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pete.hpc

The Mortgage Lending Crunch Is A Myth

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IMO, anyway :D

I've had absolutely no problem getting approved via two lenders including going via the underwriters for full applications on 90% mortgages as a FTB. I'm a very straightforward case, granted. No financial problems, no debts, decent salary, decent job history, above average credit score, all addresses check out.

I only asked for 3 times salary, but was offered 4 times.

So my conclusion is; there is no mortgage crunch. Banks are simply lending at sensible levels now on sensible criteria.

Iffy credit history? forget it. Big debts? forget it. Asking for too high a salary multiple? forget it.

So don't listen to people saying that banks should be lending more, or that they are demanding massive deposits.

It's simply not true, lending criteria is at historically normal levels.

It's just that most of the people who were being approved pre-2007 who aren't now were simply not eligible in a normal lending environment, or have BTL business plans that don't stand up to scrutiny. We are obviously a nation of spivs and debt addicts, and these people are finding out the banks do not trust them anymore.

If you are a FTBer; Get out there, make offers at 3 times your salary + 10% deposit, and drive prices down yourselves. Don't sit by waiting for them to fall. We are in a HPC as we speak, and sellers will begin to see this en masse over the coming years.

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I've been thinking the same thing. Just go get a mortgage approval and start making offers that we might consider sensible but the average estate agent would consider a piss take. No skin off my nose if no one bites, I don't want to pay more.

That said, I would be perfectly happy paying 4.5x salary in the decent bits of Zone 4 London, most starter properties round here are being offered at 6-7x. I can see they are not selling though.

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I think to a certain extent there is just a lack of demand for borrowing from sensible folk.

My OH has been watching "Young, Rich and House Hunting". Granted, most of these guys don't need a mortgage.. but out of all of the mega rich folk I think only one so far has actually bought a property. All the other's have pretty much figured out that everything is over priced. And these are people where a house would probably only be a fraction of their net worth anyway.

Made for quite interesting viewing..

Edited by libspero

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Good point. There's no shortage of mortgage funds. No rationing.

Just a movement away from insane lending that allowed those with CCJs, maasive debits and no income to borrow 6 figure sums in the hope that rising house prices would cover the default risk. Now house prices are falling lenders will only advance loans to people who have a realistic hope of repaying. And even those customers are reluctant to invest in an asset that is losing value faster than cash.

.

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I only asked for 3 times salary, but was offered 4 times.

So my conclusion is; there is no mortgage crunch. Banks are simply lending at sensible levels now on sensible criteria.

It's simply not true, lending criteria is at historically normal levels.

You're missing the point. Until 2008 nearly a half of mortagges were self (ie un) certified. Also, 95-125% mortgages were 10 a penny.

Take both of these away and you have a credit crunch - compared to what was. This will drive down prices.

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You're missing the point. Until 2008 nearly a half of mortagges were self (ie un) certified. Also, 95-125% mortgages were 10 a penny.

Take both of these away and you have a credit crunch - compared to what was. This will drive down prices.

+1

At the moment we have a stand off between sellers and buyers. As long as the lending remains sensible then ultimately price will have to drop. It is only time.

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+1

At the moment we have a stand off between sellers and buyers. As long as the lending remains sensible then ultimately price will have to drop. It is only time.

Yes....

But so bloody painful waiting, putting up with the other half nagging about getting our own place. The only people churning out kids are Labour votes in welfare housing, all going according to plan Gordon.

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Sound thinking. If we all behave as sane buyers, perhaps the sellers will get the message.

I have been in the same house for years and hadn't realised that the prices in the last hectic years of the boom were driven by lending at insane multiples of self-certified salaries, with next to no deposit. I just assumed we were less well-off than the rest of the country.

Funnily enough my bank keep ringing me trying to sell me a mortgage. Perhaps the only rationing is that noone wants to pay some of the silly prices that are being asked.

Flynn

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IMO, anyway :D

I've had absolutely no problem getting approved via two lenders including going via the underwriters for full applications on 90% mortgages as a FTB. I'm a very straightforward case, granted. No financial problems, no debts, decent salary, decent job history, above average credit score, all addresses check out.

Is that an agreement in principle or an actual firm offer after the checks have been made and application fee paid? Quite different things

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IMO, anyway :D

I've had absolutely no problem getting approved via two lenders including going via the underwriters for full applications on 90% mortgages as a FTB. I'm a very straightforward case, granted. No financial problems, no debts, decent salary, decent job history, above average credit score, all addresses check out.

I only asked for 3 times salary, but was offered 4 times.

So my conclusion is; there is no mortgage crunch. Banks are simply lending at sensible levels now on sensible criteria.

Iffy credit history? forget it. Big debts? forget it. Asking for too high a salary multiple? forget it.

So don't listen to people saying that banks should be lending more, or that they are demanding massive deposits.

It's simply not true, lending criteria is at historically normal levels.

It's just that most of the people who were being approved pre-2007 who aren't now were simply not eligible in a normal lending environment, or have BTL business plans that don't stand up to scrutiny. We are obviously a nation of spivs and debt addicts, and these people are finding out the banks do not trust them anymore.

Good post, I agree. I believe that if the banks get to a position where they can handle HPC, it will happen quickly

If you are a FTBer; Get out there, make offers at 3 times your salary + 10% deposit, and drive prices down yourselves. Don't sit by waiting for them to fall. We are in a HPC as we speak, and sellers will begin to see this en masse over the coming years.

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In 2006 I was offered 125% mortgage at Northern Rock 6x salary

Last year I was offered 95% mortgage at Halifax, 5x salary

Recently, 90% max, 4x salary

It is getting worse/better (depending on your point of view)

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You're missing the point. Until 2008 nearly a half of mortagges were self (ie un) certified. Also, 95-125% mortgages were 10 a penny.

Take both of these away and you have a credit crunch - compared to what was. This will drive down prices.

And this, in one sentence, is exactly why further prices falls are absolutely inevitable - regardless of whatever attempts the government makes to avoid them.

Although I would add the fact that 30% of mortgages were IO in the lead up to 2007 too.

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So many people think the banks will soon start lending as they did before. Very few get that this is the norm, not the madness of the boom years. Lending is returning to what it was before, to the levels of the last century.

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Yes....

But so bloody painful waiting, putting up with the other half nagging about getting our own place. T

Grow a pair ffs. Tell her that shes quite welcome to go a buy a place with her own money.

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You're missing the point. Until 2008 nearly a half of mortagges were self (ie un) certified. Also, 95-125% mortgages were 10 a penny.

Take both of these away and you have a credit crunch - compared to what was. This will drive down prices.

These are the FSA's figures for percentages of non-verified mortgages in 2010

Including lifetime mortgages:

Q1 2010: 42.60%

Q2 2010: 37.38%

Q3 2010: 32.44%

Q4 2010: 30.10%

Excluding lifetime mortgages:

Q1 2010: 41.24%

Q2 2010: 36.08%

Q3 2010: 31.05%

Q4 2010: 28.56%

So the non verified figure was falling each quarter in 2010 but what were 5% drops eased to 2% in Q4 - is that reverse thrust being engaged?

I just wonder how the recent OBR forecasts fits in with trying to make mortgage lending more sensible. Won't mortgages make up a large portion of that jump in household debt?

household debt is set to rise from £1,560bn in 2010 (160% of household income) to £2,126bn in 2015 (175% of income) – an increase of 36.3%. By 2015 UK households will have amassed over two trillion pounds worth of debt.

The household debt-to-income ratio (the best measure of how manageable the debt burden is) fell from 2007 until 2010. It is now forecast to start rising again. Osborne described pre-crisis household debt-to-income ratios as unsustainable – and yet the ratio is forecast to hit a new all-time high in 2015.

More damagingly for Osborne, the OBR forecast for June 2010 – before his first budget – predicted that household debt in 2014 would stand at £1,718bn. But following two Osborne budgets that number has now been revised up to £1,963bn – an increase of £245bn. In other words as a result of Osborne’s policies the direct debt burden on UK households is set to increase by nearly a quarter of a trillion pounds in the next three years.

http://falseeconomy.org.uk/blog/household-debt-up

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IMO, anyway :D

I've had absolutely no problem getting approved via two lenders including going via the underwriters for full applications on 90% mortgages as a FTB. I'm a very straightforward case, granted. No financial problems, no debts, decent salary, decent job history, above average credit score, all addresses check out.

I only asked for 3 times salary, but was offered 4 times.

I would have thought that you are a good risk.....a far from being a common straightforward case....everything in your case stacks up.

....anyway 4x 1 salary is quite a different proposition than 4x2 salaries.

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Get out there, make offers at 3 times your salary + 10% deposit, and drive prices down yourselves. Don't sit by waiting for them to fall.

A good benchmark, but it depends on what your salary is.

I wouldn't offer based on what I could borrow, I'd just offer on what the property is worth. I was given a mortgage in principle last year for which was twice what I needed.

But totally agree with making offers and seeing what happens. It may take a while for the market to drop, but you will find people who have to sell at any price, and will be grateful to get any sort of offer.

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Re the non verified figure not dropping as much in Q4 2010 there seemed to be a government policy change in that quarter

26 November 2010

Speaking at the National House-Building Council's annual lunch, Mr Shapps said: "I think it was about the moment I realised that I wouldn't have a mortgage if the Mortgage Market Review (MMR) changes went through that I kind of thought that this might be going a step too far."

He continued: "There is no point in closing the door after the horse has bolted"

http://www.independent.co.uk/news/business/news/i-would-have-been-denied-mortgage-says-minister-2145051.html

Jan 2011

The Prime Minister warned that the housing market was “stuck” and would not improve until banks and building societies got back to “respectable” lending. He vowed to get the market moving again.

In his strongest comments yet on buyers being denied access to the housing market, Mr Cameron said the reaction to crash which exposed people on unsustainable mortgages had now gone too far.

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8242121/Banks-have-gone-too-far-in-restricting-mortgages-says-David-Cameron.html

The Q1 2011 non verfiied figure will be very interesting. As of 9th May it was "not yet available".

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Sort of.

Self cert has gone. That powered the majority of morgage sales from 2004 onwards.

You can get a 95% mortgage. Whether you'd want to actually pay for a 95% mortgage is another thing.

Younger brother proposed to big boobed GF.

'Get on the housing' from her very thick dad.

180K house (down from 220k). But worth oly 90K tops considering the area is a job less public sector town.

Over 12 months they've saved 5K - that's about £200 each per month!

My mums stubbed up 5K.

Her dad cannot find wallet. Left it somewhere.

95% LTV 2 year fix with Yorkshire BS - 7% FFS!!!!!

They're renting a really nice house in a farmyard @ 500 month.

I pointed out to my brother that there IR payments alone are 1K a month.

Never mind repayment. Never mind maintenance + insurance.

God knows what the SVR will be at the end of 2 or 3 years.

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Almost daily there are people on MSE who think it's ok to borrow the deposit off mum, get dad to go on the mortgage with them and generally think a mortgage is a right for anyone so they can buy a house.

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Recently, 90% max, 4x salary

Nearly back to normal lending then. When I got my first place (1998, 3x salary) I had to go to an interview at the mortgage brokerage, laying out all my debts (none) and expenditure (lean) with a year's pay slips and a letter from my then-employer stating that the sun shone out my ar*e.

I was still lucky to get the mortgage, as I was only mid-20s and was buying an 'average' 3 bed (65K). I think the most I ever paid monthly on the mortgage was £360.

If we are just about back to this approach with lending, just watch house prices tumble. People are not going to go through that to buy a craphole with neighbors who live off their hard work, and make their life a misery in return.

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In 2006 I was offered 125% mortgage at Northern Rock 6x salary

Last year I was offered 95% mortgage at Halifax, 5x salary

Recently, 90% max, 4x salary

It is getting worse/better (depending on your point of view)

I don't see how anyone could rationally view a return towards normal as worse, other than the banks, if they expect their oversized mortgages to ever get paid back. It's only the people who are incapable of seeing beyond the immediate who could possibly think otherwise ("But I need those levels of lending in order to buy a house!" without considering what effect reduced levels would be and seeing that they would benefit from them if they weren't so impatient).

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Is that an agreement in principle or an actual firm offer after the checks have been made and application fee paid? Quite different things

Credit scored, all paperwork checked by underwriter, application and valuation fees paid, offer due next week if survey goes well.

You're quite right, AIP is no longer worth the paper it's written on, there are lengthy, stringent checks now on all applications via underwriters.

There is noticeable tension now from Estate Agents when you're in the no-mans land between AIP and formal offer. They must be seeing the bulk of purchases fail at this stage I would imagine.

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  • 276 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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