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Sancho Panza

High Loan To Value Mortgages Reach Six Year High As Banks Lend More Before Tighter Regulations Come Into Force

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Mindful Money 14/3/14

'Lending to high LTV borrowers reached a six-year high in February, as monthly high LTV loans topped 11,000 for the first time in six years, according to the latest Mortgage Monitor from chartered surveyor e.surv.

In February, just over a sixth of all house purchase loans were to borrowers with a deposit worth 15% or less of the total value of their property. There were 11,138 high LTV loans, 6% more than the 10,465 in January 2014 – despite the overall number of home loans falling over the same period. It was the highest monthly number of high LTV loans since April 2008 (when there were 12,489). And the average LTV climbed to 63.5% as a result – its highest level since August 2007.

House purchase lending rose 37% year-on-year in February 2014, from 52,023 approvals to 71,396 approvals. It was the strongest February for house purchase lending since the financial crisis (2007). However, on a monthly basis, the number of house purchase approvals fell 7.2% from 76,947 in January 2014, in part due to adverse weather conditions discouraging movers in the short term.

Richard Sexton, director of e.surv chartered surveyors, says: "A bumper crop of high LTV deals is tempting more buyers back to the market. Banks are far more willing to lend to borrowers with a limited savings pot. New buyers are keen to get on the ladder before house prices rise beyond their reach, and they are utilising the Help to Buy Scheme to get an initial foothold. The result, the number of monthly home loans is slowly winding its way back into pre-recession territory.

"The countdown to the introduction of MMR regulations has begun. The new rules will demand rigorous stress testing of buyers, which could further tighter regulation, and could make it more difficult to get on the ladder. We are seeing both banks and buyers pushing ahead with lending ahead of this cut-off."

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More first time buyers

There were 14,993 loans on typical first-time buyer properties – with a purchase price of £125,000 or under – in February 2014, a quarter more (+25%) than in February 2013. On a monthly basis, home loans on first-time buyer stock increased 3% from 14,620, as first-time buyers continued driving the market forward.

However, with house prices rising quickly, the supply of London first-time buyer stock is becoming rapidly depleted. The average purchase price in London was £282,537 in January, according to the latest LSL First Time Buyer Tracker. The average first-time buyer in London must now save a deposit of £64,160, with the average purchase price £282,537.

Data from estate agency chains Your Move and Reed Rains showed the average first-time buyer purchase price rose by £5,000 in the month to January. The average purchase price climbed 16% over the space of twelve months, reaching £155,832.

Meanwhile, deposits rose as a proportion of income for the first time in seven months, as real wages stayed flat. Despite this, the number of first-time buyers rose by a third year-on-year in January, as a result of the increase in high LTV lending, which is propping up the market despite the price rises.

Sexton adds: "First-time buyers are the life-blood of the market. With unemployment falling and real wages potentially set to rise in the next few months, more young buyers are choosing to get onto the property ladder. But we still need to do more to support the bottom of the market. The demand for property far outstrips the supply of new homes, which is creating a dog-eat-dog property market in which new buyers are placed under even more strain. If not handled correctly, rising prices could effectively remove the bottom rung of the property ladder. We need much more home-building to keep the market accessible."

North-South divide in high LTV lending

There remains a prominent north-south divide in high LTV lending in February. The North East & Cumbria (25%), North West (24%) and Yorkshire (24%) all contained a higher proportion of high LTV borrowers than the UK average (16%), while London (6%) and the South East (10%) contained a lower proportion.

Region Proportion of loans that are high LTV

North East & Cumbria 25%

Northwest 24%

Yorkshire 24%

Midlands 18%

Eastern 16%

UK Average 16%

Northern Ireland 15%

South/South Wales 15%

Scotland 12%

South East 10%

London 6%

Sexton adds: " In the North, buyers typically have less equity, and they are using the scheme to help them access the market with a smaller deposit saved. But Help to Buy is also essential in the South. House prices are painfully high in London and the South East, meaning buyers must save a large pot of money to qualify for a loan. Without high LTV lending, the capital could become the preserve of the cash-rich only."'

Edited by Sancho Panza

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I recall this from last time around.

The closer to the end of the rising cycle you get, the higher and higher the LTV's as everybody who was able to pay has been sucked in. The higher LTV's are driven by banks lowering cried standards to people who could not otherwise afford to buy property at overinflated prices.

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"The countdown to the introduction of MMR regulations has begun. The new rules will demand rigorous stress testing of buyers, which could further tighter regulation, and could make it more difficult to get on the ladder. We are seeing both banks and buyers pushing ahead with lending ahead of this cut-off."

If that is true he's effectively saying that banks know that these loans are unaffordable and will be in a month but they're agreeing them anyway.

Classic fraud. Banks behaving as they ever did, Bank of England quite happy for them to do so.

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If that is true he's effectively saying that banks know that these loans are unaffordable and will be in a month but they're agreeing them anyway.

Classic fraud. Banks behaving as they ever did, Bank of England quite happy for them to do so.

It is the reason bankers have to be the most regulated group in the World...EVER..

Its a shame the regulators have forgotten just why this is.

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If that is true he's effectively saying that banks know that these loans are unaffordable and will be in a month but they're agreeing them anyway.

Classic fraud. Banks behaving as they ever did, Bank of England quite happy for them to do so.

Isn't it more saying they're happy to make these loans but regulations may disagree so they're getting them out the way now quickly.

They don't have to agree with regulations criteria but they do have to abide by them.

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Isn't it more saying they're happy to make these loans but regulations may disagree so they're getting them out the way now quickly.

They don't have to agree with regulations criteria but they do have to abide by them.

yes, it says bundles about moral hazard. it wasnt moral and its certainly caused another hazard.

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Isn't it more saying they're happy to make these loans but regulations may disagree so they're getting them out the way now quickly.

They don't have to agree with regulations criteria but they do have to abide by them.

Same difference. If they shouldn't make the loan next month, then they shouldn't make it now. Regulations were drafted months ago, nothing else changes in next few weeks, so it's semantics rather than sound lending practice.

Like saying next month it becomes illegal to steal candy from a baby, but today I can get away with it so I'll steal as much candy from as many babies as possible.

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MMR was the reason that H2B was introduced early. Get as many on board as possible. It is fraud, plain and simple.

Also the reason why BTL has been pushed and ramped like never before. Criteria tightening in one lending area has to be balanced by a reduction in criteria elsewhere.

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Shall we re-phrase the heading for this thread?

High Loan To Value Mortgages BIGGER THAN EVER LIAR LOANS Reach Six Year High As Banks Lend Commit More Mortgage Fraud Before Tighter Regulations Come Into Force.

. :rolleyes:

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If that is true he's effectively saying that banks know that these loans are unaffordable and will be in a month but they're agreeing them anyway.

Classic fraud. Banks behaving as they ever did, Bank of England quite happy for them to do so.

This isn't fraud its economics. IF regulation and taxation sets arbitrary limits in a free market then it creates a market dislocation at this points. For instance, stamp duty causes sales of 249-259K houses to collapse. Brokers have long known when "good" bank mortgage deals are coming to an end so they fill out "incomplete" forms in their broker submissions to get the best rate deals and then hope to fill them with real customers over the next few months. If you fill in an app before the deadline you get to keep the deal past the deadline. They will fill their boots for the next 20 days and that will carry on as deals close at those rates over the next 90-120 days.

Now the governor of the bank of england used to "raise his eyebrows" at bank chairman at this type of perfectly legal behaviour and it would stop, but now we live in a world post big bang where American style business rules the roost i.e Make as much as you can as fast as you can forget about sustainability (their country is only a couple of hundred years old remember...).

Every time a BoE governor says anything in public they always have an agenda. Carney's recent comments on increased rates will drive people to fix their rates on a longer term basis protecting more people from rate rises but also giving the banks a larger profit in the short term.

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Same difference. If they shouldn't make the loan next month, then they shouldn't make it now. Regulations were drafted months ago, nothing else changes in next few weeks, so it's semantics rather than sound lending practice.

Like saying next month it becomes illegal to steal candy from a baby, but today I can get away with it so I'll steal as much candy from as many babies as possible.

I don't agree its the same at all and don't agree with your metaphor. It's not that cut and dry, the affordability regulations are just an opinion. Based on previous financial regulator actions I certainly wouldn't consider any analysis they did was infallible or correct or their rules and regulations were any good, even if I would expect institutions to abide by them. Stealing from babies clearly wrong already.

If they were going to cut the speed limit on motorways to 60 in a months time would you expect everyone to start driving at 59 now?

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I don't know about 2008 but its looking a lot like the summer of 1988 and the rush before Miras were ended.

:Fingers crossed:

:lol:

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I don't know about 2008 but its looking a lot like the summer of 1988 and the rush before Miras were ended.

:Fingers crossed:

:lol:

Stopped clicks and all that, nothing keeps going up and up and up forever. Not even with government props as eventually it becomes to expensive to prop up a failing market.

In theory even if in 12/24 months prices are higher there should be a pull back somewhere.

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Same difference. If they shouldn't make the loan next month, then they shouldn't make it now. Regulations were drafted months ago, nothing else changes in next few weeks, so it's semantics rather than sound lending practice.

The banks are not dragging borrowers into the banks, forcing them to borrow.

These buyers are my competition and have been for years... as they happily borrow more debt / pay higher prices.

They make their own market decisions.... not to be carried forever on shoulders of people who think their purchases are not good value and likely to lose value.

It's not like there aren't some big worrying pointers all over the place about overall debt and concerns in the economy.

Some people are like... it's only fair when borrowers/buyers constantly win with their mortgages on property. The flip side are the non-buyers, non-owners suffering for years... but they tend to get no sympathy whatsoever.

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Region Proportion of loans that are high LTV

North East & Cumbria 25%

Northwest 24%

Yorkshire 24%

Midlands 18%

Eastern 16%

UK Average 16%

Northern Ireland 15%

South/South Wales 15%

Scotland 12%

South East 10%

London 6%

Sexton adds: " In the North, buyers typically have less equity, and they are using the scheme to help them access the market with a smaller deposit saved. But Help to Buy is also essential in the South. House prices are painfully high in London and the South East, meaning buyers must save a large pot of money to qualify for a loan. Without high LTV lending, the capital could become the preserve of the cash-rich only."'

Only 6% high LTV in London suggests it already is the preserve of the cash rich. Looks like the cheaper the area, the higher the LTV. Strange.

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The banks are not dragging borrowers into the banks, forcing them to borrow.

These buyers are my competition and have been for years... as they happily borrow more debt / pay higher prices.

They make their own market decisions.... not to be carried forever on shoulders of people who think their purchases are not good value and likely to lose value.

It's not like there aren't some big worrying pointers all over the place about overall debt and concerns in the economy.

Some people are like... it's only fair when borrowers/buyers constantly win with their mortgages on property. The flip side are the non-buyers, non-owners suffering for years... but they tend to get no sympathy whatsoever.

*shrugs* If the wheels come off in a reasonable time-frame, you'll be on the right side of the bet, if they don't, you'll be on the wrong side. End of.

There's not much point in being upset that the market isn't free. It's not like that was a big secret either.

As citizen Smyth pointed out in a round-about way, at these prices affordability of monthly payments is the only available criteria, and it's on that basis that people are buying. How long do low IRs have to persist before they are 'right' and we are 'wrong'?

You recognise that markets are amoral (and, afaict, you wish to them to remain so), yet you have a strange moral indignation that they are not amoral in the way that you want.

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*shrugs* If the wheels come off in a reasonable time-frame, you'll be on the right side of the bet, if they don't, you'll be on the wrong side. End of.

There's not much point in being upset that the market isn't free. It's not like that was a big secret either.

As citizen Smyth pointed out in a round-about way, at these prices affordability of monthly payments is the only available criteria, and it's on that basis that people are buying. How long do low IRs have to persist before they are 'right' and we are 'wrong'?

You recognise that markets are amoral (and, afaict, you wish to them to remain so), yet you have a strange moral indignation that they are not amoral in the way that you want.

I've been wrong for many years... wrong side of things, in reckless borrowing/lending years. I'm thinking for my family and young people coming through, more than myself.

Wrong.. because of what Ed Balls now suggests (IMO) was a just a simple mistake,,, lack of understanding, 'mistake' they've learnt from.... wanting to have another go at it.... and conveniently despite all the supposed problems... 0.5% base rates, hundreds of billions QE ect ect... prices going up and up again, new peaks, locked in HPI for gamblers and older-people.

Ed Balls (yesterday) "All of us in our lives get things right, but all of us make some mistakes, and the last Labour government didn't regulate the financial services in a tough enough way. But we've learnt from that and we'll come in not just with experience, not just some wisdom, which comes from that experience, but with utter determination to make this country fairer and stronger for the future."

I'm with you on that. I have to pinch myself sometimes. The last 6 months have been like 2007 on steroids.

Is Dances With Sheeple still in denial?

Maybe he is. Why not same sympathy for him as for your buyers, our competitors, who are willing to borrow/pay any price to outbid us? Yet Wallayat (or whatever his name is) convinced of new HPI, and plenty more like him. Many borrowers happy taking on big debt. It's their own decision, especially if they think interest rates wont rise, or other triggers won't be squeeze, like a sudden fall away in willing borrowers/buyers. They could be correct. As you say.. you're either on right side of equation, or you're not. So pack in the sympathy and excuses for buyers paying ever higher silly prices, perhaps?

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Maybe he is. Why not same sympathy for him as for your buyers, our competitors, who are willing to borrow/pay any price to outbid us?

What makes you think I don't have sympathy for those who've held off? (after all, I'm one of 'em). My sympathy, once more with feeling, is for everyone who's been forced to choose between a rock and a hard place simply in order to have somewhere to live, but I have zero sympathy for anyone who's treated housing as an investment.

My sympathy for you (not that you give a damn - why should you?) is somewhat tempered by the fact that you seem to want a highly financialised market. Although I understand your reasons, I can't help feeling you're missing the point.

My sympathy for Dances with Sheeple, likewise, is somewhat tempered by his contempt for 'the sheeple'. For someone who has risen so high above the mere herd of mankind, he is capable of some extraordinary denial, which makes that contempt doubly absurd.

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In Ireland it is now possible to have some of your mortgage debt disappeared if you're in too deep.

http://www.independent.ie/business/personal-finance/six-big-banks-giving-deals-to-more-mortgage-holders-in-arrears-30089764.html

From Belfast VI on NI forum

That seems to read as though they just add the arrears to the debt. Can-kicking olympic event.

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