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scottbeard

Would Banning Mortgages Make Houses More Affordable?

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Sounds crazy - how could anyone afford a house without a mortgage?

However, both my sets of grandparents bought their first houses outright, as mortgages didn't really exist in the 1920s/30s. One set bought a (very small) detached house for 2x annual salary!

Without mortgages, house prices would be way, way lower and - although people would have to save up the full price and buy later in life - overall might they pay less rent and interest over their lifetimes than they do now?

Excessive lending caused the 2000-2007 bubble - how would a world of the opposite - no lending - be?!

The catch I think is that back in the 1920s/30s we still had the gold standard and essentially zero inflation. In a high inflation world, house prices outstrip a safe tax-free return on your savings - so maybe in a world of fiat currency and inflation, a mortgage really is the only way to get "on the property ladder".

That's my musing - any thoughts?

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Sounds crazy - how could anyone afford a house without a mortgage?

Yes Of course it would make a difference, I have been forced into Emigration from the UK, due to a shocking credit rating, and now live part time in a country that it is impossible to get a mortgage in, (no matter how good your credit rating is) the house prices here or apartment prices i should say, have tumbled, I am not ashamed to admit that after paying off all my debts in the Uk, I have a better life here than I could have had in the UK. I now can afford to buy apartments outright with no mortgage, I am thirty and now have 3. plus a small farm (50 acres) only problem is I cant get to it because the snow is about two metres deep and temps forecast for -20 later this week!!

Still at least I have a homebrew & a girlfriend..... (in the wrong order I guess)?

Edited by Grayphil

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You can buy places for 1-2x your salary now if you looked in the right areas, this is despite the "excessive lending" dished out by the banks.

Remove the thorny housing issue and a society with a flexible money supply would be more prosperous than one that fixes its monetary base. Reintroduce a defective housing market and both systems go to pot.

Edited by Chef

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Sounds crazy - how could anyone afford a house without a mortgage?

Yes Of course it would make a difference, I have been forced into Emigration from the UK, due to a shocking credit rating, and now live part time in a country that it is impossible to get a mortgage in, (no matter how good your credit rating is) the house prices here or apartment prices i should say, have tumbled, I am not ashamed to admit that after paying off all my debts in the Uk, I have a better life here than I could have had in the UK. I now can afford to buy apartments outright with no mortgage, I am thirty and now have 3. plus a small farm (50 acres) only problem is I cant get to it because the snow is about two metres deep and temps forecast for -20 later this week!!

Still at least I have a homebrew & a girlfriend..... (in the wrong order I guess)?

Where is this wonderful land you speak of? Is it Iceland?

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Not if you were to start from now.

The rich would just buy all the property outright and screw everybody by fixing rents.

And that would be different how?

no, the rich, may of them, would lose their riches overnight, as many would have assets in "financial Instruments"...these would collapse overnight...

And rents....you cant charge what people cant afford. thats one reason SMI in its current form is such a scandal...its pure market manipulation.

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I (and Bloo Loo as it happens) believe that banks should not be allowed to secure debts against property.

By removing the link between property value and lending, you avoid the destructive recursive link whereby the more property goes up, the more you can lend...until asset prices fall and you get to the bank bust.

No - I would say the banks have to get to 'know you', base their decision to lend on trust, your word. Lending is too remote, too lazy to be effective.

This would limit lending and make property more affordable for one and all and everyone would live happily ever after in a permanent state of bliss and harmony.

Given a choice in a free market which bank would you loan your savings to;

Bank A) That always uses real estate as collateral thus covering themselves if the debtor fails to meet their obligations

Bank B} That never uses collateral and instead prefers to work on the basis of trust.

I know where my money would be headed. And so do you, which is why your solution involves pointing a gun in somebody's face.

Edited by Chef

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Most likely Latvia

Or even Belarus :P:P:P

Hey! Belarus isn't actually that bad. Have spent a lot of time in Minsk. Even there you are looking at $80k though for a 2 bed flat.

Edited by Kyoto

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And that would be different how?

no, the rich, may of them, would lose their riches overnight, as many would have assets in "financial Instruments"...these would collapse overnight...

And rents....you cant charge what people cant afford. thats one reason SMI in its current form is such a scandal...its pure market manipulation.

It wouldn't be any different, thats kind of the point.

The main reason rents are so high at the minute is due to HB and one of the things proping up house prices is SMI. Once this kind of manipulation is taken away housing and living in general will become much cheaper all by itself.

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Sounds crazy - how could anyone afford a house without a mortgage?

However, both my sets of grandparents bought their first houses outright, as mortgages didn't really exist in the 1920s/30s. One set bought a (very small) detached house for 2x annual salary!

Without mortgages, house prices would be way, way lower and - although people would have to save up the full price and buy later in life - overall might they pay less rent and interest over their lifetimes than they do now?

Excessive lending caused the 2000-2007 bubble - how would a world of the opposite - no lending - be?!

The catch I think is that back in the 1920s/30s we still had the gold standard and essentially zero inflation. In a high inflation world, house prices outstrip a safe tax-free return on your savings - so maybe in a world of fiat currency and inflation, a mortgage really is the only way to get "on the property ladder".

That's my musing - any thoughts?

i doubt it would make people relatively wealthier or poorer, the monetary system would adapt to it, fundamentally in order to do so it would require a complete rewrite of planning and taxation policy to avoid monopolisation, but given they also currently need and will at some point get a complete overhaul that doesnt make alot of difference

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It wouldn't be any different, thats kind of the point.

It would be worse.

Without lending, the only people who could buy houses would be the wealthy. Most people would have to rent their entire lives. We have had this situation in the past, and it was not better or the same, but worse

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It would be worse.

Without lending, the only people who could buy houses would be the wealthy. Most people would have to rent their entire lives. We have had this situation in the past, and it was not better or the same, but worse

Not disagreeing, but curious...

There would be downward pressure on rents (you can't charge too much to rent something that people can buy cheaply), and if rents go low enough then people can afford to save in order to buy... I wonder at what point the equilibrium would hold things steady? (i.e. at what level of salary would people be able to save enough to buy?)

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Not disagreeing, but curious...

There would be downward pressure on rents (you can't charge too much to rent something that people can buy cheaply), and if rents go low enough then people can afford to save in order to buy...

There would be an upward pressure on rents because lending to tenants acts as competition to their landlords. Real estate is still bought and competed over by the wealthy and its price is set by the aforementioned rents. We have more or less seen this in near living memory and the situation results in most people renting their entire lives.

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  • 309 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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