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Mortgages To Be Restricted To Pre-1980's Leverage

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The Bank of England has suggested new powers which could see it restrict the size of mortgages in the future.

The Bank's Financial Policy Committee said that it was looking at introducing limits on loan-to-value ratios, which could mean in future banks would be prevented from issuing mortgages it regarded as unaffordable.

The plans, mooted in a press release following the committee's meeting earlier this month.

They could spell an end to the 100%-plus loan-to-value mortgages which many regarded as fuelling the debt crisis.

The FPC is set to become Britain's chief financial regulator, overseeing the banking system and trying to ensure it does not fuel future financial crises.

However, at present its job includes issuing recommendations to the old regulator, the Financial Services Authority, and suggesting what powers it ought to have in the future.

In its latest announcement, it laid out for the first time the kind of levers it should be granted in future, including leverage ratios, which would affect the total amount banks can lend, capital requirements and risk weightings, which would affect the riskiness of a bank's balance sheet.

But perhaps most intriguing was the mention of loan-to-value restrictions, which, if enacted, would be seen as a return to the pre-1980s era of direct controls on leverage, or an attempt to ape draconian financial rules imposed in the Far East.

In fact, it emerges that the FPC has sent a researcher to Asia to investigate how countries in that region use tools such as LTV (Other OTC: LTVCQ.PK - news) ratios to bring their housing markets under control.

However, the precise nature of the tools has yet to be decided and will be part of new laws due in late 2012 or early 2013.

The FPC also recommended that, in the face of the recent financial market lurches, banks should shore up their balance sheets with more capital - which may imply issuing more shares in future.

It warned that this included "raising long-term funding whenever possible and ensuring that discretionary distributions reflected any reduction in profits" - which implies that banks should restrict bonus payments and dividends if their profits fall.

The FPC announcement said: "Since its previous meeting there had been severe strains in financial markets, which stemmed in large part from continuing concerns about the sustainability of external and internal debt positions of some countries, especially in the euro area.

"Anxiety about the consequences of these issues for banks had increased materially and, in turn, the perceived vulnerabilities of banks were adding to strains in financial markets."

http://uk.finance.yahoo.com/news/Could-Bank-Regulator-Limit-skynews-1359397516.html

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Why dont they just bring in tough new laws now, and enforce them by withdrawing the banking licence of non-compliers? What benefit is there to be gained by waiting?

Luring in the last few desperate to get on the ladder, whatever the cost?

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I just read a piece on Bloomberg about the Norwegian Central Bank doing the same thing: 85% LTV tops and income assessment to ensure that servicing capacity allows for a 5% rise in interest rates!!!

Combined with the liquidity squeeze on banks it looks like the CBs want to regain control of the situation.

Pity all the leveraged speculators.

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...seems reasonable since all the funny money is being run out of the system and not to return in our projected memory life span...this is back to common sense...and will mean lower prices....much lower....and save for a deposit before you buy ....all sensible.... :rolleyes:

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I just read a piece on Bloomberg about the Norwegian Central Bank doing the same thing: 85% LTV tops and income assessment to ensure that servicing capacity allows for a 5% rise in interest rates!!!

Combined with the liquidity squeeze on banks it looks like the CBs want to regain control of the situation.

Pity all the leveraged speculators.

you don't really pity them do you? ;)

I know i don't

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What next?

Estate agents face two years in prison for overvaluing property

http://www.housepricecrash.co.uk/forum/index.php?showtopic=169510

HMRC to check mortgage applications to prevent liar lons

http://www.housepricecrash.co.uk/forum/index.php?showtopic=169484

FSA mortgage stats already show a steady decline

http://www.housepricecrash.co.uk/forum/index.php?showtopic=169130

mortgages.jpg

Wasn't there an article recently where the government were warning people not to rely on a capital gain from property?

post-15752-0-53162700-1317231436_thumb.jpg

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Why dont they just bring in tough new laws now, and enforce them by withdrawing the banking licence of non-compliers? What benefit is there to be gained by waiting?

No point in waiting. There is no LTV rule they are not aware of. They should bring them in immediatelyand stop this fiasco of people claiming Britains homes are 'affordable'. Thye are not. They are outrageously expensive for no reason other than policy failure over 40 years. It has caused massive damage to our economy and long term competitiveness in the world and is just one of the reasons why manufacturing has slumped being replaced by 'financial services'. "That's another fine mess you got us into"

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The BOE`s job is to get as many people up to there necks in debt as possible {they make there money by issuing debt}

So I see the statement as a, look were getting tough on the banks bull$iht propaganda just before the next round of printy printy ,and to paint a blacker than black picture to justify it

We must print more money or its the end of the world I tell thee, we are being softened up simple`s, sounds all 07/08

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It's this type of thinking that is ruining the housing market. How can people sell and move up the ladder if people wanting to buy can only borrow 3 times their income and save up a 10% deposit? How can the UK becopme prosperous again if house prices cannot rise every year by 10%?

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It's this type of thinking that is ruining the housing market. How can people sell and move up the ladder if people wanting to buy can only borrow 3 times their income and save up a 10% deposit? How can the UK becopme prosperous again if house prices cannot rise every year by 10%?

I know it's madness.

It's as if someone has decided they want money to be invested in businesses instead of being tied up in housing. That means some unfortunate people are going to have to work for a living and produce something, instead of just selling bricks to one another.

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I know it's madness.

It's as if someone has decided they want money to be invested in businesses instead of being tied up in housing. That means some unfortunate people are going to have to work for a living and produce something, instead of just selling bricks to one another.

And how will the brick industry survive?

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And how will the brick industry survive?

Oh I have not looked at the brick industry for a couple of years. From memory profits were falling, and oven/kiln things being mothballed as there was too much brick capacity.

Brick prices might have picked up though.

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...seems reasonable since all the funny money is being run out of the system and not to return in our projected memory life span...this is back to common sense...and will mean lower prices....much lower....and save for a deposit before you buy ....all sensible.... :rolleyes:

I agree. :rolleyes: we didn't have all this funny debt money in the system 30 years ago...people bought a home they could afford with a saved (not borrowed deposit), and moved on to the next home when they could show they had repaid a proportion of the loan and could prove the pay rise and disposable income affordability, keeping within the income multiples and LTV rules...all that should do a great service to house prices and subsequent sale prices. ;)

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And how will the brick industry survive?

The brick business should boom, there's pent up demand for housing to be built.

People were selling bricks that had already been produced and laid a long time ago. There have been low levels of house building, more needs to be built, hence the demand for bricks...

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No point in waiting. There is no LTV rule they are not aware of. They should bring them in immediatelyand stop this fiasco of people claiming Britains homes are 'affordable'. Thye are not. They are outrageously expensive for no reason other than policy failure over 40 years. It has caused massive damage to our economy and long term competitiveness in the world and is just one of the reasons why manufacturing has slumped being replaced by 'financial services'. "That's another fine mess you got us into"

Well said, sir.

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The brick business should boom, there's pent up demand for housing to be built.

People were selling bricks that had already been produced and laid a long time ago. There have been low levels of house building, more needs to be built, hence the demand for bricks...

Trouble is bricks are so easy to come by. You could probably build a small housing estate with the collective bricks being shat by anyone with an uncomfotable amount of leverage after reading this.

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Why dont they just bring in tough new laws now, and enforce them by withdrawing the banking licence of non-compliers? What benefit is there to be gained by waiting?

saydo.

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  • 333 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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