Sharp Rise in 30 Year Mortgages

[Bland Unsight]

4 hours ago, allornothing said:

If you are renting in the same area so still paying 4% or whatever rent on the value of the property, is renting really opting out of the house valuations?

House prices can really, really shift and that'll have no significant effect on rents.

The existence of interest-only BTL mortgages means the same crappy flat commanding the same rent can be bought and sold at a much higher price. Continuing to rent in that market does not constitute opting in. Buying represents opting in. Renting represents opting out.

Edited January 14, 2017 by Bland Unsight

[Bland Unsight]

6 minutes ago, allornothing said:

 

Is it really possible to opt out of anything anymore? Holding cash is a FX bet as well as a HPC bet. You are just putting chips on a different square. 

By choosing where to live, we are invested in the area. If there is high HPI then we are contributing to that by paying the increased market rent. LAndlords chase yeild after all, and travel the country to find it. There has got to be some correlation between yeild, rent and house prices?

As the price goes up, the yield goes down.

(Because rents aren't influenced by changes to the price or terms of mortgage credit, obviously. Spoiler Alert: Rents paid using incomes.)

[longtomsilver]

3 hours ago, One-percent said:

Tptb keep telling us that "we" all live longer but I've not seen the data presented anywhere to support this assertion.  It's just a way afaict to justify the raising of the pension age 

Absolutely this 100% it's the greatest con trick in history. Humans have a predetermined lifespan, programmed into our genes - we can not outsmart Mother Nature.

[Bland Unsight]

46 minutes ago, Bland Unsight said:

(Because rents aren't influenced by changes to the price or terms of mortgage credit, obviously. Spoiler Alert: Rents paid using incomes.)

Source

[Bland Unsight]

54 minutes ago, Bland Unsight said:

(Because rents aren't influenced by changes to the price or terms of mortgage credit, obviously. Spoiler Alert: Rents paid using incomes.)

Still like this one from back in the day...

I'm not sure I really understand your theory regarding how landlords travelling all over the country chasing higher yields leads to higher rents. Could you explain it in greater detail? (Do they shed money from their backsides as they travel these days? The graphs suggests that the role of the  @rse-money deposit channel didn't really show up in the aggregated data in the p@rsted, sorry, past.)

[Ah-so]

8 hours ago, longtomsilver said:

Absolutely this 100% it's the greatest con trick in history. Humans have a predetermined lifespan, programmed into our genes - we can not outsmart Mother Nature.

Then surely we have been reducing the chances of dying prematurely vs our natural maximum lifespan. Clearly life expectancy had improved, so I cannot see how it is the biggest con trick in human history. 

This has partly come about due to changes in our lifestyles (eg reduction in smoking rates, improved diet) and improvements in medicine. 

But a reduction in premature death leads to an increase in age related illnesses, such as cancer.

Edited January 15, 2017 by Ah-so

[One-percent]

15 minutes ago, Ah-so said:

... Clearly life expectancy had improved...

How exactly is it clear?  I've seen no evidence being presented for this, just suit after suit asserting it in the media.  Happy to be corrected if there is data to support this and until there is, I'll treat this in the same way I treat everything I'm told by tptb.  With scepticism. 

[darkmarket]

6 minutes ago, One-percent said:

How exactly is it clear?  I've seen no evidence being presented for this, just suit after suit asserting it in the media.  Happy to be corrected if there is data to support this and until there is, I'll treat this in the same way I treat everything I'm told by tptb.  With scepticism. 

http://data.worldbank.org/indicator/SP.DYN.LE00.IN?locations=GB

[longtomsilver]

26 minutes ago, Ah-so said:

Then surely we have been reducing the chances of dying prematurely vs our natural maximum lifespan. Clearly life expectancy had improved, so I cannot see how it is the biggest con trick in human history. 

This has partly come about due to changes in our lifestyles (eg reduction in smoking rates, improved diet) and improvements in medicine. 

But a reduction in premature death leads to an increase in age related illnesses, such as cancer.

Jam tomorrow!

Googling life expectancy falls uk brings up a few articles. One from December last year that says life expectancy in America has fallen for the first time in twenty-three years and another that tells me the number of healthy years has remained static in the U.K. for nearly two decades and the only  increase has been years spent in ill health! 

It's all very well for ONS statisticians to plot a graph of continually increasing longevity into our mid 80s by 2030 but they won't be around in an occupational sense to validate their spurious claims.

[One-percent]

9 minutes ago, darkmarket said:

http://data.worldbank.org/indicator/SP.DYN.LE00.IN?locations=GB

Thanks darkmarket but I'll stick with my scepticism. It's a chart  without the underlying data and it is concerned with life expectancy again, not actual numbers showing the age at what people tend to die.  What would be convincing is a dataset that shows age of death for every person in the uk.  

I would guess that the stats backing the assertion, if there are any, is that there has been much improvement in the numbers of children dying. In the last century, there were massive advances against many common killers, such as smallpox, measles, whooping cough, diphtheria, and dysentery.  There was also the discovery and subsequent widespread use of antibiotics. Therefore, the mean will have improved.  If we looked at older age ranges, I would suggest that we are not individually living longer, just more of the population is reaching old age. 

[darkmarket]

27 minutes ago, One-percent said:

Thanks darkmarket but I'll stick with my scepticism.

You did say you were sceptical about increased life expectancy, and you were "happy to be corrected if there is data to support this."

I provided you with World Bank data showing increased life expectancy, that's all.

[One-percent]

20 minutes ago, darkmarket said:

You did say you were sceptical about increased life expectancy, and you were "happy to be corrected if there is data to support this."

I provided you with World Bank data showing increased life expectancy, that's all.

Fair enough, but what I'm arguing with is that for tptb, increased life expectancy is turned into we all live longer, oh look, because you are all living longer, you can all work longer and so can take out mortgages over a longer term, with all the intended and unintended consequences.  I'm trying to challenge their basic premise. 

[Richmond]

23 minutes ago, One-percent said:

Fair enough, but what I'm arguing with is that for tptb, increased life expectancy is turned into we all live longer, oh look, because you are all living longer, you can all work longer and so can take out mortgages over a longer term, with all the intended and unintended consequences.  I'm trying to challenge their basic premise. 

I thought TPTB say that more people are living to old age (however that is achieved) and basically they can't afford to pay for the extra people that are alive and in retirement at any one time. So everyone has to work longer etc. 

Agree though that they dress it up that YOU will live much longer when in all liklihood you won't live longer than your grandparents did.

Edited January 15, 2017 by Richmond

[One-percent]

1 minute ago, Richmond said:

I thought TPTB say that more people are living to old age (however that is achieved) and basically they can't afford to pay for the extra people that are alive and in retirement at any one time. So everyone has to work longer etc. 

The first part of this  isn't disputed. See my earlier post regarding the massive decrease of child mortality. However, they also peddle the argument that we are all living longer and then use this to justify policy change. It's this that I dispute. 

[Richmond]

1 minute ago, One-percent said:

The first part of this  isn't disputed. See my earlier post regarding the massive decrease of child mortality. However, they also peddle the argument that we are all living longer and then use this to justify policy change. It's this that I dispute. 

Yes, I edited my post after you quoted it:

Agree though that they dress it up that YOU will live much longer when in all liklihood you won't live longer than your grandparents did.

 

[One-percent]

Just now, Richmond said:

Yes, I edited my post after you quoted it:

Agree though that they dress it up that YOU will live much longer when in all liklihood you won't live longer than your grandparents did.

 

Agree.  And the issue is that they are still taking money off us all to pay for our pensions.  NI and then making it so that everyone has to pay into a private pension, giving their money to the sharks in the city.  If the government can't afford to pay pensions, I'm sure the private financial sector can't. 

They need to just come clean and tell us that it's up to us all individually to plan our futures. Drop all this jam tomorrow rubbish 

[Bland Unsight]

9 minutes ago, allornothing said:

Rents and house prices are positively correlated to some degree surely..

The average yield looking at the historic charts is about 4% plus base rate. So about 4% now, and 8% 10 years ago.

Personally, as house prices go up, i'm more willing to pay higher rent. And as house prices go down, I expect to pay less rent. otherwise I would buy. 

Landlords chase yield geographically. If stockport yeilds are high, Mr Blair goes and buys a block of flats in stockport. 

What buy-to-let investors label as gross yield is simply the annual rental income divided by the price of the property, so a property that costs £200,000 and returns an annual rental income before all costs of £10,000 has a 'gross yield' of 5%.

You propose an average yield of "4% plus base rate". Now in Q3 2007, the Nationwide price index (nominal) was at about £180k and the base rate was 5.75% so your model says a rent of £17,550/year. By Q2 2008 prices are down a bit at £160k but the base rate is at 0.5% so your model says rent of £7,200. Now the data does not show rents falling by 60% so I think its reasonable to suggest that the model you propose is worthless.

Regarding paying higher rents when prices are higher, the graphs I've posted show that you are not statistically representative, highlighting again the old saw about how the plural of anecdote is not data.

Finally, regarding yield chasing. What happens is that investors bid up prices and reduce the yields.

I'm intrigued as to the source of these historical yield charts you mention. Can you link to a source, please?

 

[darkmarket]

1 hour ago, One-percent said:

Fair enough, but what I'm arguing with is that for tptb, increased life expectancy is turned into we all live longer, oh look, because you are all living longer, you can all work longer and so can take out mortgages over a longer term, with all the intended and unintended consequences.  I'm trying to challenge their basic premise. 

I quite agree with you there, I just think it's more credible if the arguments are based on facts.

If we start with the assumption that life expectancy is getting longer, add the expectation that based on this retirement ages will be increased, we start to get to the core of the problem - there aren't enough jobs for everyone, opportunities for career development are hampered, and many, if not most, people won't have the job security to take on mortgages of this duration and still have an asset at the end of the term.

That's probably the objective.

[Ah-so]

3 hours ago, One-percent said:

How exactly is it clear?  I've seen no evidence being presented for this, just suit after suit asserting it in the media.  Happy to be corrected if there is data to support this and until there is, I'll treat this in the same way I treat everything I'm told by tptb.  With scepticism. 

Although others have now posted the data, here are UK government stats: https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/lifeexpectancies/bulletins/nationallifetablesunitedkingdom/20132015

Particularly useful are the following sections, which strip out the impact of reduced child mortality :

Life expectancy at age 65

Life expectancy at age 65 for men in the UK reached 18.4 years in 2012–2014 and for women it reached 20.9 years. This means that a man aged 65 could expect to live to age 83 and a woman to nearly age 86.

Table 1 shows that life expectancy at age 65 in the UK improved throughout the period 1980-1982 to 2012–2014. The improvement was most noticeable for men, where life expectancy increased by 5.4 years over the 32 year period. For women, life expectancy saw a smaller increase of 4.0 years over the same period.

The difference between male and female life expectancy at age 65 decreased fairly steadily over the last 32 years. In 1980–1982, the difference between male and female life expectancy in the UK was 3.9 years and by 2012–2014 it was 2.5 years. This was caused by the faster rate of improvement in male life expectancy than female life expectancy. Despite the gap between male and female life expectancy narrowing, life expectancy for men still remained lower than that for women in 2012–2014.

In 1982–1984, the majority of all deaths in the UK fell within the 60 to 79 year age group for men (53.9%). However, for women the majority of all deaths fell in the 80 and over age group (51.1%). By 2012–2014 the majority of male deaths had shifted to the 80 and over age group category with the highest percentage of deaths for both men (57.5%) and women (69.1%). This is an indication that the population is ageing.

[Ah-so]

1 hour ago, Richmond said:

Yes, I edited my post after you quoted it:

Agree though that they dress it up that YOU will live much longer when in all liklihood you won't live longer than your grandparents did.

 

In all probability you will live longer than your grandparents. See the data in my post above. 

[Greater Fool]

Whats the problem? Going on current trends prices in 30 years time will be more than quadruple what they are now, every homeowner will be at least a millionaire. Prices will just go up forever, init.

[One-percent]

32 minutes ago, Ah-so said:

Although others have now posted the data, here are UK government stats: https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/lifeexpectancies/bulletins/nationallifetablesunitedkingdom/20132015

Particularly useful are the following sections, which strip out the impact of reduced child mortality :

Life expectancy at age 65

Life expectancy at age 65 for men in the UK reached 18.4 years in 2012–2014 and for women it reached 20.9 years. This means that a man aged 65 could expect to live to age 83 and a woman to nearly age 86.

Table 1 shows that life expectancy at age 65 in the UK improved throughout the period 1980-1982 to 2012–2014. The improvement was most noticeable for men, where life expectancy increased by 5.4 years over the 32 year period. For women, life expectancy saw a smaller increase of 4.0 years over the same period.

The difference between male and female life expectancy at age 65 decreased fairly steadily over the last 32 years. In 1980–1982, the difference between male and female life expectancy in the UK was 3.9 years and by 2012–2014 it was 2.5 years. This was caused by the faster rate of improvement in male life expectancy than female life expectancy. Despite the gap between male and female life expectancy narrowing, life expectancy for men still remained lower than that for women in 2012–2014.

In 1982–1984, the majority of all deaths in the UK fell within the 60 to 79 year age group for men (53.9%). However, for women the majority of all deaths fell in the 80 and over age group (51.1%). By 2012–2014 the majority of male deaths had shifted to the 80 and over age group category with the highest percentage of deaths for both men (57.5%) and women (69.1%). This is an indication that the population is ageing.

Many thanks Ah-so.  The link is particularly useful.  On the ons page, there is a link to the raw data of deaths for each year/age which would be worth playing around with.  A task for when I'm at work with little to do.  

[Bland Unsight]

This thread reminded me that the CML were flagging this early last year.

One way to look at this is about who holds the risk and when the risk manifest. If you allow people to borrow at very high multiples of the income then when the economy falters, wages dip and unemployment moves upwards people find it very difficult to pay their mortgages. By 2007 we had huge volumes of liar loans (self-certified mortgages) and therefore we'll probably never know what level LTIs had reached. In this situation so many people couldn't pay their mortgages that it threatened the solvency of the banks, the fact that the banks were so leveraged made matters even more serious.

MMR essentially keeps the risk away from the heart of the system (the banks) and places it to a greater extent on the borrowers. The weakest part of MMR (as Democorruptcy correctly identifies) is the lack of rules on mortgage terms. If what you want (and I do) is a limit on how much people can borrow, this is a pretty serious weakness and sure enough it is being exploited.

Chart 3: Repayment terms longer than 25 years, % take-up by borrower type (CML, same source as above)

 

This is pretty cynical, but WTF. It has to be acknowledged that there is an enormous amount of risk associated with the fact that people paid way too much for their houses during the boom and to varying degrees have left themselves in a position where they are going to struggle to pay it back and end up owning the house at the end of their working lives. There are millions of interest-only mortgage prisoners. Allowing longer mortgage terms gives some of these folks a lifeline.

Setting aside entirely the interests of the borrower and focusing only on the interests of the lender, it also give the lender a lifeline. The so-called interest-only time bomb is real problem. Low mortgage rates and longer terms allows FTBers to pay prices at which mortgage prisoners can sell and not leave the lender with the consequences of negative equity. It also allows mortgage prisoners to move from interest-only loans to repayment mortgages. These longer terms work for the lenders because they take some risks that are in the present and move them into the future (FTBers replacing mortgage prisoners) and it takes some risks that will manifest in the near future (2025-2032) and may eliminate them entirely (mortgage prisoners refinancing onto repayment terms).

 

Edited January 15, 2017 by Bland Unsight

[Richmond]

1 hour ago, Ah-so said:

In all probability you will live longer than your grandparents. See the data in my post above. 

Considering my grandparents are all in their 80s and going strong I certainly hope you are right

[dugsbody]

2 hours ago, darkmarket said:

um