Jump to content
House Price Crash Forum
Sign in to follow this  
canbuywontbuy

End Of Cheap Mortgage Boom As Big Banks Raise Rates

Recommended Posts

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/11762045/End-of-cheap-mortgage-boom-as-big-banks-raise-rates.html

From the comments (this comment is posted a lot by the way, but it's spot on):-

Since about 2000, house prices and mortgage debt have significantly outpaced economic fundamentals like inflation, incomes and GDP. Every home buyer has to take on more debt than the person selling to him. Yet our political leaders and central bankers are more concerned about whether we will pay less tomorrow for a pint of milk than new home buyers borrowing £20-30,000 more than last year to put a roof over their head.

In private business, pyramid schemes are illegal. In government and central banking, they are the central policy upon which entire national economies are constructed.

Start apologising to your children now, because it is they who will be paying for all of this neo-Keynesian stupidity.

Share this post


Link to post
Share on other sites

Once you start along the path of getting growth via debt, the only way to get future growth is with ever greater debt, but the problem is the returns diminish each time you increase further.

Factor in stagnating wages you have an economy with built in limits.

Share this post


Link to post
Share on other sites

There is one part of this article at the DT which will be factually incorrect;

Banks and building societies will begin to withdraw their best mortgage deals next week as home owners scramble to beat the rise in interest rates this winter.

There won't be any rate increases this Winter, this is a bubble the BoE will not want to burst!

Totally agree with the comment though!

Edited by Noginthenog

Share this post


Link to post
Share on other sites

There is one part of this article at the DT which will be factually incorrect;

There won't be any rate increases this Winter, this is a bubble the BoE will not want to burst!

Totally agree with the comment though!

IRs and mortgage rates are two (mostly) seperate things.

The FLS 2012-2014 boom was base don free BoE FLS money at 0.5% allowing them to lend it out to any mug with a 40% deposit at 2%.

It's what used to be called, CRIMINAL

Edited by TheCountOfNowhere

Share this post


Link to post
Share on other sites
Borrowers scrambling to snap up cheap fixed-rate deals before they disappear fuels 15 month high in home loan approvals
0DD5089E00000514-0-image-m-11_1437746596

Figures from the British Bankers' Association suggest the housing market is heating up with 44,488 mortgages with a total value of £7.7 billion approved for house purchases in June.

The Wail article.

Share this post


Link to post
Share on other sites

Borrowers scrambling to snap up cheap fixed-rate deals before they disappear fuels 15 month high in home loan approvals

0DD5089E00000514-0-image-m-11_1437746596

Figures from the British Bankers' Association suggest the housing market is heating up with 44,488 mortgages with a total value of £7.7 billion approved for house purchases in June.

The Wail article.

Normal UK market needs about 100k mortgages a month to tread water.

House prices have been 'saved' by very low transaction.

Of course, all those delayed transaction are just saving drops for the future.

Share this post


Link to post
Share on other sites

I thought the banks were private businesses that could charge what they liked for their products and services.....losing money in some areas they may choose to make it up by increasing costs in other areas......unless writen in contract to say linked to boe base rate, surely they can increase their margins as and when they feel fit?

....unless someone can explain otherwise.

Edit to say....churn is something that is good for lenders such as fixing a rate for a fee.....maybe they want people to panic a bit and shop around,,,,bit like they tell you to do with energy companies......no one needs to worry if they haven't over stretched themselves and are slowly working towards repaying their debt, together with shopping, spending and saving more wisely.

Edited by winkie

Share this post


Link to post
Share on other sites

I thought the banks were private businesses that could charge what they liked for their products and services.....losing money in some areas they may choose to make it up by increasing costs in other areas......unless writen in contract to say linked to boe base rate, surely they can increase their margins as and when they feel fit?

....unless someone can explain otherwise.

http://www.bankofengland.co.uk/statistics/pages/iadb/notesiadb/wholesale_baserate.aspx

BoE on the minimum lending rate.

Share this post


Link to post
Share on other sites

further evidence of a disconnect between the BoE rate and the rate at which money can be borrowed (other than from the BoE)

all these points have been made previously

- a fraudster can't get a credit card, but a fraudulent bank (convicted re LIBOR / FX) can borrow from the BoE and participate in QE asset purchases - how so?

- lenders are there to lend and, absent of any hazard (i.e. on past form they mostly expect to be bailed out if they get in a mess), will lend more riskily than might be sensible to chase returns

- the only difference between being a bank and being a counterfeiter of money is a banking licence

Would you lend £150k interest only to a BTLer if that represented 85% LTV / 125% rent cover to earn 10 year fixed return of 4.5% gross return?

That is what banks have been doing.

It is only even worth considering in either a rising housing market, or where the borrower has significant other assets to cover the risk, or where interest rates aren't expected to increase, or where your employer really doesn't care because it knows the taxpayer has its back and you get a bonus for writing the loan...

Share this post


Link to post
Share on other sites

All fairly unclear to me.....prehaps you could explain in simple terms what your link is saying....Ta. ;)

It seems to me that the pair of you are talking at cross purposes. IRRO's link concerns how the central bank operates in the markets and provides lending services to the private banks in order to turn the policy rate from a number printed on their minutes into a market rate.

Your question was about the rates on products offered by the private banks to their customers, principally rates on mortgages, and the answer to your question is, to the best of my understanding, as you propose. It seems to me that a bank could offer mortgage that paid negative interest on the balance but which had a whacking great fee (meaning the loan still made money for the bank). However, because of the April 2014 implementation of the Mortgage Market Review reforms you would only be able to take out the loan if an assessment of your earnings and expenses suggested that you could cover the interest and repayment if the interest rate had in fact been (effectively) 5%. (The actual mechanics of how the higher rate are assessed are not quite so simple as I suggest here, but life is short.)

Share this post


Link to post
Share on other sites

It seems to me that the pair of you are talking at cross purposes. IRRO's link concerns how the central bank operates in the markets and provides lending services to the private banks in order to turn the policy rate from a number printed on their minutes into a market rate.

Your question was about the rates on products offered by the private banks to their customers, principally rates on mortgages, and the answer to your question is, to the best of my understanding, as you propose. It seems to me that a bank could offer mortgage that paid negative interest on the balance but which had a whacking great fee (meaning the loan still made money for the bank). However, because of the April 2014 implementation of the Mortgage Market Review reforms you would only be able to take out the loan if an assessment of your earnings and expenses suggested that you could cover the interest and repayment if the interest rate had in fact been (effectively) 5%. (The actual mechanics of how the higher rate are assessed are not quite so simple as I suggest here, but life is short.)

Thanks, that has explained how they check affordability on a new loan.....what I was wondering for existing borrowers whether a bank or building society can increase their say SVR the rate at which many variable secured loans are linked to when they fancy......afterall other loan rates can rise and fall, the payday loan company loans do not look like they are related in any way to the BoE base rate.....I do understand that many rates are attached to risk but that is not what I am talking about in this instance. ;)

Share this post


Link to post
Share on other sites

All fairly unclear to me.....prehaps you could explain in simple terms what your link is saying....Ta. ;)

My interpretation is that banks are free to lend at whatever interest rate they like, however if they get into trouble the BoE is stating at what rate it will lend to them. I'm guessing if they have lent money too much money at below BoE base rates they are effectively are signing their own death warrant if they run into trouble.

Share this post


Link to post
Share on other sites

Once you start along the path of getting growth via debt, the only way to get future growth is with ever greater debt, but the problem is the returns diminish each time you increase further.

Factor in stagnating wages you have an economy with built in limits.

People have said this limit was reached in 2008 and peak debt was reached. Fast forward with FLS, HTB, RTB, QE, ZIRP and many others and it's repeat and rinse. When can we go to sound money and my generation can have a sustainable future?

Share this post


Link to post
Share on other sites

People have said this limit was reached in 2008 and peak debt was reached. Fast forward with FLS, HTB, RTB, QE, ZIRP and many others and it's repeat and rinse. When can we go to sound money and my generation can have a sustainable future?

And house prices not even at 2007 levels for most of the country.

Go figure, maybe some on here were right all along.

Have you seen the nationwide ( or is it halifac ) unaffordability graph....we are headed towards peak unaffordability but this is with 0,5% IRS/FLS etc and much higher cost of living.

There is only one way house prices are going in the future and this is down.

They have been going down in ream terms for a long time now

Share this post


Link to post
Share on other sites

People have said this limit was reached in 2008 and peak debt was reached. Fast forward with FLS, HTB, RTB, QE, ZIRP and many others and it's repeat and rinse. When can we go to sound money and my generation can have a sustainable future?

http://data.worldbank.org/indicator/FS.AST.PRVT.GD.ZS

http://data.worldbank.org/indicator/FS.AST.DOMS.GD.ZS/countries?display=map

Private debt did peak in 2008/09 and has been declining since, replaced now of course by govt borrowing. All they have done so far is prop up the market.

Share this post


Link to post
Share on other sites

http://data.worldbank.org/indicator/FS.AST.PRVT.GD.ZS

http://data.worldbank.org/indicator/FS.AST.DOMS.GD.ZS/countries?display=map

Private debt did peak in 2008/09 and has been declining since, replaced now of course by govt borrowing. All they have done so far is prop up the market BANKS.

Corrected for you....

Share this post


Link to post
Share on other sites

People have said this limit was reached in 2008 and peak debt was reached. Fast forward with FLS, HTB, RTB, QE, ZIRP and many others and it's repeat and rinse. When can we go to sound money and my generation can have a sustainable future?

When IQ rises to a level where people can see the're being stolen from.

Given the Japs have a high IQ and still buy into the same bad economics and rip off's as us, I don't hold out much hope...

Share this post


Link to post
Share on other sites

And house prices not even at 2007 levels for most of the country.

Go figure, maybe some on here were right all along.

Have you seen the nationwide ( or is it halifac ) unaffordability graph....we are headed towards peak unaffordability but this is with 0,5% IRS/FLS etc and much higher cost of living.

There is only one way house prices are going in the future and this is down.

They have been going down in ream terms for a long time now

Cambridge area (ie cambridge + 15 miles) is now well beyond 2007...500k for things little more than 1000sq ft out in the sticks. Get the luxury of spending 2 hours in the car each day battling into Cambridge to do a shitty job on wages that are a fraction of London.

Most the money seems to be from China, admittedly. Aside from the takeaway owners, you wouldnt see chinese faces once a mile outside of Cambridge till about 2 years ago...now they're everywhere.

Share this post


Link to post
Share on other sites

Cambridge area (ie cambridge + 15 miles) is now well beyond 2007...500k for things little more than 1000sq ft out in the sticks. Get the luxury of spending 2 hours in the car each day battling into Cambridge to do a shitty job on wages that are a fraction of London.

Most the money seems to be from China, admittedly. Aside from the takeaway owners, you wouldnt see chinese faces once a mile outside of Cambridge till about 2 years ago...now they're everywhere.

November 2007 305.44
May 2015 322.27

5% past 2007 peak and prices looked to have topped out. is 5% well beyond, or just beyond ?

I rememebr cambridge crashed hard in 2008, low point was :

May 2009 249.46

so down : 19%.

So prices up 25% in almost a decade. Hardly worth writing home about. We had that in 1 year in London.

What do people really think is coming next ? More rises when prices are beyond unaffordable ?

50% crash in places like this is now looking more and more likely IMHO.

Look at sales volumes:

March 2007 290.6 1214
March 2014 293.61 849
March 2015 320.42 632, down 27% from 2014.
Low point in sales for march since 2007 is:
March 2009 255.55 525
so hardly a booming market.
Sales volumes look to be heading back to 2009 lows.
Them people in Cambridgeshire must be thick, dont they have a good Uni there ?
If people are stupid enough to pay these government/criminal supported prices then let them. No one in their right mind would have bought a house in the last 2 years.
Edited by TheCountOfNowhere

Share this post


Link to post
Share on other sites

Cambridge area (ie cambridge + 15 miles) is now well beyond 2007...500k for things little more than 1000sq ft out in the sticks. Get the luxury of spending 2 hours in the car each day battling into Cambridge to do a shitty job on wages that are a fraction of London.

Most the money seems to be from China, admittedly. Aside from the takeaway owners, you wouldnt see chinese faces once a mile outside of Cambridge till about 2 years ago...now they're everywhere.

£500K gets 2000sqft in a good area, 8 miles south of Cambridge. Twenty-five minutes to get to science park on North Side or railway station area on south side. (I did both commutes @8am). Wages in tech-jobs as good as anywhere else in UK.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   29 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.