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Times - Chill Wind In The Mortgage Market...


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:blink: Chill wind could hit mortage lending by winter, say analystsGabriel Rozenberg, Economics Reporter

A slowdown in the housing market by this winter remains on the cards, despite resilient levels of mortgage activity, analysts said yesterday.

Figures from the British Bankers’ Association (BBA) showed that mortgage lending remains surprisingly robust. There were 67,000 new loans in July, which Capital Economics said was an eight-month high when adjusted for seasonal variations. However, economists said that activity in the property sector was slowing in response to the Bank of England’s five interest-rate rises since August last year.

Oliver Gilmartin, senior economist at the Royal Institution of Chartered Surveyors (RICS), said: “Tightening borrowing standards could intensify the current slowdown in lending activity. Equally, those trying to get on the property ladder may need higher deposits to allay the fears of lenders.”

The value of gross lending in July hit £21.3 billion, 12 per cent higher than last year, the BBA figures showed, driven by an increase in remortgaging as borrowers tried to shut out the threat of higher interest rates.

Seema Shah, of Capital Economics, said: “The latest data . . . suggests that mortgage demand has remained relatively firm. Even so, with buyer interest on the wane, the moderation in mortgage approvals seen to date is far from finished . . . We continue to expect housing market activity levels to be in a significantly more subdued state by the end of the year.”

Capital Economics forecasts that outright falls in house prices remain unlikely, but believes that the market will stagnate for the next 12 to 18 months. A report published by the RICS this month found that confidence in the housing market was drying up, with inquiries by new buyers falling at their fastest rate since August 2004.

The buy-to-let sector has weathered the rise in rates, according to figures published by Paragon Mortgages. The specialist lender said that rents rose by an average of 3 per cent over the three months to July. Paragon said that yields on buy-to-let homes had remained stable at the 6 per cent mark for more than a year. Total returns, including capital gains, rose by 11.6 per cent in the year to July.

Nigel Terrington, the chief executive of Paragon Group, said: “Landlords are not completely sheltered from the effects of rising rates, but we would expect arrears in the sector to continue to perform better than those in the mainstream market.”

The BBA’s figures show that the number of loans for remortgaging was 68,814 in July, up 11.6 per cent from a year ago. Levels rose amid expectations that the Bank would raise interest rates again to 6 per cent this year. Since then, turbulence on financial markets has led analysts to conclude that the Bank may not need to raise rates further in the current cycle.

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The buy-to-let sector has weathered the rise in rates, according to figures published by Paragon Mortgages. The specialist lender said that rents rose by an average of 3 per cent over the three months to July. Paragon said that yields on buy-to-let homes had remained stable at the 6 per cent mark for more than a year. Total returns, including capital gains, rose by 11.6 per cent in the year to July.

Don't be silly, rents don't ever increase. There's at least four people on here who reckon they're paying no more than they were 50 years ago, which is all the proof one needs.

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Don't be silly, rents don't ever increase. There's at least four people on here who reckon they're paying no more than they were 50 years ago, which is all the proof one needs.

I rented a 5 bed property in Cornwall 10 years ago for £500 pcm. The rent has now risen to £650.00 pcm. (One single rent rise of £150 pcm 2 years ago) The current value of the property is probably in the region of £350K. The value 10 years ago when we started renting was circa £100K.

Anyone care to comment on what the figures say - I'm too damn stupid to work it out. All I know is that it seems like I've got a good deal.

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The UK doesn't have a subprime problem, people are still paying their mortgages aren't they? The US was different, they were lending hundreds of $k to tramps FFS, that hasn't happened here.

Smell the fear....... ever considered staying in bed all day? :lol::lol:

Of couse it has happened here. Blind greed, that all it is. Its just not as bad here..... yet.

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The UK doesn't have a subprime problem, people are still paying their mortgages aren't they? The US was different, they were lending hundreds of $k to tramps FFS, that hasn't happened here.

How do you know it has not happened here? "Lie to buy" featured on the Money Proramme and elsewhere in the media years ago.

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The UK doesn't have a subprime problem, people are still paying their mortgages aren't they? The US was different, they were lending hundreds of $k to tramps FFS, that hasn't happened here.

Don't be too sure - who knows what yet may crawl out from the woodwork? A couple of years ago my daughter briefly worked for a small independent mortgage broker. Self-certified mortgages were limited only by the imagination of the broker. No-one who wanted a motgage was turned down whatever their financial staus or impecunity. In short, fraudulent accounts were the order of the day.

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Yes, years ago and we still haven't had any fallout. People may have lied to borrow but they haven't any problems making the payments. That's what matters in the end.

Unless they've been paying the mortgage with the proceeds of their equity release. Or harvesting their childrens organs, or some other non-sustainable method of funding.

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The UK doesn't have a subprime problem, people are still paying their mortgages aren't they? The US was different, they were lending hundreds of $k to tramps FFS, that hasn't happened here.

I was offered a mortgage with my fries the other day. A special introductory rate McMortgage, signed there and then so I could have a pink coke glass thrown in.

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Yes, years ago and we still haven't had any fallout. People may have lied to borrow but they haven't any problems making the payments. That's what matters in the end.

Except they lied to buy in the last couple of years (something you seem not to dispute), scale of problem unknown, interest rates have doubled and you think everything will be fine? You are welcome to be bullish of course but to me that defies logic.

S.

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Oliver Gilmartin, senior economist at the Royal Institution of Chartered Surveyors (RICS), said: “Tightening borrowing standards could intensify the current slowdown in lending activity. Equally, those trying to get on the property ladder may need higher deposits to allay the fears of lenders.”

That last bit could of course be taken as a covert way of worrying people into "getting on the ladder before it's too late" => last burst of HPI.

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I rented a 5 bed property in Cornwall 10 years ago for £500 pcm. The rent has now risen to £650.00 pcm. (One single rent rise of £150 pcm 2 years ago) The current value of the property is probably in the region of £350K. The value 10 years ago when we started renting was circa £100K.

Anyone care to comment on what the figures say - I'm too damn stupid to work it out. All I know is that it seems like I've got a good deal.

No, you got a shocking deal.

Over the period you have paid out £63,600 and own nothing. You could have bought the property on a interest only mortgage 10 years ago, paid a similar amount out in cash, and would now have £250k in equity.

So you have lost £250k by renting!!!

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I rented a 5 bed property in Cornwall 10 years ago for £500 pcm. The rent has now risen to £650.00 pcm. (One single rent rise of £150 pcm 2 years ago) The current value of the property is probably in the region of £350K. The value 10 years ago when we started renting was circa £100K.

Anyone care to comment on what the figures say - I'm too damn stupid to work it out. All I know is that it seems like I've got a good deal.

it means your rent has gone up by compounded 2.5% per year approx, which is, I think, below inflation during that period.

true, tho, many bears do exaggerate how much rent hasn’t gone up, but it is definitely below inflation, and possibly very very low in the last few years or so even compared to low rises of the past

bulls are still right to argue that some bears exaggerate

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The UK doesn't have a subprime problem, people are still paying their mortgages aren't they? The US was different, they were lending hundreds of $k to tramps FFS, that hasn't happened here.

In the UK Tramps = 5xHPrice Mortgage borrowers, half of anyone working in the lower end of the so called Finance industry including mortgage advisors, brokers etc, financial advisors who work for realestate agents, estate agents, anyone doing a job that can be sent to India or China, anyone who lied about their wages to get a mortgage, people who currently think they are professionals (just cause they wear a suit) etc etc, in other words just about 1/2 of the current work force who's taken out a mortgage in the last 5 - 7 years depending on where they live. Subprime by another name perhaps.

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No, you got a shocking deal.

Over the period you have paid out £63,600 and own nothing. You could have bought the property on a interest only mortgage 10 years ago, paid a similar amount out in cash, and would now have £250k in equity.

So you have lost £250k by renting!!!

Sure! Had I been able at the time to buy, I would have done so. In fact, at the time (1996) I had an even better deal offered - converting a £500pcm tenancy of a 5-bed house in 5 acres into a purchase for £130,00. The same property sold a couple of months ago for £850,000. I know I missed out on the buying opportunities but circumstances prevented.

So. forgetting the missed buying opportunity, I was trying to look at the rental deal from a BTL POV. My landlord hasn't done very welll as far as I can tell, but as a tenant, I haven't done too badly. At least, I think that is the case.

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Sure! Had I been able at the time to buy, I would have done so. In fact, at the time (1996) I had an even better deal offered - converting a £500pcm tenancy of a 5-bed house in 5 acres into a purchase for £130,00. The same property sold a couple of months ago for £850,000. I know I missed out on the buying opportunities but circumstances prevented.

So. forgetting the missed buying opportunity, I was trying to look at the rental deal from a BTL POV. My landlord hasn't done very welll as far as I can tell, but as a tenant, I haven't done too badly. At least, I think that is the case.

Which bit of this are you having trouble with exactly? Your landlord has made a fortune, you haven't. Now guess again, who got the good deal?

clue: it wasn't you.

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No, you got a shocking deal.

Over the period you have paid out £63,600 and own nothing. You could have bought the property on a interest only mortgage 10 years ago, paid a similar amount out in cash, and would now have £250k in equity.

So you have lost £250k by renting!!!

indeed

such are the vagaries of market timing!

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It he had been wise enough to liquidate, but its probably already too late.

The landlord has probably already paid off the mortgage on the property using the tenants mortgage payments, so probably won't care about a price drop that much.

One thing people on this site need to get their heads round is that if your property has gone up by 150% over the last 10 years, even the bears wildest wet dream of a 40% fall in nominal prices will still leave them pretty well off.

Not that a 40% fall in nominal prices, or anything like it, is going to happen.

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The UK doesn't have a subprime problem, people are still paying their mortgages aren't they? The US was different, they were lending hundreds of $k to tramps FFS, that hasn't happened here.

On Bloomberg. Non-conforming = subprime/btl/no deposit

Delinquencies Rise Among Some U.K. Mortgage Borrowers, S&P Says

By John Glover

Aug. 29 (Bloomberg) -- An index measuring delinquencies on

riskier U.K. home loans, known as non-conforming mortgages, rose

almost 5 percent in the second quarter and will climb further in

the second half of the year, Standard & Poor's said.

Borrowers who failed to meet their commitments for 90 days

or more stood at 9.92 percent of the total, according to an e-

mailed report on the U.K. Non-Conforming RMBS Index, which rose

to 20.9 percent from 19.9 percent. The mortgages typically don't

meet standard lending criteria such as credit history or the

amount borrowed and include buy-to-let and self-certified loans.

The Bank of England has raised interest rates five times in

a year, increasing the pressure that floating-rate borrowers are

under as the pace at which house prices gain slows down, S&P

said. Moreover, the full effects of higher interest rates

haven't yet fed through, according to the report, whose authors

were Kate Livesey and Sean Hannigan in London.

S&P ``expects the delinquency and repossession levels to

worsen in the second half of 2007,'' the report said. ``A

decline in house prices will affect the refinancing options available to borrowers and their incentive to meet mortgage

payments.''

Issuance of bonds backed by non-conforming loans continues

to grow, with 5.68 billion pounds ($11.4 billion) of new

transactions rated by S&P in the second quarter bringing the

total to 37.49 billion pounds, according to the report.

--Editor: Shanahan

To contact the reporter on this story:

John Glover in London at +44 20 7073 3563 or

[email protected]

To contact the editor responsible for this story:

Gavin Serkin at +44 207 673 2467 or [email protected]

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