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Cml's View On Market Problems (As Expressed To The Shapps Summit)

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http://www.cml.org.u...andviews/83/303

The CML's views it expressed at the Shapps summit;

First-time buyers (FTBs) have a high political profile, and today we are attending a "summit" called by the housing minister, Grant Shapps, to discuss their plight. Both David Cameron and Grant Shapps have spoken in recent weeks about the difficulties faced by those who many believe should be considered a reasonable risk for a mortgage that would enable them to realise their aspirations to own their first home.

Whatever the outcome of today's summit, the plight of FTBs will continue to be a feature of our regular discussions – as it has been in the past – with a range of government departments, including the Treasury, and other interested bodies, including the Bank of England, the Financial Services Authority, the Homes and Communities Agency and the Home Builders Federation.

Meanwhile, in his first speech to the CML at our annual conference last November, our new chairman, Colin Walsh, highlighted the need for innovation in the industry, especially to improve access to home-ownership for FTBs and hence support a sustainable market.

FTBs are often seen as a bellwether for the health of the wider housing market – a crucial, though not unique, source of liquidity at the lower end of the market that helps to create mobility for other people to move around within it. But affordability pressures for FTBs have been growing since the late 1990s, and have got much worse since the credit crunch.

In our view, today's summit needs to focus on the causes of problems for buyers in the current market, and not on their effects (one of which is a small number of FTBs). The key points for the summit to address are:

  • The fallout from the credit crunch, which has led to a shortage of funding that is affecting the whole market. Gross lending in 2010 totalled £136 billion, down from a peak of £363 billion in 2007. Over the same period, the number of transactions in the UK has declined from 1.6 million to fewer than 900,000. So, although there are specific difficulties for FTBs, they are not the only group of borrowers facing problems.
  • Wholesale funding markets remain effectively closed, with only a small number of securitisation deals working their way through to completion.
  • The shortage of funding has made it more expensive for lenders to raise retail deposits.
  • Regulatory reforms mean that lenders now have to hold more liquidity and capital. Requirements to hold more capital to support lending at a higher loan-to-value ratio have a direct effect on many FTBs.
  • Other prudential and conduct of business regulatory requirements restrict lending capacity in other ways. Firms are under pressure to pursue a cautious, risk-averse business strategy.
  • Building societies are additionally affected by the regulatory requirements imposed by the new building societies' sourcebook. This is particularly restrictive for smaller societies who have often sought to lend to FTBs in local markets.
  • Lenders are continuing to re-build their businesses after the systemic shocks caused by the financial crisis and the recession. Their risk-averse approach is being reinforced by uncertainty about the UK's economic prospects, future demand from borrowers and house prices.
  • The UK suffers from a continuing and long-standing undersupply of housing, which puts upward pressure on property prices. Last year, 114,000 new private properties were completed , compared to an annual average of 147,000 between 2005 and 2008.

....

The above is the introduction there is plenty more including figures and graphs in the full article

Edited by koala_bear

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http://www.cml.org.u...andviews/83/303

The CML's views it expressed at the Shapps summit;

The above is the introduction there is plenty more including figures and graphs in the full article

They do get it. They did mention the key points:

_______________________________________________________________________________________________________________

"But affordability pressures for FTBs have been growing since the late 1990s, and have got much worse since the credit crunch.

(...)

# Lenders are continuing to re-build their businesses after the systemic shocks caused by the financial crisis and the recession. Their risk-averse approach is being reinforced by uncertainty about the UK’s economic prospects, future demand from borrowers and house prices.

(...)

# The UK suffers from a continuing and long-standing undersupply of housing, which puts upward pressure on property prices. Last year, 114,000 new private properties were completed , compared to an annual average of 147,000 between 2005 and 2008.

Future prospects for FTBs

(...)

More generally, we expect affordability pressures to persist, given that any significant decrease in the ratio of house prices to earnings is unlikely (particularly given the low levels of house-building we expect in the foreseeable future, which will help underpin house prices).

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from the crystal ball glazing section entitled "future prospects"

But although the housing market has stabilised over the last 18 months or so, we are forecasting only a tentative and relatively weak recovery from here. We expect there to be only around 860,000 property transactions this year. Around 30% of these will be cash sales, implying only around 600,000 mortgage-financed transactions, and perhaps 200,000 to 225,000 FTBs this year, similar to the low levels we have seen in each of the last three years.

Looking beyond this year, a return of more normal mortgage funding conditions is probably a prerequisite – but will not, in itself, be sufficient – for a significant return of FTBs. More widespread availability of funding could help bring about an easing of LTV requirements, potentially decreasing the dependence of FTBs on parental support.

Balanced against this, however, are the regulatory requirements for lenders to hold more capital for lending at higher LTV ratios. Under Basel rules, lenders typically may have to hold six to eight times as much capital for a mortgage advanced at an LTV ratio of more than 90% than the capital required for a loan with an LTV ratio below 60%. And in order to generate sufficient return on capital, many lenders therefore make borrowing at higher LTV ratios more expensive.

More generally, we expect affordability pressures to persist, given that any significant decrease in the ratio of house prices to earnings is unlikely (particularly given the low levels of house-building we expect in the foreseeable future, which will help underpin house prices). On top of this, other regulatory changes, including those emerging from the mortgage market review, are likely to increase mortgage costs for all borrowers and bear down on the availability of mortgage credit for FTBs.

All this suggests that FTB numbers will only recover slowly over time, and may take several years to approach the annual rate of 400,000 to 500,000 purchases that we have seen historically, and which would be supported by demographic factors and long-term aspirations to home-ownership.

Transactions at 50% of historic level = recovery???

Highest LTV's in decades (or since reliable data available) =recovery???

Edited by koala_bear

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In our view, today's summit needs to focus on the causes of problems for buyers in the current market, and not on their effects (one of which is a small number of FTBs).

meaningless

The UK suffers from a continuing and long-standing undersupply of housing, which puts upward pressure on property prices. Last year, 114,000 new private properties were completed , compared to an annual average of 147,000 between 2005 and 2008.

wtf - in respect of the long term, and without comparison to current population increase and likely dempographic trend (reducing the rate of increase with time) this is again meaningless

Any half brained minister would see this clearly for the nonsense that it is.

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http://www.cml.org.u...andviews/83/303

The CML's views it expressed at the Shapps summit;

The above is the introduction there is plenty more including figures and graphs in the full article

....their first point ...."The fallout from the credit crunch, which has led to a shortage of funding"....

don't they understand now Gordo's funny money securitisation and it's spin offs are gone there is no "shortage"..?...it's gone back to near normal ....and their days of greed and plunder are over......they are a sick bunch who need to be eliminated from the media spotlight and realise their views are not important in today's economic pond...... :rolleyes:

.

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Talking of summits.............

http://www.moneymarketing.co.uk/packaging-summit-2007-btl-as-big-as-ftb-market-by-2011-says-hbos/135654.article

PACKAGING SUMMIT 2007: BTL as big as FTB market by 2011, says HBOS

25 January 2007 4:44 pm

Lee Jones

HBOS has predicted that the buy-to-let market will be as big as the first-time buyer market by 2011.

Speaking at the Mortgage Strategy Packager's Summit, Phil Jenks, head of mortgage strategy at HBOS, predicted that an increase in immigration from Eastern Europe, as much as 100,000 people per year until 2011, would mean the buy-to-let market will go from strength to strength.

He says: 'We have looked at the statistics, and buy-to-let seems a pretty sure thing. We really do believe the specialist market will grow to cover as much as 30% of the entire market by 2011. This is why I believe packagers will survive, the economics says that they will be able to continue into the future as the specialist sector grows.'

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"But affordability pressures for FTBs have been growing since the late 1990s, and have got much worse since the credit crunch.

The mid 1990's was the last time house prices followed their long term, historic inflationary affordability as a proportion of median UK household income:

This graph uses the Office of National Statistics seasonally adjusted average earnings index to scale house prices.

prices1.png

For house prices to return to this level of historic affordability, we would need a 50% + crash.

*The average First Time Buyer Mortgage in 1997 was just £41.5k [Council Mortgage Lenders]

Edited by Dan1

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gawd, imagine sitting through those speeches all day.

Id burst a blood vessel.

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The CML have also introduced a new mortgage metric in their discussion:

"the deposit as a % of annual income"

It has gone from ~40% in the 2007 to ~100% now.

Like all the the problems outlined by the CML, the solution is simple: lower house prices

At least the CML understand the number of FTBs is not the problem, it is the result of the problems (unlike Shapps). There is one thing the CML can never say "house prices are too high"

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our new chairman, Colin Walsh, highlighted the need for innovation in the industry, especially to improve access to home-ownership for FTBs and hence support a sustainable market.

Grantley Chapps is on the case.

All these f*ckers are so transparent is very difficult not to :lol:

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Did anyone else's heart skip a beat when they read this part? It kinds of sounds like they have a back up plan to replace FTB'ers with (i guess) wider scale BTL's

FTBs are often seen as a bellwether for the health of the wider housing market – a crucial, though not unique, source of liquidity at the lower end of the market that helps to create mobility for other people to move around within it

******

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Did anyone else's heart skip a beat when they read this part? It kinds of sounds like they have a back up plan to replace FTB'ers with (i guess) wider scale BTL's

FTBs are often seen as a bellwether for the health of the wider housing market – a crucial, though not unique, source of liquidity at the lower end of the market that helps to create mobility for other people to move around within it

******

If they don't have enough money to lend high LTV to FTBs, they don't have enough money to lend high LTV to BTLs either.

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"Colin Walsh, highlighted the need for innovation in the industry"

That would be enough for me to wave this man off the platform with all the disdain it deserves.

This will be another political sham that refuses to address the real problem facing FTBs and the rest of the nation. The Tories have lost my vote next time.

HOUSE PRICES NEED TO COME DOWN..........A LOT.

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Did anyone else's heart skip a beat when they read this part? It kinds of sounds like they have a back up plan to replace FTB'ers with (i guess) wider scale BTL's

FTBs are often seen as a bellwether for the health of the wider housing market – a crucial, though not unique, source of liquidity at the lower end of the market that helps to create mobility for other people to move around within it

******

Yes, I think that is exactly what they meant.

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The CML would like to see Liar Loans being the accepted norm and some kind of FTB incentive, they really are just kicking this down the road.

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Did anyone else's heart skip a beat when they read this part? It kinds of sounds like they have a back up plan to replace FTB'ers with (i guess) wider scale BTL's

FTBs are often seen as a bellwether for the health of the wider housing market – a crucial, though not unique, source of liquidity at the lower end of the market that helps to create mobility for other people to move around within it

******

Well, the Tories are lining up all these people currently in council houses which they intend to 'free up' as their earnings increase/they get promoted (:lol:), so perhaps Grantley Chapps and his bankster chummies will come up with an innovative scheme for bunging them the deposit or a subsidised rate or whatever to nudge them out of social housing. They'll find FTBs from somewhere............

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  • 312 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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