Jump to content
House Price Crash Forum
Mikhail Liebenstein

Bank of England should be watching mortgage price war like a hawk

Recommended Posts

Bank of England says it should be watching the current mortgage price war like a hawk: https://www.msn.com/en-gb/money/business/bank-of-england-says-it-is-should-be-watching-mortgage-price-war-like-a-hawk/ar-AABQFDW?li=BBoPWjQ&ocid=iehp

But is it?

The situation with banks using computer driven models to extend further risky lending and there by run down capital seems strangely familiar!!!

Share this post


Link to post
Share on other sites

Isn't the interest rate committee separate from the financial risk committee? Always struck me as a strange one that. Convenient almost.

Share this post


Link to post
Share on other sites
35 minutes ago, Si1 said:

Isn't the interest rate committee separate from the financial risk committee? Always struck me as a strange one that. Convenient almost.

Whether two committees, who are inclined to do nothing as part of an institution that is inclined to do nothing, are separate is perhaps irrelevant. 

Share this post


Link to post
Share on other sites
On 26/05/2019 at 11:05, Si1 said:

Isn't the interest rate committee separate from the financial risk committee? Always struck me as a strange one that. Convenient almost.

Do you mean MPC and FPC?

Carney, Broadbent, Cunliffe & Ramsden are on both.

Share this post


Link to post
Share on other sites
48 minutes ago, Democorruptcy said:

Do you mean MPC and FPC?

Carney, Broadbent, Cunliffe & Ramsden are on both.

Do you suppose they connect the two, or do they operate with a functional firewall irrespective of common staff?

Share this post


Link to post
Share on other sites
On 5/26/2019 at 9:28 AM, Mikhail Liebenstein said:

Bank of England says it should be watching the current mortgage price war like a hawk

Bank of England and hawk in the same sentence?  Is this some kind of joke?

Share this post


Link to post
Share on other sites
On 27/05/2019 at 17:36, Si1 said:

Do you suppose they connect the two, or do they operate with a functional firewall irrespective of common staff?

They are different committees with different agendas - the FPC as a wider remit and membership from different organisations. Both committees will be able to draw on common research and data but the standing support staff preparing for them will be different, inevitably. 

Share this post


Link to post
Share on other sites
On 28/05/2019 at 10:16, msi said:

Don't make me laugh. BOE is as useful as the child protection officer watching Jimmy Saville.

Considering the enormous amount of highly effective regulations it has brought in since the financial crisis, your rather crude analogy suggests that you talk from ignorance with a bit of the Dunning-Kruger effect at work.

The speech in question shows that the Bank and PRA spend a lot of time considering emerging risks and taking steps to reduce them:

https://www.bankofengland.co.uk/-/media/boe/files/speech/2019/scanning-the-horizon-speech-by-sam-woods.pdf?la=en&hash=EE7EEA4F31B3FC6B2DDBED2B10E3E8AA776D7C1B

For professional reasons, I know prudential regulation pretty well, and it is vastly more effective than the useless regime it replaced pre-crisis.

Share this post


Link to post
Share on other sites

Given house prices are in an obvious bubble, what exactly has the bank of England done to deflate that bubble? 

Can you give us some examples? 

Capital ratios etc are irrelevant: they're about bank solvency not deflating a bubble. 

So let's have some concrete examples. 

Share this post


Link to post
Share on other sites
7 hours ago, Ah-so said:

For professional reasons, I know prudential regulation pretty well, and it is vastly more effective than the useless regime it replaced pre-crisis.

To replace useless with slightly less than useless is indeed progress, but ultimately useless.

Share this post


Link to post
Share on other sites
On 03/06/2019 at 22:21, msi said:

To replace useless with slightly less than useless is indeed progress, but ultimately useless.

You didn't quote my first paragraph but I think that still applies. If you think that the changes post crisis are useless, you should post some evidence about why. 

Share this post


Link to post
Share on other sites
On 03/06/2019 at 20:03, 24gray24 said:

Given house prices are in an obvious bubble, what exactly has the bank of England done to deflate that bubble? 

Can you give us some examples? 

Capital ratios etc are irrelevant: they're about bank solvency not deflating a bubble. 

So let's have some concrete examples. 

House prie are sort of an after effect of Browns credit boom and UK pops misplaced beleif in housing dynamics.

Whast the BoE doing to deflate? Nothing active. Its not its job.

Capital rations are *very* relevant. They restrict he amount of money that banks can lend and the cos of that lending. Go back to 05 and UK banks were holding sold all capital. Today banks are holding a lot more capital - up to 10x.

The Boe has effectively banned IO mortgages, pushing them away from he regulated banks.

MMR basically ties house prices to after costs income.

You'll see he average mortgage fall to about 5 times the local median wage after costs. You start seeing the immediate effect of MMR in commuter towns. The boost of moving 80miles out and hubby commuting in so you can get a bigger house is now dead as MMR will remove ehe cost of commute before getting a mortgage , which is significant i nhe UK.

You can see the effect in the number of transaction - have a look athe LR data. trasnacions are abou 1/3 of the level from 20 years ago.

Mix that with the decimation of the financial sector - one of the Uks big employers and big payers - and lots of areas esp. the south, are in big trouble.

 

 

Share this post


Link to post
Share on other sites
14 hours ago, spyguy said:

 

Whast the BoE doing to deflate? Nothing active. Its not its job.

Capital rations are *very* relevant. They restrict he amount of money that banks can lend and the cos of that lending. 

The Boe has effectively banned IO mortgages, pushing them away from he regulated banks.

 

 

That sounds like a very lame excuse for the bank of England.

It's done nothing to reduce the bubble in house prices.You admit it.

Capital ratios: It hasn't stopped banks inflating bubble further, quite the contrary.

It's simply untrue to claim it's banned io mortgages. Not true. 

Basically, the bank of england has doubled the bubble so the banks can max their bonuses; and that's it. 

I don't believe the big lie that our banks are safe. I think they're going down when italy does, and carney knows it. Tell us it ain't so, Joe.  

Share this post


Link to post
Share on other sites
3 minutes ago, 24gray24 said:

That sounds like a very lame excuse for the bank of England.

It's done nothing to reduce the bubble in house prices.You admit it.

Capital ratios: It hasn't stopped banks inflating bubble further, quite the contrary.

It's simply untrue to claim it's banned io mortgages. Not true. 

Basically, the bank of england has doubled the bubble so the banks can max their bonuses; and that's it. 

I don't believe the big lie that our banks are safe. I think they're going down when italy does, and carney knows it. Tell us it ain't so, Joe.  

Balls.

Transactions have fallen off a cliff. 

Capital rations and funding cost are a huge ussue for banks. And constraint.

Banks are effectively banned from IO mortgages.

What binuses? People in retail banks were more likely to be sacked than given a bonus. And mortgage banks font tend to fo bonuses.

You are a bit finfused. You need to do some research.

Share this post


Link to post
Share on other sites
24 minutes ago, spyguy said:

Balls.

Transactions have fallen off a cliff. 

Capital rations and funding cost are a huge ussue for banks. And constraint.

Banks are effectively banned from IO mortgages.

What binuses? People in retail banks were more likely to be sacked than given a bonus. And mortgage banks font tend to fo bonuses.

You are a bit finfused. You need to do some research.

This is Basilea III. Banks need to have sufficient high liquid assets to meet all their ouflows in 30 days. Since banking is all about borrowing short term, lending long term, its not a surprise that  we see credit shortage everywhere.

Share this post


Link to post
Share on other sites
7 hours ago, Neapolitan said:

This is Basilea III. Banks need to have sufficient high liquid assets to meet all their ouflows in 30 days. Since banking is all about borrowing short term, lending long term, its not a surprise that  we see credit shortage everywhere.

Its not a credit shortage.

Its the correct, safe, level of bank lending.

You only need to look to see how many people have been laid off by the banks to see how much things have changed - several 100k.

Brons idiot 2001-2007 - its gone. Its not really coming back as the bank don exis any more.

Share this post


Link to post
Share on other sites
9 hours ago, spyguy said:

Balls.

Transactions have fallen off a cliff. 

Capital rations and funding cost are a huge ussue for banks. And constraint.

Banks are effectively banned from IO mortgages.

What binuses? People in retail banks were more likely to be sacked than given a bonus. And mortgage banks font tend to fo bonuses.

You are a bit finfused. You need to do some research.

Those bonuses are still there only very different. Often not ‘sales’ led but profit led and determined by personal contribution performance (which in some cases will be sales) and overall bank performance. And for some non sales staff, those bonuses have never been bigger. You are right though, a mortgage adviser or financial adviser can therefore no longer earn massive individual bonus. But those incentives (albeit with personal targets to mitigate risks) are still there and fairly substantial compared to working elsewhere. 

IO is alive and well for those already in the system holding IO mortgages looking for a new rate. Also readily available for those with proper equity. Ie if you have other assets to repay the debt in total. Again though to some extent you are right...the entitled 118’er with a 20% deposit and no real assets will now find IO is becoming an ancient myth. 

Capital ratios are helping....but not enough to stem speculation in the north. Effectively what we need is a regime that changed BTL lending and uses 3, 4 or even 5 x annual rent (ie treat the rental income as you would a salary). So a £10k rent allows you to borrow £50k. Instead we have £10k rent covering £150k mortgages. 

I think the BoE is watching the price war like a hawk. It knows what is happening. Actually doing anything about retail prices and putting up rates is a whole different matter because (for tptb) it’s all good at the moment 😉

Share this post


Link to post
Share on other sites

IO mortgages have gone back to what they were - a very expensive, specialist product.

Its new IO mortgages that drive the market.

Existing ones are sat tehre. Over 65s the bank will take the house. Under 55 - repo.

Yes, I could get a IO mortgage is I went to my and showed various assets I coud lquiuiose.

But ..... it wont be drawn down from the BoE. The money will come from a bond sale 100%.

The comment on BTL and leverage is over. 10k rent will be taxed at ~30%. 50k - 40%. S24 kills that. And S24 kills curernt IO BTL too.

What needs to happen for IO BTL is for banks to hold 100% of the capital and LL neesd to cover mortgage payments from icncoem sources other than rent.

 

 

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

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.