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Last year, the Financial Services Authority (now the Financial Conduct Authority) dropped its proposed requirement for affordability to be assessed on a maximum 25-year term after intense lobbying by the lenders. They argued that as house prices are so expensive, mortgage duration has to be lengthened to allow younger people to buy.

The FSA was wrong to cave in. House prices are largely a function of how much money lenders are willing to lend. If you fiddle the affordability test so that a jumbo loan becomes "affordable" by lengthening the term, you are not making a purchase more achievable, you are simply hosing more money on to a market that has pitifully constrained supply, so prices jack up even further. This doesn't help people trying to get on the fabled property ladder – it just makes the situation worse. And for some first-time buyers (average age now in their 30s) it will leave them repaying loans well into retirement.

Seems to sum it up quite neatly.

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Hosing money onto housing makes EVERYTHING unaffordable

It certainly makes people in the UK uncompetitive with overseas as they also require higher wages to afford housing. It destroys the UK economy.

Edited by billybong

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I like where this narrative is going but the 'pitifully constrained supply' irks me.

As per prev discussions on here - I estimate only 15% of bedrooms locally are actually used every night.

The issue isn't constraint but distribution - there are too many family homes with boomers rattling around them and too many weekend/holiday homes rurally leveraged using city HPI.

I understand the argument that building more will help resolve the issue, but it's not addressing the core issue.

Land tax is required to stop people who benefit from periods of HPI being able to exist expense-free whilst the younger population creating the current GDP is locked out yet paying most of the running costs for the country.

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I like where this narrative is going but the 'pitifully constrained supply' irks me.

As per prev discussions on here - I estimate only 15% of bedrooms locally are actually used every night.

The issue isn't constraint but distribution - there are too many family homes with boomers rattling around them and too many weekend/holiday homes rurally leveraged using city HPI.

I understand the argument that building more will help resolve the issue, but it's not addressing the core issue.

Land tax is required to stop people who benefit from periods of HPI being able to exist expense-free whilst the younger population creating the current GDP is locked out yet paying most of the running costs for the country.

The need to build more homes argument annoys me too. New home prices will be set by the local price of secondhand homes. Lenders are interested in lending and will find ways to make repayments affordable as we have seen. No one who makes a profit from lending money has an interest in lending less. No builder is interested in taking less profit if a lender will facilitate a high profit.

The government like citizens to obtain 'stuff' to keep them quiet and so will facilitate debt.

Houses on a recent Taylor Wimpey newbuild estate of 50 papier mache homes in my village range in price from £250k to £450k for 3 bed to 6 bed options - 2 bed to 3 bed in reality, if you don't count either a cupboard or the attic as 1 or 2 bedrooms, respecitively.

I doubt there would be much need for new housing if the empty (25% of houses are holiday homes in my area) were brought onto the market.

Edited by LiveinHope

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Quite.

How many times have you heard people say "it's cheaper to holiday abroad than here, it costs £60 a night in a B&B"... or whatever.

They don't then make the link to land and property prices that make that business uncompetitive...and then extrapolate that to all the businesses in UK plc (or what is left of them).

Actually, it's banks just hosing money onto themselves, and persuading us that we'll get stuff in the process. Lyrics are prescient.

Edited by LiveinHope

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Last year, the Financial Services Authority (now the Financial Conduct Authority) dropped its proposed requirement for affordability to be assessed on a maximum 25-year term after intense lobbying by the lenders. They argued that as house prices are so expensive, mortgage duration has to be lengthened to allow younger people to buy.
That's pathetic. The FSA should do the job or admit that they are useless.

The lobbyist's argument shows that they want to put out the fire by throwing petrol on it.

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That's pathetic. The FSA should do the job or admit that they are useless.

The lobbyist's argument shows that they want to put out the fire by throwing petrol on it.

Well, they do make money by lending money, and we all like interest on our savings.

Edited by LiveinHope

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When there is extreme inequality, there results a 'glut' of savings looking for investments rather than circulating as demand. Globally this pushes yields and rates on savings down.

As a result of loosening capital controls and then the BSoc Act 1986, banks and bsocs had untrammelled access to this glut caused by massive trade imbalances on an international level, which almost immediately proceeded to press down on the rates that domestic savers could command on their hard earned savings.

Appreciated,

Mine was a simplistic, provocative, tongue-in-cheek post as to how simplistically I think some see the situation,. Much of the money in the system is entirely fictitious.

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Appreciated,

Mine was a simplistic, provocative, tongue-in-cheek post as to how simplistically I think some see the situation,. Much of the money in the system is entirely fictitious.

OK. Perhaps a ;) or a :) would clarify.

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I like where this narrative is going but the 'pitifully constrained supply' irks me.

As per prev discussions on here - I estimate only 15% of bedrooms locally are actually used every night.

The issue isn't constraint but distribution - there are too many family homes with boomers rattling around them and too many weekend/holiday homes rurally leveraged using city HPI.

I understand the argument that building more will help resolve the issue, but it's not addressing the core issue.

Land tax is required to stop people who benefit from periods of HPI being able to exist expense-free whilst the younger population creating the current GDP is locked out yet paying most of the running costs for the country.

It may not be where you are, but it certainly makes a difference in the SE. Huge population growth over the past few years and little building, hemmed in by a green belt designed for an earlier era.

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I doubt there would be much need for new housing if the empty (25% of houses are holiday homes in my area) were brought onto the market.

Probably true...for St Ives or Southwold. But this affects a tiny percentage of the priced out population, so let's not allow the Seaside tail to wag the London dog.

London and the Home Counties need hundreds of thousands of new homes.

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Probably true...for St Ives or Southwold. But this affects a tiny percentage of the priced out population, so let's not allow the Seaside tail to wag the London dog.

Look at all the 3, 4, 5 bed houses in your area and ask how many are fully utilised?

I lived in square in a city for 13 years, of those 15 houses (45 bedrooms) only two houses had all 3 bedrooms used - and when we left there was non fully occupied as one of the kids in the other went to uni. Most of the boomers bought sub 80K, one recently sold for 450K

Several had one person in. Several also had loft conversions so were actually 4 bed.

So the occupancy was equivalent to the village we live in now - which has a lot of second homes, boomers and virtually no families.

The over 50 demographic are sitting on large properties they are using as investment tools - whilst most young families make do with no garden and bunk beds.

They can sit on those properties until death for the cost of heating.

The problem is distribution, not volume. Assets/wealth need to have some built in attrition, income tax payers can't shoulder the entire cost of running this country.

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What interest on our savings?

I'm not happy about that either. Why should my savings rate be cr4p because others mewed for a 'debauched lifestyle' and so the banks who encouraged it have to recapitalise

What I do know is that the canteen in my place of work, whose till always has a large amount of cash at the end of every week, is seeing a large increase in the number of staff who will 'pop up' when its quiet to ask if they can possibly borrow a couple of hundred quid until after the weekend; coincidentally most pop up around the end of the month. These are people living in £300k houses with new cars etc etc

So, I am glad I have savings, even if I'm getting little interest. The alternative mewed lifestyle is clearly much more stressful.

I think we'll see the house prices and the savings rates we want once the banks have recapitalised sufficiently to take the losses. At least I hope so.

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How many times have you heard people say "it's cheaper to holiday abroad than here, it costs £60 a night in a B&B"... or whatever.

Many European countries - mindful of the importance of tourism, no doubt - also have a lower rate of VAT on hotel stays (and restaurants) rather than the standard rate, as is the case here.

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I'm not happy about that either. Why should my savings rate be cr4p because others mewed for a 'debauched lifestyle'

You wouldn't have any savings if they hadn't. What are you going to save, leaves...

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You wouldn't have any savings if they hadn't. What are you going to save, leaves...

Much of the money in the system is fictional, and that includes some of my savings and salaries over the recent years as they are the result of the "property financing" that facilitated the increased spending power of the public and employers, which generated tax revenue for the Govt. Luvvly jubbly

see Previous post

Edited by LiveinHope

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You wouldn't have any savings if they hadn't. What are you going to save, leaves...

It would be better to have smaller savings secured on modest mortgages which might actually get repaid than bigger savings secured on pie-in-the-sky 5x joint self-declared income interest only mortgages.

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It would be better to have smaller savings secured on modest mortgages which might actually get repaid than bigger savings secured on pie-in-the-sky 5x joint self-declared income interest only mortgages.

I think the point the poster was making was that as money is debt, if the 'debauched' had not taken on all this debt the monetary system would have collapsed many years ago. Savings are a store of labour. That labour is being stored in Sterling. You would have to move to other asset classes to avoid supporting the debauched system.

Edited by 98% Chimp

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