Mark Carney Told To Rein In Mortgages

[The Masked Tulip]

Nordic regulators call for swift action to prevent crisis as Bank of England Governor Mark Carney expected to announce new measures to rein in mortgage lending

http://www.telegraph.co.uk/finance/bank-of-england/10917307/Mark-Carney-told-to-rein-in-mortgages.html

There is a survey on the above link page asking what Carney should do - alas, the option I was looking for was not there but there are some HPC favourites.

[gf3]

- alas, the option I was looking for was not there

I think Carney's ears stick out too far for that to be possible.

[Habeas Domus]

What should the Bank of England do to rein in the market?
Nothing 6.31% (122 votes)

...
Total Votes: 1,933

So from that survey only 6% think everything is fine the way it is, perhaps we arent a lunatic minority any more?

[xela57]

I hope that the BoE does put some limits in... hopefully sensible ones!

I would have thought that Max LTV of 95% and a Max LTI of 5 would be pretty non-controversial.

I would prefer to see something around Max LTV of 90% and Max LTI of 4.

Maybe the BoE could soften the blow to the banks by giving some flexibility back by saying that 95% of loans must obey the new LTV/LTI cap (i.e. 5% of loans could be special cases) and the banks would have to prove they sick to the rules with monthly reports of the previous 12 months loans.

I like the idea of the counter-cyclical capital buffer that the telegraph article alludes to... BUT how on earth can one tell where one is in a cycle without a time machine!?! Sounds like a nice idea but impossible (or very difficult) to implement.

[zugzwang]

What should the Bank of England do to rein in the market?

Nothing 6.31% (122 votes)

...

Total Votes: 1,933

So from that survey only 6% think everything is fine the way it is, perhaps we arent a lunatic minority any more?

Sadly, those 6% are all employed at the Treasury and the BoE.

[Blod]

He's dammed if he does and dammed if he doesn't.

Sentiment is a strong influence, any measure to rein in the high LTI lending will crash the market.

If he chooses to do nothing then we'll get HPC sooner than later.

I wonder how he sleeps at night know that he's become the fall guy for twenty plus years of unsustainable HPI.

[campervanman]

There seems to be more of an acceptance that mortgage availability and mortgage rates are a means of fine tuning a debt dependant economy than a means to enable people to buy houses.

[Dorkins]

He's dammed if he does and dammed if he doesn't.

Sentiment is a strong influence, any measure to rein in the high LTI lending will crash the market.

If he chooses to do nothing then we'll get HPC sooner than later.

I wonder how he sleeps at night know that he's become the fall guy for twenty plus years of unsustainable HPI.

Carney is being paid £850k a year to possibly take the blame for the next financial crisis, and whether it happens or not he'll head back to Canadian politics with millions of pounds and a long list of powerful contacts in his pocket. He can't really lose.

[Bloo Loo]

I hope that the BoE does put some limits in... hopefully sensible ones!

I would have thought that Max LTV of 95% and a Max LTI of 5 would be pretty non-controversial.

I would prefer to see something around Max LTV of 90% and Max LTI of 4.

Maybe the BoE could soften the blow to the banks by giving some flexibility back by saying that 95% of loans must obey the new LTV/LTI cap (i.e. 5% of loans could be special cases) and the banks would have to prove they sick to the rules with monthly reports of the previous 12 months loans.

I like the idea of the counter-cyclical capital buffer that the telegraph article alludes to... BUT how on earth can one tell where one is in a cycle without a time machine!?! Sounds like a nice idea but impossible (or very difficult) to implement.

LTI was 3-4 times the main plus 1 times the second before the crash of 1990s

whats different about money today that 5 times is going to work today, and much less then?

[campervanman]

Mortgage rates always below 5% rather than always above 5% until they aren't.

[RentaBear]

While I would be happy to see LTV and LTI caps (I'd suggest 85%LTV / 4x) these only affect new entrants to the market and do nothing to shake out all those zombie households that got mortgages under far laxer lending criteria. I'd say we need both an interest rate rise and some macroprudential caps.

[Fully Detached]

That's nice to read on a Sunday morning. I voted to force the banks to hold higher capital ratio, since that will pretty much cover all the individual lending restriction options.

[FallingAwake]

He's dammed if he does and dammed if he doesn't.

Sentiment is a strong influence, any measure to rein in the high LTI lending will crash the market.

If he chooses to do nothing then we'll get HPC sooner than later.

I wonder how he sleeps at night know that he's become the fall guy for twenty plus years of unsustainable HPI.

Based on his salary, I imagine he sleeps very comfortably.

[RentaBear]

Based on his salary, I imagine he sleeps very comfortably.

I doubt it - he's so poorly paid that they have to bung him another 250K/yr to pay for his rent

[Executive Sadman]

Oddly Zoopla's bubblefest newsfeed abruptly stopped gathering property porn back in april.

http://www.zoopla.co.uk/property-news/

[Bland Unsight]

In one sense, rising risk-taking is evidence of the monetary medicine working. If there are adverse side-effects, then an alternative drug can be called upon – macro-prudential policies. These are an

important new addition to the central bank armoury. When risks are localised – say in the UK housing market – macro-prudential measures can act like a targeted lightning strike. The Bank’s Financial Policy Committee (FPC) is discussing these risks. I will not, tonight, steal their lightning.

Source: Bank of England - The corridor of uncertainly (Speech by Andrew Haldane), emphasis added.

When the Bank of England's Chief Economist starts talking about giving a localised risk (i.e. a housing bubble?) a 'lightning strike' I become more hpc-optimistic.

Edited June 22, 2014 by ex nihilo de novo

[frederico]

No way, the economy will tank, what's left of it

[19 year mortgage 8itch]

Source: Bank of England - The corridor of uncertainly (Speech by Andrew Haldane), emphasis added.

When the Bank of England's Chief Economist starts talking about giving a localised risk (i.e. a housing bubble?) a 'lightning strike' I become more hpc-optimistic.

Now who's got a God complex?

[Bland Unsight]

No way, the economy will tank, what's left of it

I don't think it is quite that simple. Surely as we get an ever larger cohort of renters on rents they can barely afford and FTBers with mortgages that they can barely afford (even at these rates) then the burden of adding new entrants to the bottom of the housing Ponzi starts to throttle demand out of the economy and you end up in a damned if you do, damned if you don't situation.

Basically, the economy will tank eventually if we try to sustain unsustainable house prices, causing house prices to correct, but it will also tank when house prices correct if that correction is precipitated by policy. However house prices will correct eventually. They will correct from wherever they eventually reach, hence it makes more sense to take your medicine sooner rather than later.

As we are now post-2008 the intellectual environment in which policy decisions are embedded is totally different today to what it was like in 2007, and I am still hopeful that as a consequence the policy options selected may well be different. In reality, pre-2008 we were only ever going to get talk from TPTB and the bubble would seek its own end without policy intervention. It's perfectly possible that the same thing is going to happen this time, but it's also perfectly possible that something different will happen. Crucially via HTB pushing one way and removal of FLS for residential mortgages pushing the other it's certainly clear that policy tools are being deployed to 'manage' the bubble. Regardless of their potency or efficacy that is different to the pre-crisis ideology that the banks were the best people to judge how much debt should be allocated against houses and that the prices set by the market in this way were somehow always the 'right' prices.

[Bland Unsight]

Now who's got a God complex?

Fair point - still as long as they smite the right people...

[renting til I die]

I doubt it - he's so poorly paid that they have to bung him another 250K/yr to pay for his rent

Well that's what it costs to rent in London! Poor guy.

[MARTINX9]

Well that's what it costs to rent in London! Poor guy.

Exactly - a 3 bed property in Belgravia like this costs £18k a month to rent. Times that by 12 and you aren't far off his £250k allowance - and he also has the leccy and broadband bill to pay.

http://www.rightmove.co.uk/property-to-rent/property-46839260.html

Edited June 22, 2014 by MARTINX9

[The Masked Tulip]

Mail online is running a story about the new caps trapping thousands of people in their homes.

[rentbug]

Mail online is running a story about the new caps trapping thousands of people in their homes.

Does it affect the doors in some way?

[zugzwang]

Exactly - a 3 bed property in Belgravia like this costs £18k a month to rent. Times that by 12 and you aren't far off his £250k allowance - and he also has the leccy and broadband bill to pay.

http://www.rightmove.co.uk/property-to-rent/property-46839260.html

£4,000 a week cocaine-bling minimalism. But where would Mrs Carney hang her macrame?