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Carney Warns House Buyers: Can You Afford Your Mortgage?

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I can't believe what's happening.Pulling funding for lending and then saying things like this.

it's a start I suppose.

oracle warns britain, can you survive while your politicians still flog your manufacturing/engineering sector away?.

if the politicans cannot yet see that the destruction of the "make-it" sector is deliberate, then they are either:

1) stupid/lunatic...and do not deserve to be paid anything for their make-weight careers..in worst cases locked up as a danger to society at large

or

2)complicit and malevolent....and they deserve to be hung by the neck until dead...end of.

it's not even about exports(that's a bonus), it's about consuming less and making more in-house.

Edited by oracle

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Maybe Carney has finally realised he is being used.

Carney will be the scapegoat after the 2015 general election when this thing blows up.

Edited by SleepyDog

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I can't believe what's happening.Pulling funding for lending and then saying things like this.

I had to read that a second time I couldn't quite believe it.

May be after a few months in the job he has had the chance to go through all the data carefully and make evidence based decisions???

There is still lots of old dodgy lending to clear up though.

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As long as they are all singing from the same hymn sheet.

We Conservatives are nothing if we’re not the party of small business, and that’s the way it’s going to stay. And we’re the party of home ownership too.

I’m the first person to say we must be vigilant about avoiding the mistakes of the past. That’s why I gave powers to the Bank of England to stop dangerous housing bubbles emerging.

But too many people are still being denied the dream of owning their own home. So instead of starting the second phase of Help to Buy next year, we’re starting it next week.

There are some people - many living in the richest parts of London - who say we shouldn’t be doing these things. I have this to say:

Take you arguments down the road to Nelson or Colne, where house prices have fallen for the past five years. Take your arguments to Bury, or Morecambe, where young working couples are still living at home with their parents.

Take your arguments to our great towns and cities where there are families who have saved for years, earning decent salaries, who can afford the mortgage repayments but can't possibly afford the deposit being asked by the banks these days.

Take your arguments to those families and say: “This policy is not right. You shouldn't be allowed to get your home.”

I tell you what they'll say back: “It's alright for you. You've got your own home. We’ve been saving for years. What about us?”

I know whose side this Party is on. We are the party of aspiration. The housebuilding party of Macmillan.

The party of Thatcher's right to buy. And now the party of David Cameron’s Help to Buy. We are the party of home ownership and we’re going to let the country know it.

We are also going make sure no one is left behind as our economy recovers. Our goal is nothing short of a recovery for all.

http://www.politics.co.uk/comment-analysis/2013/09/30/george-osborne-s-conference-speech-in-full

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"What we don't want to see is a marked deterioration in underwriting standards that often happens, whether it's here or abroad, when a housing cycle really gathers momentum. It's one of the things that feeds momentum, so we want to see prudence from lenders," Carney said.

The governor said the Bank had enough powers to prevent a housing bubble as the FPC can recommend to the regulators that lenders take a tougher stance on the size of a mortgage compared to the value of the house – the so-called loan-to-value (LTV) ratio. He said that if the Bank did in the future recommend any caps on LTVs, he expected lenders to heed the warning.

"We have to make the case to act, convince people of the case, but it is not insubstantial if the FPC stands up and recommends that there should be a cap on loan to values just as a hypothetical example," Carney said.

It's very interesting that Carney seems to have very different views on this to Osborne.

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I can't believe what's happening.Pulling funding for lending and then saying things like this.

After all the years of stimulus, QE, base rates from 5.5% to 0.5%, SMI slashed from 6 months to 13 weeks, HTB1+2, so much that's come out of the mouth of our politicians to help hard-working people aspiring to home-ownership....

now FLS being pulled for mortgages, and Carney saying this common-sense. I'll definitely take it, but it feels like the HPC non-homeowner equivalent of being very happy to be fed a bowl of gruel against all the measures we've seen to lock in HPI.

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Looks like the responsibility for mortgage debt is on the borrowers. No forbearance or bailouts. Not that radical really as 'make sure you can afford your repayments if rates go up' seems sensible - it was practically an alien concept during the past decade.

I did think that the help to buy was brought in early because of the strict lending criteria coming in April in the MMR - the early start allowed folk to borrow before the new regs come into force.

http://www.fca.org.uk/firms/firm-types/mortgage-brokers-and-home-finance-lenders/mortgage-market-review

Jawboning

http://www.bloomberg...mulus-exit.html

Carney's measures coincide with evidence that demand and prices are rising. Lenders granted 67,701 mortgages in October, the most since February 2008, the BOE said today. Home values increased 0.6 percent in November, Nationwide Building Society said. They climbed 6.5 percent from a year earlier, the fastest pace since July 2010.

edited to add MMR link

Edited by neontetra

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So much concern about a possible future where housing is in a bubble. Um. It started 10 years ago and we are still in it. Hello?

Is this bubble warning a technique aimed at convincing us all that we're not in one now?

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I had to read that a second time I couldn't quite believe it.

May be after a few months in the job he has had the chance to go through all the data carefully and make evidence based decisions???

There is still lots of old dodgy lending to clear up though.

Quite,any downturn in values could have a seriously detrimental impact on most Bank/BS balance sheets.At the moment the best way to avoid repossession is to have no equity and there are millions of IO mortgages out there that are deep in the hole.

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"Why were the bankers bailed out and the rest of us left in permanent austerity to fight over dwindling housing stock."

This one must be into BTL, the amount of To Let signs near me is mind boggling, and sheeple are still driving round all the time in their "top end" motors. Can`t see the austerity and can`t see the lack of housing stock.

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Like his predecessor, Osborne is borrowing £120+bn a year to hold up house prices. He can't do the same thing for another five years, the interest on the national debt is already set to top £80bn by 2018. Rates must rise and house prices fall. The market always has the final word.

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Like his predecessor, Osborne is borrowing £120+bn a year to hold up house prices. He can't do the same thing for another five years, the interest on the national debt is already set to top £80bn by 2018. Rates must rise and house prices fall. The market always has the final word.

When even Carney is telling potential property mentalists to cop themselves on surely people must get it that the game is up?

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When even Carney is telling potential property mentalists to cop themselves on surely people must get it that the game is up?

I think maybe Carney is doing what Bernanke has done over the past few years - "We've done our bit, now it's down to fiscal policy."

Apart from confirmation that the base rate won't rise, the most significant part was about the planning system (subject to linking the actual speech):

He said that Britain was building half as many homes a year as Canada despite having a population twice as large, and added: "It is widely acknowledged that there is a very large supply-side issue here."I fully recognise that Canada is the second-biggest country in the world. It's easy to build housing as it's easy to find places [to build]. But it does give you a sense of the issues around the constraints on supply and the movements in prices you see as well. They all reinforce that sense that there is a supply issue. And there's nothing the Bank of England can do to change that."

The governor expressed a reluctance to use interest rates as a way of cooling down the housing market because it would affect all parts of an economy only just recovering from recession.

Another point from that last sentence is that he's content to allow the underwater debt to carry on, don't panic.

http://www.theguardian.com/business/2013/nov/29/mark-carney-bank-of-england-home-buyer-warning

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I think they probably fumed at this particular comment from Carney; ' ... Or are you counting, even subconsciously, on the price of your house keeping going up and if something happens an ability to sell it quickly and not facing the consequences of not being able to pay?"

Carney seems to be implying that mortgage interest rates will rise, house prices will not rise and the debt will not 'inflate' away and will need to be paid, all of which are anathema to the readers of the guardian.

+1

The reaction may be partly due to Carney's opposition to bankers bonus cap.

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To give some perspective, a search using the terms: Mark Carney warning house prices between 1 Jan 2010 and 1 Jan 2013:

https://www.google.co.uk/search?q=mark+carney+warning+house+prices&safe=off&biw=1877&bih=1042&sa=X&ei=JSyZUsHCJ4PQ7AbMwYHICw&ved=0CB4QpwUoBg&source=lnt&tbs=cdr%3A1%2Ccd_min%3A01%2F01%2F2010%2Ccd_max%3A01%2F01%2F2013&tbm=#q=mark+carney+warning+house+prices&safe=off&start=0&tbs=cdr:1,cd_min:01/01/2010,cd_max:01/01/2013

From one of the many links:

So where’s the worm in the apple?

Mr. Carney’s solution to the financial crisis was to be aggressive in easing Canadian monetary policy. It certainly helped to limit the scale of Canada’s contraction and paved the way for a rebound. But it also created potentially dangerous imbalances. Canadian households carry debt equivalent to nearly 170% of income, nearly 40 percentage points above the U.S.’s at the peak of its debt cycle.

Much of that debt hangs on housing, which itself has raced away.

In a country like Canada, with unlimited land and a modestly sized population, property prices ought to match growth in nominal GDP. Since the first quarter of 1999, Canada’s nominal GDP expanded 85%. Growth in property prices has been 40 percentage points higher. The result is that, on balance, Canada’s property market is surprisingly unaffordable. In the major cities Montreal and Toronto, the median house price is more than five times the median income–affordable is about three times or less, according to the Demographia International Housing Affordability Survey. In Vancouver, the multiple is more than ten times.

Overall, housing in Canada’s major cities is about 4.5 times income.

Although Mr. Carney warned Canadians publicly against taking on too much debt and tried to protect the banking sector by tightening credit limits, any serious shakeup of the property market will cause serious economic problems. And there are signs this might be happening. House prices have started to slip back over the past couple of months.

That he tried to lean against excess and failed suggests the limits of the sort of macro-prudential policy he’ll be expected to implement in the U.K. What’s more, a focus on growth at all costs could well push the U.K. further down the road of ultimate inflationary disaster if it means Mr. Carney is loath to make difficult or unpopular decisions on interest rates.

Mr. Carney’s answer to the financial crisis may yet prove to have been a matter of storing up even bigger problems for the future. For somebody else to clean up.

Indeed, hiring Mr. Carney is a bit like it was for the U.S. hiring Alan Greenspan in 2006. At the time, the former Federal Reserve chairman was seen as an infallible guru. Now the consensus is much less positive.

http://blogs.wsj.com/source/2012/11/27/mark-carney-the-u-k-s-savior-maybe-not/

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To give some perspective, a search using the terms: Mark Carney warning house prices between 1 Jan 2010 and 1 Jan 2013:

... Although Mr. Carney warned Canadians publicly against taking on too much debt and tried to protect the banking sector by tightening credit limits, any serious shakeup of the property market will cause serious economic problems. And there are signs this might be happening. House prices have started to slip back over the past couple of months.

That he tried to lean against excess and failed suggests the limits of the sort of macro-prudential policy he’ll be expected to implement in the U.K.

Apart from warning, I guess the interest rate rise was his leaning, although I can't recall if he was the one to have lowered them to 0.25% in the first place, and it's not too much of a shocking rise back to 1%. At least he made his warning, and it might be those who didn't listen to be the ones who fail, replaced by sounder money at lower prices, and an outcome for Canada and the over-indebted might not be long away.

"Remember that Carney raised rates in Canada in 2010 from 0.25 percent to 1 percent. He is one of few Western bank governors to have actually raised rates since the crisis," he told the online Reuters Global Markets Forum.

...However, there remain headwinds to recovery, not least from deep cuts in public spending.

A report from the Organisation for Economic Co-operation and Development this week said Britain faced the deepest budget cuts in Europe over the next decade to put finances back on track.

Britain's Finance Minister George Osborne unveiled last month 11.5 billion pounds ($17.5 billion) in cuts for the 2015/16 fiscal year, including steps to trim the welfare budget, but the OECD's findings suggest that will not be enough.

Britain's deficit is expected to be 6.8 percent of economic output in 2013, according to the European Commission, only lower than that of Ireland in the bloc, and more than double the level of Italy. Germany's deficit is seen at 0.2 percent this year.

July 2013 http://uk.reuters.com/article/2013/07/03/uk-pmi-services-britain-idUKBRE9620J420130703

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