RickyD Posted July 26, 2016 Share Posted July 26, 2016 https://www.theguardian.com/business/2014/oct/02/bank-england-powers-intervene-housing-market The Bank of England wants powers to intervene in the mortgage market which would allow policymakers to limit the value of loans to homeowners and prevent a housing bubble disrupting the financial system. Threadneedle Street is asking the chancellor, George Osborne, for powers to restrict the size of mortgages compared with the value of a property and borrowers’ income, in what is a major policy shift following the 2008 banking crisis. The buy-to-let market will also be part of its considerations when deciding to apply any restrictions. The Bank is keeping a close eye on the housing market because two-thirds of the 46 systemic banking crises globally were preceded by housing boom-bust cycles. The FPC added that “cyclical exuberance in the buy-to-let sector can bolster house price increases, thereby amplifying risks from the housing market more broadly”. Quote Link to comment Share on other sites More sharing options...
Bruce Banner Posted July 26, 2016 Share Posted July 26, 2016 The article is from October 2014. Quote Link to comment Share on other sites More sharing options...
RickyD Posted July 26, 2016 Author Share Posted July 26, 2016 So it is. My apologies. Quote Link to comment Share on other sites More sharing options...
ccc Posted July 26, 2016 Share Posted July 26, 2016 Still - good to see they've done a stonking job over the past two years - bubble ? What bubble !! Quote Link to comment Share on other sites More sharing options...
TheCountOfNowhere Posted July 26, 2016 Share Posted July 26, 2016 The article is from October 2014. Read the headline and thought...what, not again !!! BTW...how did hat intervention worked out ? The words lying cheating scumbag banker bas****ds sprung into my mind just then. Quote Link to comment Share on other sites More sharing options...
mubes Posted July 26, 2016 Share Posted July 26, 2016 BoE wanted to tighten lending rules to make it harder to buy a BTL. Good thing no? Not sure I understand why this is a bad thing. It wasn't BoE's job to prevent nominal prices rising, it was their job to reduce chance of arrears no? Quote Link to comment Share on other sites More sharing options...
Si1 Posted July 26, 2016 Share Posted July 26, 2016 Osborne's socially responsible answer was more htb? Followed by losing his job. Afaict. Quote Link to comment Share on other sites More sharing options...
cool_hand Posted July 26, 2016 Share Posted July 26, 2016 what s the chances that we could get the HTB scheme scrapped? Quote Link to comment Share on other sites More sharing options...
billybong Posted July 26, 2016 Share Posted July 26, 2016 (edited) Then when HtB was announced and some said it would likely lead to a house price bubble and Osborne etc claimed that the BoE had the power to prevent any bubble - then Carney said he had no such power. It's the double bind pass the parcel house price economy. Even now in 2016 does anyone have the power to stop a house price bubble? That's if it was ever identified as such. It doesn't make sense to run a country based on silly false claims and silly japes. Edited July 26, 2016 by billybong Quote Link to comment Share on other sites More sharing options...
MrXxx Posted July 26, 2016 Share Posted July 26, 2016 For a moment there I though George Osbourne had been UN-sacked, like the recent Labour Minister for Ladies issues that UN-resigned! Quote Link to comment Share on other sites More sharing options...
mubes Posted July 26, 2016 Share Posted July 26, 2016 I'm not sure I havnt' read what Osborne said. But it doesn't sound right to me that he would say BoE had power to stop a bubble. As Osborne doesn't see it as a bubble does he? I 'think' Osborne would have more likely said BoE had power to prevent risky lending. Carney from what I've heard has often said, his powers are quite limited. He can set lending criteria, make sure loans are not offered on irresonsible terms. But he can't control, for instance, if governmetn subsidise deposits to the tune of 20-40% . Yes in 2016 the gov has power to lower house prices. Could do it very quickly if they wanted to, just end the gov subsided deposits, raise taxes. But they don't seem to want to do it. They surely have the power to do it. But BoE is not in charge (just thinking aloud here, not 100% sure) of intervening in house policy, that's the gov's realm. Their main remit with BTL lending criteria was to ensure that BTL borrowers could withstand the shock of a sharp recession without starting a sprial of defaults. But this hasn't really got much to do with nominal prices afik. I'm pretty much making this up - disclaimer. I'd love to be corrected by someone who knows their actual history. Quote Link to comment Share on other sites More sharing options...
rollover Posted July 26, 2016 Share Posted July 26, 2016 what s the chances that we could get the HTB scheme scrapped? Deutsche Bank say: Government policy remains pivotal. The key policy which could provide upside we believe is Help to Buy equity loan where we believe a temporary increase in the equity stake taken by government to 30% (still remaining short of the 40% in the London Help to Buy product) could provide meaningful support to volumes, as could a short term stamp duty holiday at the lower end of the house price scale. Quote Link to comment Share on other sites More sharing options...
Si1 Posted July 26, 2016 Share Posted July 26, 2016 Then when HtB was announced and some said it would likely lead to a house price bubble and Osborne etc claimed that the BoE had the power to prevent any bubble - then Carney said he had no such power. It's the double bind pass the parcel house price economy. Even now in 2016 does anyone have the power to stop a house price bubble? That's if it was ever identified as such. It doesn't make sense to run a country based on silly false claims and silly japes. Politics was all just a game for Osborne, it's impact on everyday lives an abstract side show. I am hopeful that the new government take a different view. Quote Link to comment Share on other sites More sharing options...
billybong Posted July 26, 2016 Share Posted July 26, 2016 (edited) I'm not sure I havnt' read what Osborne said. But it doesn't sound right to me that he would say BoE had power to stop a bubble. As Osborne doesn't see it as a bubble does he? I 'think' Osborne would have more likely said BoE had power to prevent risky lending. Carney from what I've heard has often said, his powers are quite limited. He can set lending criteria, make sure loans are not offered on irresonsible terms. But he can't control, for instance, if governmetn subsidise deposits to the tune of 20-40% . Yes in 2016 the gov has power to lower house prices. Could do it very quickly if they wanted to, just end the gov subsided deposits, raise taxes. But they don't seem to want to do it. They surely have the power to do it. But BoE is not in charge (just thinking aloud here, not 100% sure) of intervening in house policy, that's the gov's realm. Their main remit with BTL lending criteria was to ensure that BTL borrowers could withstand the shock of a sharp recession without starting a sprial of defaults. But this hasn't really got much to do with nominal prices afik. I'm pretty much making this up - disclaimer. I'd love to be corrected by someone who knows their actual history. Any future bubble. They always deny an existing bubble. The power to control a possible house price bubble as well as risky lending. The two can go together. http://www.bbc.co.uk/news/business-24293971 Chancellor George Osborne has asked the Bank of England to take a bigger role in ensuring his Help to Buy housing scheme does not fuel a property boom. The Bank's Financial Policy Committee (FPC) will make annual reviews of the scheme, starting next September. After several statements by Osborne (after HtB was first introduced) saying that the BoE had the power Carney seemed eventually forced to say that he didn't have the power. It was continually in the media at the time. Typically. https://next.ft.com/content/277ed534-2762-11e3-8feb-00144feab7de http://www.huffingtonpost.co.uk/2014/01/09/osborne-cable-housing-bubble_n_4566871.html http://www.heraldscotland.com/news/13165092.Osborne_acts_on_risky_mortgages/ http://www.telegraph.co.uk/finance/autumn-statement/11193158/George-Osborne-I-will-not-control-housing-market-with-unfair-punitive-stamp-duty.html http://www.dailymail.co.uk/news/article-2560957/I-control-UKs-soaring-house-prices-says-Carney-Bank-chief-admits-powerless-average-asking-price-jumps-250-000.html http://www.thisismoney.co.uk/money/news/article-2560614/Bank-England-chief-powerless-stop-soaring-London-property-prices.html Plus the OP's guardian link. Edited July 26, 2016 by billybong Quote Link to comment Share on other sites More sharing options...
shindigger Posted July 26, 2016 Share Posted July 26, 2016 The article is from October 2014. Only 20 years late then. Not bad. Quote Link to comment Share on other sites More sharing options...
19 year mortgage 8itch Posted July 27, 2016 Share Posted July 27, 2016 I'm not sure I havnt' read what Osborne said. But it doesn't sound right to me that he would say BoE had power to stop a bubble. As Osborne doesn't see it as a bubble does he? I 'think' Osborne would have more likely said BoE had power to prevent risky lending. Carney from what I've heard has often said, his powers are quite limited. He can set lending criteria, make sure loans are not offered on irresonsible terms. But he can't control, for instance, if governmetn subsidise deposits to the tune of 20-40% . Yes in 2016 the gov has power to lower house prices. Could do it very quickly if they wanted to, just end the gov subsided deposits, raise taxes. But they don't seem to want to do it. They surely have the power to do it. But BoE is not in charge (just thinking aloud here, not 100% sure) of intervening in house policy, that's the gov's realm. Their main remit with BTL lending criteria was to ensure that BTL borrowers could withstand the shock of a sharp recession without starting a sprial of defaults. But this hasn't really got much to do with nominal prices afik. I'm pretty much making this up - disclaimer. I'd love to be corrected by someone who knows their actual history. If you want to change history, you're going to need a bigger brush. Quote Link to comment Share on other sites More sharing options...
Venger Posted July 27, 2016 Share Posted July 27, 2016 I'm not sure I havnt' read what Osborne said. But it doesn't sound right to me that he would say BoE had power to stop a bubble. As Osborne doesn't see it as a bubble does he? I 'think' Osborne would have more likely said BoE had power to prevent risky lending. Carney from what I've heard has often said, his powers are quite limited. He can set lending criteria, make sure loans are not offered on irresonsible terms. But he can't control, for instance, if governmetn subsidise deposits to the tune of 20-40% . Yes in 2016 the gov has power to lower house prices. Could do it very quickly if they wanted to, just end the gov subsided deposits, raise taxes. But they don't seem to want to do it. They surely have the power to do it. But BoE is not in charge (just thinking aloud here, not 100% sure) of intervening in house policy, that's the gov's realm. Their main remit with BTL lending criteria was to ensure that BTL borrowers could withstand the shock of a sharp recession without starting a sprial of defaults. But this hasn't really got much to do with nominal prices afik. I'm pretty much making this up - disclaimer. I'd love to be corrected by someone who knows their actual history. Who knows? His parents in London downsized just a couple of years ago or so, for whatever reasons - although if it was foreverHPI surely the far more expensive house would have given them more future mad-gainz. Is that from same line of thought that S24 just to slow house prices growth, and that it actually makes prices less likely to correct? First up, I agree with your idea that post-2009 BTL will not produce any material losses, even in the case of a 40% correction. However, for some loan books at some banks (particularly where the business was written at very high-LTV) I'm guessing that 40% from here would produce some red ink in some of the 2005-2008 stuff that is presently hanging on by its fingernails, but as the graphs in the OP show, with each passing year the 2005-2008 cohorts become a smaller and smaller part of the overall book. It is not unimaginable that some of the 2005-2008 lot are getting out by selling to the current lot! As to why we've gone down this road rather than just allowing a correction, I think that you've got to recall the WTF mood of 2007-2008. The major consultation papers that led to the MMR weren't published till December 2011. I've taken the view that up to this point the regulators/technocrats 'knew' what was going on, but didn't know the gory details with sufficient confidence to win the political battle with the banks about the need for these practices to be reformed. Interest only mortgages were still being written as a mainstream product for owner-occupiers up to 2012. It takes time to turn the ship around. As to why BTL is allowed to continue, I am also not inclined to suppose that there was a meeting in a smoke filled room where Mervyn King, chomping on a cigar and talking like James Cagney in Angels With Dirty Faces, told Osborne the plan. However, anything that shares out the risk, especially if it places it on the shoulders of those with the financial strength to bear it, was always going to be welcomed by the Treasury and the Bank of England. Likewise, the banks are placing whopping fees on this BTL stuff - £2000 a pop - and it is lent at decent rates. Given that it still falls under the FLS, the margins must be "Thank you very much!" The punters are clamouring for it, there is no political dissent because the MPs are all up to their necks in it. Likewise the journos. I agree it is emergent. However, I am inclined to believe that the regulators are on the same page as me - anyone who wants to help bail out the banks is welcome to chip in. BTL is not a regulated product. Nobody expected the regulators to stop people buying shares in Pets.com and nobody should expect the regulators to stop BTLers buying houses. As to whether the regulator should step in, or whether BTL is a political matter that should be addressed by statute law - those are different, important questions. Section 24. Quote Link to comment Share on other sites More sharing options...
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