Double Trouble For Uk House Prices?

[awaytogo]

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

Yep

It looks like they are very cautious with the housing market, it looks like they don,t feel comfortable lending to someone with a large deposit now. Things must look bad if they don't feel safe with all that equity if the property is reproed, they must think they will not be able to resell the property full stop?

[TeddyBear]

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.

I think you weren't wanting to borrow enough over long enough, for 20k over 5 years they want loan rates rather than mortgage rates these days I think. I've had several lenders offer me 4 x salary on 50% ltv (have A1 credit rating, etc..).

[DeepLurker]

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

They don't have to put it in a bank

As well as stuffing their mattress with Twenties, maybe they've bought shares, shiny metals, given some to ERNIE, etc...

[Tired of Waiting]

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.

I think you are right. Hopefully.

I think I remember Vince Cable talking about it a few times.

BTW, I think in general the LibDems get this bubble better than the Tories.

[waferthin]

The banks are simply returning to sensible lending levels, because they can no longer get away with securitizing the debt and passing the risk on to some other mug.

Take a look at this graph of CDO issuance:

Hmmm massive ramp up to 2006-2007....

I keep hearing politicians saying things like "the banks must start lending again" - they are entirely happy to lend, but on sensible levels. What the politicians mean is lending like they did in the CDO phase, but thats not going to happen. You are not going to see crazy multiples, liar loans and 100% mortgages, as its now the banks themselves that shoulder the risk.

[dances with sheeple]

The banks are simply returning to sensible lending levels, because they can no longer get away with securitizing the debt and passing the risk on to some other mug.

Take a look at this graph of CDO issuance:

Hmmm massive ramp up to 2006-2007....

I keep hearing politicians saying things like "the banks must start lending again" - they are entirely happy to lend, but on sensible levels. What the politicians mean is lending like they did in the CDO phase, but thats not going to happen. You are not going to see crazy multiples, liar loans and 100% mortgages, as its now the banks themselves that shoulder the risk.

Perfectly laid out IMO. Visitors take note, spread the word, "windfall" time he long gone.

[dances with sheeple]

Mad and incoherent.

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

Obviously too big a chunk for you to understand, just answer yes or no to these questions,  1. Have they ever dealt with anything like this before, and would bailout money help?  2. Is someone who owns their house outright making money for the banks, and would the bank rather this person stays where they are or go into a home and release the house to someone who must borrow to buy it? 3. Would a bank which has been propped up and survived (just) rather lend or not lend, and without securitization what would be the best method to start lending without too much downside for the bank? (hint: It begins with a C)

[mel in w9]

Perhaps the banks have observed what has happened to the American housing market and see the same thing about to happen here. I suppose they don't want to be stuck with millions of properties on their books which are worth a fraction of what they were purchased for.

I do believe housing is going to fall hard in this country. I mean Britain must have the most over inflated property market in the world. If you bought in the last 6-7 years with a 80-90% mortgage, I think you are definitely looking at being in negative equity.

I know when this started happening in America, many home owners just walked away from the house and the mortgage. (actually was (is) more of a problem in $1 million(+) homes). So now banks across the nation are holding millions of properties worth a mere pittance.

[mel in w9]

Biggest defaulters on mortgages are the rich.

Think this could happen here?

[twatmangle]

I do believe housing is going to fall hard in this country. I mean Britain must have the most over inflated property market in the world. If you bought in the last 6-7 years with a 80-90% mortgage, I think you are definitely looking at being in negative equity.

I agree about the there being some falls, but not your analysis. I don't think that many people will be in Neg Eq as you think based on your numbers. Don't forget that as time goes by, people will be reducing the size or their mortgage, and combining this with a 10% or 20% deposit will give most some sort of buffer.

At 5% interest, with a 10% deposit

After 5 years you have a mortgage >20% less than purchase price.

After 7 years you have a mortgage >25% less than purchase price.

At 5% interest, with a 20% deposit

After 5 years you have a mortgage >29% less than purchase price.

After 7 years you have a mortgage >33% less than purchase price.

Although everyone one here bangs on about NR, IO, 125%, 6x etc, the reality is that most people have repayment mortgages and are plodding along with repayments which will increase their buffer each month.

[mel in w9]

Well I happen to believe housing is going to fall about 40% over the next year. I think the days of its gradual decline are over.

It happened in Ireland.

[Tired of Waiting]

Well I happen to believe housing is going to fall about 40% over the next year. I think the days of its gradual decline are over.

It happened in Ireland.

That is a big fall.

BTW, I think you should update your profile. You still have: "Bull or Bear? Neither" there!