more than just market analyses. I think the banks are coordinating their actions with the BoE/FSA and the new government.

And no, I am not a "conspiracy theorist" sort of person. (Though I realise they all say that...)

The industry has received signals from the Coalition gov. months ago saying that a 25% fall in house prices would be welcomed. (I guess real prices, within this Parliament.)

Remember that news?

News: http://www.moneymarketing.co.uk/mortgages/coalition-ready-to-let-property-values-fall/1015197.article

Thread: http://www.housepricecrash.co.uk/forum/index.php?showtopic=147307&st=0

Edited October 25, 2010 by Tired of Waiting

[winkie]

Maybe the lenders know house prices will fall.

Maybe the lenders know jobs will not be so secure.

Maybe the lenders know interest rates can go up.

Maybe the lenders are now in the business to lend to business and not for bricks.

[twatmangle]

http://ftalphaville.ft.com/blog/2010/10/25/381611/double-trouble-for-uk-house-prices/

I don't agree that it's definitely to do with expectations of falling prices - half the people on here seem to think that banks are deliberately engineering a situation to take people's homes at rock bottom prices etc, and so this is counter to this hypothesis.

Lots of reasons why banks won't lend.

• Expectations of falling prices.

• Expectations of increased unemployment.

• Expectations of increasing inflation and having their returns being diminished in real terms.

• Maybe the banks just haven't got the money to lend.

• Maybe people just don't have the deposit.

• Maybe the banks are funding other opportunities with a greater return? In BRICs?

[winkie]

I don't agree that it's definitely to do with expectations of falling prices - half the people on here seem to think that banks are deliberately engineering a situation to take people's homes at rock bottom prices etc, and so this is counter to this hypothesis.

Lots of reasons why banks won't lend.

• Expectations of falling prices.

• Expectations of increased unemployment.

• Expectations of increasing inflation and having their returns being diminished in real terms.

• Maybe the banks just haven't got the money to lend.

• Maybe people just don't have the deposit.

• Maybe the banks are funding other opportunities with a greater return? In BRICs?

.... a deposit is now required simply because your money is lost before theirs.

[LittleSteroid]

I don't agree that it's definitely to do with expectations of falling prices - half the people on here seem to think that banks are deliberately engineering a situation to take people's homes at rock bottom prices etc, and so this is counter to this hypothesis.

Lots of reasons why banks won't lend.

• Expectations of falling prices.
• Expectations of increased unemployment.
• Expectations of increasing inflation and having their returns being diminished in real terms.
• Maybe the banks just haven't got the money to lend.
• Maybe people just don't have the deposit.
• Maybe the banks are funding other opportunities with a greater return? In BRICs?

nah, it's just base rate is a bit to high.

[lets get it right]

I don't agree that it's definitely to do with expectations of falling prices - half the people on here seem to think that banks are deliberately engineering a situation to take people's homes at rock bottom prices etc, and so this is counter to this hypothesis.

Lots of reasons why banks won't lend.

• Expectations of falling prices.
• Expectations of increased unemployment.
• Expectations of increasing inflation and having their returns being diminished in real terms.
• Maybe the banks just haven't got the money to lend.
• Maybe people just don't have the deposit.
• Maybe the banks are funding other opportunities with a greater return? In BRICs?

I'm beginning to think that it's "Maybe teh banks just haven't got the money to lend".

In virtually any and every situation, over the years, banks have lent money for mortgages. But now, it seems, they are seriously cutting back. They have dealt with problem housing markets since the day dot so I think it must be something else. Lots of people have taken cash out of the banks over the last couple of years and bought property. Maybe they really don't have the money to lend.

Edited October 25, 2010 by Let's get it right

[Malkin]

I'm beginning to think that it's "Maybe teh banks just haven't got the money to lend".

In virtually any and every situation, over the years, banks have lent money for mortgages. But now, it seems, they are seriously cutting back. They have dealt with problem housing markets since the day dot so I think it must be something else. Lots of people have taken cash out of the banks over the last couple of years and bought property. Maybe they really don't have the money to lend.

Edited October 25, 2010 by Malkin

[Democorruptcy]

Lots of people have taken cash out of the banks over the last couple of years and bought property. Maybe they really don't have the money to lend.

Did the people who sold the house then just put the cash they got for it under their mattress?

[dances with sheeple]

I'm beginning to think that it's "Maybe teh banks just haven't got the money to lend".

In virtually any and every situation, over the years, banks have lent money for mortgages. But now, it seems, they are seriously cutting back. They have dealt with problem housing markets since the day dot so I think it must be something else. Lots of people have taken cash out of the banks over the last couple of years and bought property. Maybe they really don't have the money to lend.

They have never dealt with a problem market like this before? and they are flush with new bailout money? As I have said many times the banks have an interest in crashing the market, someone who paid off their mortgage decades ago is not making the bank any money? far better to (mortgage) starve that person out of their home at 150k rather than the 800k they think it is worth and get some Tesco drone on to the income stream for greedy bank piggies program, rinse and repeat. The banks know that many more people will keep paying existing loans than default, so they can afford to sacrifice a few "deluded sellers"? They also know that they have to crash fast so that people are still "primed" to buy (that is why the property porn is on constant repeat mode all over the telly) a  long drawn out misery of a crash will put people off ever buying IMO.

[GeordieAndy]

I'm beginning to think that it's "Maybe the banks just haven't got the money to lend".

Lots of people have taken cash out of the banks over the last couple of years and bought property. Maybe they really don't have the money to lend.

I have taken cash out of the bank to keep nearby as I think there will be runs on the banks sometime soon and simply don't believe in the while pyramid scheme they have been operating on so other's must also be doing this?

Obviously this won't do any of smart ars3s any good when £s are worth nothing after QE II though :angry:

Edited October 25, 2010 by GeordieAndy

[efdemin]

My money's on they've got no money to lend. Aren't the short-term insurance schemes that Gordon & Darling put in place due to end next year? The SLS, and whatever the other schemes are I mean.

But at the same time they are being encouraged to up their capital ratios so they are 'safe' from another bank run?

All adds up to not having enough money to risk on lower LTV's.

Which is where QE2 comes in...

Edited October 25, 2010 by efdemin

[RichM]

The best argument for prices staying up in the UK is that they didn't build a great deal in the UK over the past 10 years, compared to all the building that went on in the US, Ireland, Spain etc.

Now, this may be true - I don't know all the figures, building rates, occupancy rates, numbers into the country, numbers out etc etc - but rents never tripled like property did, and the whole thing was built on cheap credit. No credit, no more crazy house prices. It's a case of "when", not "if". The UK crash may have been stalled, but will resume its decline once people realise that there's knight in shining armour coming to rescue the UK housing market.

The builders/banks can see that the government don't have two farthings to rub together, therefore, no more bailouts. It just won't happen now. Merely the admission that a sector needs a (another!) bailout would panic various other markets. Better to just let the overpriced sectors fade out, rather than burden the rest of the economy with more debt.

Edited October 25, 2010 by RichM

[Laughing Gnome]

They have never dealt with a problem market like this before? and they are flush with new bailout money? As I have said many times the banks have an interest in crashing the market, someone who paid off their mortgage decades ago is not making the bank any money? far better to (mortgage) starve that person out of their home at 150k rather than the 800k they think it is worth and get some Tesco drone on to the income stream for greedy bank piggies program, rinse and repeat. The banks know that many more people will keep paying existing loans than default, so they can afford to sacrifice a few "deluded sellers"? They also know that they have to crash fast so that people are still "primed" to buy (that is why the property porn is on constant repeat mode all over the telly) a  long drawn out misery of a crash will put people off ever buying IMO.

Mad and incoherent.

Did they hatch the plot in a lead lined bunker, or hire out the Albert Hall?

[Laughing Gnome]

Well we know the special liquidity scheme is supposed to end in 2012. Maybe the banks actually expect it to end and they are

"saving up". (Or rebuilding their capital base if you prefer)

But what about money market bonds etc.?

Are bonds taken out before the credit crunch still to be rolled over? What would be a typical maturity on these; 2,4,5 yrs?

I don't have a clue. Whereare the hotshots!

[Muskoka]

I did a little marketing exercise yesterday and was shocked by the results

I'm a STR/cash buyer - substantial sum stashed away. Ex-home owner so bank knows I pay my bills/mortgage

I've been with the same bank since year dot and I know I have an A1 credit rating. Bank is thought to be one the safest banks in the U.K. and is a global bank.

Registered at same address for years.

In a perm job - as stable as I can be.

Adequate salary - pretty average.

The bank immediately agreed a mortgage, but would only offer me 34K (that was about 6% LTV). I was 'blown away'

Money must be substantially incredibly tight. I asked about borrowing 20K over 5 years.

I couldn't care less because I don't need or want a mortgage, but it was a very interesting exercise. Might make interesting reading if some other HPC'ers do this.

[Byron]

The Government probably want mortgage money to be used as commercial loans to try and increase employment, not have it locked up for 25 years in massive mortgages backed up by falling house prices.

[BornAtTheRightTime]

I'm in a very similar situation to you Muskoka, although earning around double the average salary. I also have a substantial STR fund.

RBS last week offered to lend me 46% LTV, ie £288k, which is £50k more than I want, need or think I can afford. They also wanted to base the offer on a term longer than 25 years to push it higher.

Interesting reading I hope you agree.

[koala_bear]

My money's on they've got no money to lend. Aren't the short-term insurance schemes that Gordon & Darling put in place due to end next year? The SLS, and whatever the other schemes are I mean.

But at the same time they are being encouraged to up their capital ratios so they are 'safe' from another bank run?

All adds up to not having enough money to risk on lower LTV's.

Which is where QE2 comes in...

Exactly the banks have very little to lend.

SLS is due to be repaid April to December 2011, CGS (a nice money spinner for HMT - IR far more than SLS) has a longer repayment profile but the banks esp. lloyds seem to have been paying this off faster (i.e very early) as it is more expensive.

Nomura July 2010:

"Banks must raise about £390bn in new debt in 2011, or more than £30bn every month just to replace their existing funding as they are hit by a combination of maturing bonds and the closure of major Government-guaranteed financing schemes."

Lloyds results quote "At 31 December 2009, the Group's overall funding support from Governmental and Central Bank sources totalled £157 billion, with a significant proportion (predominantly Special Liquidity Scheme (SLS) and Credit Guarantee Scheme (CGS) funding) maturing over the course of the next two years. The Group's balance sheet reduction plans will avoid the necessity to refinance much of this funding."

Edited October 25, 2010 by koala_bear

[mattyfc]

http://ftalphaville.ft.com/blog/2010/10/25/381611/double-trouble-for-uk-house-prices/

with lenders refusing to fund buyers they previously would have accepted.

I really hope this part is true. HPI is over, it's time to get back to earning a real living. No more loans to people with no means of repayment is a good first step.

[Redcellar]

I have taken cash out of the bank to keep nearby as I think there will be runs on the banks sometime soon and simply don't believe in the while pyramid scheme they have been operating on so other's must also be doing this?

Obviously this won't do any of smart ars3s any good when £s are worth nothing after QE II though :angry:

If there's a run on the banks then just use your credit and debit cards. Electronic money will continue to work.

The reason banks are lending is they don't have the money. The securitisation market has all but vanished and required reserves increased, so they can't replace the money they loaned out. Therefore what little they do have they are able to be extra cautious with and only place it with safe bets. High LTV's just don't cut it any more.

I wouldn't read any more into it than that. In other words, predictions of crashes etc.