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Lloyds Tightens Mtge Lending Rules To Address Specific Inflationary Pressures

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http://www.theguardian.com/business/2014/may/20/ms-profits-for-third-year-running-uk-inflation-cost-of-living-business-live?view=desktop#block-537b79dde4b0ecc738948d1a

Here is the full statement, just released:

LLOYDS BANKING GROUP ANNOUNCES TARGETED POLICY CHANGES TO ADDRESS INFLATIONARY PRESSURES IN LONDON HOUSING MARKET

Lloyds Banking Group today announces an update to its policy for new high value mortgage lending.

From today, where the mortgage lending on a property in the UK is over £500,000, the Group will assess the mortgage application by applying an income multiple limit of four. This is a targeted policy change primarily designed to address specific inflationary pressures in the London housing market. The new policy will be applied in addition to our usual affordability assessment.

Stephen Noakes, Group Director of Mortgages said:

“Whilst the housing market outside of London is starting to improve, the recovery is fragile and prices largely remain below their peak. It is important we don’t disrupt this recovery.

“But in London, house prices are almost now 30% above the 2007 peak. This is largely driven by issues of supply which are particularly acute in London and this is having an impact on income multiples which are failing to keep pace with asset growth.”

“We’re not seeing such issues across the rest of the UK and therefore this is a targeted response to an issue largely in the upper tiers of the London housing market.
This prudent update to our lending policies is intended to manage risks to our business and for our customers.”

“The Group continues to support the Help to Buy mortgage guarantee scheme as it has raised confidence in the housing market particularly outside of London.
Help to Buy is not one of the factors driving London house prices. Just 2% of purchases in London in 2014 have been through the scheme with the significant majority of applications coming from the rest of the UK.”

The Group expects this policy change to impact around 8% of our lending in London.

This policy change will take effect immediately and applies to mortgage lending through Halifax, Lloyds Bank, Bank of Scotland and Scottish Widows Bank.

My bold highlights.

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Banks voluntarily restricting lending... That has never happened anywhere ever before...

It's not voluntary - they must have been ordered and Cameron is out in force trying to save votes from bankrenters, whilst instigating a crash in the background.

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Banks voluntarily restricting lending... That has never happened anywhere ever before...

It's not voluntary - they must have been ordered and Cameron is out in force trying to save votes from bankrenters, whilst instigating a crash in the background.

I think several lenders did it in 06/7, effectively setting up Northern Rock as the patsy.

Tricky this with it being a state owned lender - are they being leaned on by govt or BoE or simply anticipating Carney getting his 'tool' out? BoE saying it's a 'commercial decision'.

steve hawkes @steve_hawkes 18m

Bank of England on Lloyds: "It's a commercial decision for the firm."

Edited by R K

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Who is the majority share holders in llyods ?

There is so much noise from government.

Something is happening.

They wont be able to apply any gentle brakes , the london bubble is bursting and as i've said before it will take down the market all round the country.

Edited by TheCountOfNowhere

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Who is the majority share holders in llyods ?

There is so much noise from government.

Something is happening.

They wont be able to apply any gentle brakes , the london bubble is bursting and as i've said before it will take down the market all round the country.

Something serious is up, that's for sure.

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I had been wondering for a while: Who is buying all of this newly issued mortgage debt? BOE has finished it's QE program, so it must be going somewhere?

Into the black hole that is the banks balance sheets :lol:

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Something serious is up, that's for sure.

I believe it must be.

If it were business as usual all the rubish wouldnt be coming out.

Either they want to push prices higher (some how ) and panic more people into buying or they know it's all collapsing about their ears and are trying to deflect the blame.

I wonder which ?

I personally wouldn't touch housing with a barge pole right now, too much risk.

Now, where are all those E.A. bulls this week ? :P

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Maybe they are putting these things out knowing it will have bugger all impact but trying to seem responsible thus pick up a few more votes before this Thursday's election where the tory vote is tanking?

This has only been coming out since people could postal vote. Let's see what happens after Thursday.

Edited by sf-02

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Lloyds says house prices in London now 30% above their peak - first sign of anyone tackling what has clearly become a bubble

Now, which editor do I sent my email to the BoE alerting them to the developing bubble ?

the peak from which price last collapsed - ok I see.

Good job disposable income had grown since the last collapse - oh wait.

Do I hear interest rates rising? Ooops.

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Over the last few years, banks had a buffer of 20 - 30% on lending by restricting access to low rates to people with large deposits. If that was circumvented by HTB, perhaps banks are seeking other ways to limit their losses should prices dip by that much?

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On the bBC.

http://www.bbc.co.uk/news/business-27494904

Lloyds Banking Group says it will limit mortgage lending to four times income for properties worth more than £500,000

POP

You have to wonder what they were lending before?

I am assuming that is 4 x household income, so 'just' 200k MAX on 50k joint etc. If repayment interest rates rose back to 5% that would still bankrupt most people. I would have thought 3x household would be far more sensible.

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If you were in the process of buying a ~£500k home with, say, a £160k salary (so not affected directly by this tightening), what would you do, if you knew there were other offers at the time yours was accepted? Withdraw and see what happens? Tempting, I'd say. What's the worst that happens?

Would be good if a few other lenders followed suit.

Kind of interesting to consider what happens a bit below the £500k threshold- suddenly a £450k property may attract interest from those that were previously looking at more expensive ones but may get restricted by the rules (assuming others follow suit, a big 'if'). Would buyers on, say, £100k who were looking at £450k houses be deterred by the fact that there may be others with bigger earnings forced into the mix? Might they and others on lower earnings be encouraged to limit themselves to similar multiples?

Edited by The Knimbies who say no

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Have they run out of these :

http://en.wikipedia.org/wiki/Greater_fool_theory

The greater fool theory states that the price of an object is determined not by its intrinsic value, but rather by irrational beliefs and expectations of market participants.[1] A price can be justified by a rational buyer under the belief that another party is willing to pay an even higher price.[2][3] Or one may rationally have the expectation that the item can be resold to a "greater fool" later.[4]

"In real estate, the greater fool theory can drive investment under the expectation that prices always rise.[5][6] A period of rising prices may cause lenders to underestimate the risk of default.[7]"

:lol: :lol: :lol:

Edited by TheCountOfNowhere

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I thought they (lenders) weren't meant to be lending at multiples in MMR? Previously yes but I thought the cap was 4x cap pre MMR?

Edited by Ash4781

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I thought they (lenders) weren't meant to be lending at multiples under MMR? Previously yes but I thought the cap was 4x under old pre MMR?

Yeah, I think they were meant to...now they actual are.

The FLS money must be gone.

The mythical chinese investor must be gone.

The HTB buyer must be gone.

The government can now blame the government owned bank for the collapse.

Brilliant.

P.S. What is amazing in all this is:

"Lloyds Banking Group said that from today, people applying to take out a mortgage worth more than £500,000 will see the amount they are allowed to borrow limited to four times their income."

Does that mean you can earn 50K a year and borrow 400K ?

That'll help.

:rolleyes:

Edited by TheCountOfNowhere

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Yeah, I think they were meant to...now they actual are.

The FLS money must be gone.

The mythical chinese investor must be gone.

The HTB buyer must be gone.

The government can now blame the government owned bank for the collapse.

Brilliant.

So is it a mix of MmR and old in pipeline old system. Bring forwarr demand and then crash the market seems like a wicked policy.

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