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Lending Log Jams My Ar$e

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There is no lending log jam, the money is there, a fraction of people now meet the criteria that was standard until 8 years ago.

http://thecrownblogspot.blogspot.com/2008/...ng-log-jam.html

10 years ago a borrower needed at least a 5% deposit, proof of their income and proof of repayment method. The borrowing limit was 2.5 times joint income. A 2 year fixed rate was 6.5% with a booking fee of £299

Today a borrower needs a 10% deposit, proof of their income and proof of repayment method. The borrowing allowed is 4.25 joint income. A 2 year fixed rate is 6.2% with a fee of £599.

So over the 10 years a larger deposit is now needed, although you can still borrow more historically and at a lower rate than 10 years ago.

So why the fuss?

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There is no lending log jam, the money is there, a fraction of people now meet the criteria that was standard until 8 years ago.

http://thecrownblogspot.blogspot.com/2008/...ng-log-jam.html

10 years ago a borrower needed at least a 5% deposit, proof of their income and proof of repayment method. The borrowing limit was 2.5 times joint income. A 2 year fixed rate was 6.5% with a booking fee of £299

Today a borrower needs a 10% deposit, proof of their income and proof of repayment method. The borrowing allowed is 4.25 joint income. A 2 year fixed rate is 6.2% with a fee of £599.

So over the 10 years a larger deposit is now needed, although you can still borrow more historically and at a lower rate than 10 years ago.

So why the fuss?

You can still borrow 95% from 22 lenders. At RBS you can go up to 4.9 times income.

I think you will find now that because there is no Northern Rock the young first time buyer, usually an ex student with unsecured debt, cannot afford the high house prices as the income multiples aren't good enough, they cannot consolidate and that stalls the rest of the chain.

Also credit scoring is a lot tougher now. Lots of addresses in the last 3 years, not on voters roll, even just one late payment on a credit card will spell doom for a FTB application.

So that means there is a lending log jam in the sense that the banks have to money to lend, but they aren't prepared to take the risk on anyone they deem not financially savvy enough to have it.

Edited by bobby9983

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Good point.

We had sensible lending 10 years ago and now the credit crunch has brought back sensible lending again. Thats all to the good. The problem is what happened in between. If the world had carried on sensible lending for the last decade we would not have had the housing bubble, the credit crunch or a house price crash.

It was the extreme lending criteria that existed only 18 months ago of 100 - 125% mortgage, no proof of income and interest only that was the root of where we are now. People who would not have been allowed to have a mortgage in the past were suddenly allowed to get one as long as they could pay the initial fee. It was an absolute failure of reglation that allowed it to happen and regulators now do not know what to do. People with existing mortgages cannot refinance on the easy terms they were originally offered and are defaulting as they cannot afford to pay the interest or produce a larger deposit as they are now being asked to do under new stricter lending criteria.

The US and UK Govts seem to be saying 'quick lets try and pump the bubble back up before it deflates any more' which is like a doctor prescribing more alcohol to an alcoholic to stop him sobering up and getting withdrawal symptoms.

It treats the immediate symptom but causes death in the end. Better to have some pain and nursing care until the patient heals themself. Just like banks need to raise more capital, cut dividends and and only do sensible lending for a few years.

Problem is that the political timetable demands an instant solution and James Crosby's report to the Treasury today seems to be saying no quick fix is available. Now that is the real problem.

Edited by Wad

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There is no lending log jam, the money is there, a fraction of people now meet the criteria that was standard until 8 years ago.

How do you distinguish between the money being there but not enough suitable people and the money not being there? The observables (few mortgages being granted and only to the best people) are the same, but the causes are different. I was under the impression that banks' capital ratios were under pressure - hence these rights' issues etc. - and therefore there wasn't the money to lend,

Peter.

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There is no lending log jam, the money is there, a fraction of people now meet the criteria that was standard until 8 years ago.

Yes, there is no doubt about it. The new myth on the block is the myth of mortgage shortages. It has become a euphemism for what is REALLY going on, which is that prices are still too high and people are waiting for them to drop further. In a long succession of government AND media lies (there is no point in suggesting they are anything but lies) this one takes the biscuit. "Economists call for mortgage support", "RICS report says mortgage availability is dead", "Housing Minister blames slowdown on Mortgage famine", ad nauseam.

The fact is that mortgages are not only available, but lenders are falling over themselves to attract business, but this time they want solid borrowers who are not seeking 8 times income, who are not lying about income, and who wish to buy a property at a sensible price. In other words, Mortgages are now merely WHAT THEY ALWAYS WERE before the self-cert, BTL madness that started a decade ago. What dumfounds me is firstly how so many people can be taken in by these blatant lies, and secondly how compliant (and therefore complicit) the media is in repeating this myth without the slightest pause to reflect, examine or research the FACTS. It seems that almost any vaguely property-related profession can spout any untruths they wish and the whole media will willingly repeat them without the slightest qualm.

Where property is concerned, the vast majority of financial journalists and the WHOLE broadcasting media have utterly suspended their critical faculties. Let's look at the long list of myths which have been shamlessly promoted in the last year, ALL of which have proven to be completely untrue:

1. There is a desperate shortage of houses - FALSE - there is an unprecedented number of properties available to buy.

2. There won't be a crash, just a small correction - FALSE - there is now the fastest crash in modern history

3. The economic fundamentals are sound - FALSE - we are in deep sh1t

4. Food inflation is caused by shortages and rising costs - Mostly FALSE - it is largely caused by a shift in speculation from property to commodities

5. The UK banking system is fundamentally sound - FALSE - most lenders have existed for years on a wing and a prayer

6. Lowering interest rates will "save" the housing slump - FALSE - it won't make the slightest difference

7. It's different this time - FALSE - no explanation needed

8. Rents are rising fast because of shortages - FALSE - rents will exactly reflect sale values and there is no shortage whatsoever taking the nation as a whole

Every single one of these myths were, at the time they were promoted, utterly untrue and the simplest investigation reveals that. At each point when every myth, one by one, is exploded and the truth can no longer be avoided, the media goes on to the next myth and hangs on to it for as long as possible until, in turn, that myth is revealed as nonsense too, and the next myth is invented, and so on, ad infinitum. This is no ordinary manipulation; it is a serious and sinister attempt to control rather stupid people who seem to have lost any ability to think for themselves, or investigate beyond the headlines and platitudes they are fed daily. But this stupidity is also emanating from people who are, in normal circumstances, perfectly intelligent and in all other respects reasonably discerning. It must therefore be that so many people are directly or indirectly attached to their own vested interest in property staying forever inflated that they simply cannot bear to face the truth, and thereby hang on to each myth as a kind of straw clutching in order to stave off reality.

VP

Edited by VacantPossession

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From my experience at work, there is plenty of money that the banks are willing to lend. However the number of people that now fit the lending criteria has diminished considerably. There is not a money or mortgage drought. But a shortage of applicants with sufficient deposits, good credit records and a high enough real salary to be able to buy at 3.5 - 4.5 multiples. We have one client who wishes to borrow a very substantial sum (not housing related). His bank can not give him the money fast enough. The banks are only interested in quality lending like in the good old days, not quantity lending as per the last 5/6 years.

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Yes, there is no doubt about it. The new myth on the block is the myth of mortgage shortages. It has become a euphemism for what is REALLY going on, which is that prices are still too high and people are waiting for them to drop further. In a long succession of government AND media lies (there is no point in suggesting they are anything but lies) this one takes the biscuit. "Economists call for mortgage support", "RICS report says mortgage availability is dead", "Housing Minister blames slowdown on Mortgage famine", ad nauseam.

The fact is that mortgages are not only available, but lenders are falling over themselves to attract business, but this time they want solid borrowers who are not seeking 8 times income, who are not lying about income, and who wish to buy a property at a sensible price. In other words, Mortgages are now merely WHAT THEY ALWAYS WERE before the self-cert, BTL madness that started a decade ago. What dumfounds me is firstly how so many people can be taken in by these blatant lies, and secondly how compliant (and therefore complicit) the media is in repeating this myth without the slightest pause to reflect, examine or research the FACTS. It seems that almost any vaguely property-related profession can spout any untruths they wish and the whole media will willingly repeat them without the slightest qualm.

Where property is concerned, the vast majority of financial journalists and the WHOLE broadcasting media have utterly suspended their critical faculties. Let's look at the long list of myths which have been shamlessly promoted in the last year, ALL of which have proven to be completely untrue:

1. There is a desperate shortage of houses - FALSE - there is an unprecedented number of properties available to buy.

2. There won't be a crash, just a small correction - FALSE - there is now the fastest crash in modern history

3. The economic fundamentals are sound - FALSE - we are in deep sh1t

4. Food inflation is caused by shortages and rising costs - Mostly FALSE - it is largely caused by a shift in speculation from property to commodities

5. The UK banking system is fundamentally sound - FALSE - most lenders have existed for years on a wing and a prayer

6. Lowering interest rates will "save" the housing slump - FALSE - it won't make the slightest difference

7. It's different this time - FALSE - no explanation needed

8. Rents are rising fast because of shortages - FALSE - rents will exactly reflect sale values and there is no shortage whatsoever taking the nation as a whole

Every single one of these myths were, at the time they were promoted, utterly untrue and the simplest investigation reveals that. At each point when every myth, one by one, is exploded and the truth can no longer be avoided, the media goes on to the next myth and hangs on to it for as long as possible until, in turn, that myth is revealed as nonsense too, and the next myth is invented, and so on, ad infinitum. This is no ordinary manipulation; it is a serious and sinister attempt to control rather stupid people who seem to have lost any ability to think for themselves, or investigate beyond the headlines and platitudes they are fed daily. But this stupidity is also emanating from people who are, in normal circumstances, perfectly intelligent and in all other respects reasonably discerning. It must therefore be that so many people are directly or indirectly attached to their own vested interest in property staying forever inflated that they simply cannot bear to face the truth, and thereby hang on to each myth as a kind of straw clutching in order to stave off reality.

VP

Top post VP - a lot of the lunchtime banter at work yesterday was about houses going up by 25% in the next few years. You could smell the fear and almost see the straws they were clutching. I remained silent. Easier that way.

F

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Top post VP - a lot of the lunchtime banter at work yesterday was about houses going up by 25% in the next few years. You could smell the fear and almost see the straws they were clutching. I remained silent. Easier that way.

F

I suppose they were afraid becuse they already want better houses but are priced out.

+25% must be a pretty f**king miserable concept for home owners who want a better house.

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for what is REALLY going on

yeah too right

credit crunch my **** its a housing bubble thats popped....

but no one in real estate dares wisper it, its game over

US/UK/AUS/SPAIN/IRELAND/CHINA/INDIA

world wide property is crashing leading to a freeze on loans as property lending DOMINATES bank lending books

you can smell the fear

obnle the most basic countries with no infrastructure will be spared this is a global property crunch based on a bubble, based on negitivwe gearing tax laws and lax borrowing standards only those with cash and no debt can now profit...

its like pig hunting, wait till the dogs got the pig by nose ears tail and balls then go in with a knife

if you have cash this is your chance to set yourself and familly up for life, its what this site was set up for

wait 12 months and go kill some piggies!

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So that means there is a lending log jam in the sense that the banks have to money to lend, but they aren't prepared to take the risk on anyone they deem not financially savvy enough to have it.

Yes a log jam in that respect - the media are referring to a lack of money creating a total log jam where nobody can borrow.

How do you distinguish between the money being there but not enough suitable people and the money not being there? The observables (few mortgages being granted and only to the best people) are the same, but the causes are different. I was under the impression that banks' capital ratios were under pressure - hence these rights' issues etc. - and therefore there wasn't the money to lend,

Because I know many mortgage brokers who have no problem placing mortgages inside the normal criteria. As soon as you go outside that, the lenders do not want to know. Last year there was no problem with any borrower.

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You can still borrow 95% from 22 lenders. At RBS you can go up to 4.9 times income.

Ignoring the credit scoring side, a 5% deposit in this area is around 10 grand and even at 4.9 times the joint income needed is about 40 grand.

That rules out most families in this area. People were getting the deposits, when required, from equity in the previous property. No equity equals no deposit and no hope of saving up 10 grand either. On top of that 20 grand salaries not the norm down here either. My wife has 20 years service in her job and is a manager. She gets 25k which puts her in the top 10% of earners at her workplace.

House prices need to fall quite a bit more before the type of families they were originally built for can afford them.

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Maybe the banks are looking for a few good loans to bungle up with their lie to buy loans so that they can get AAA ratings and try to sell them on.

We must question he 3.5 X Income figure due to

1. Miras removed

2. Stealth taxes

3. Oil/Gas prices going balistic.

The western world has a cancer and that cancer is it's own goverments that have become corupted by corporations that think they can control our every move.

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Nope, I can't agree with you on this. The money is not "there" it can be if the (balance sheet) banks/lenders want to lend to someone with an impeccable background. The money is not there as proved by the fact that 75% of mortgage product has been stripped from the market, this surely equates to roughly 75% less money available and this was primarly money sourced from the markets which is as frozen now as in September 2007. As for applicants sitting on their hands, applications are way down, perhaps by half, but that's also because more and more brokers/lenders are rejecting before an application has even been filled in, "I dont think I'm going to be able to help you" is a phrase not used for approx. 4-5 years.

Lenders are also rejecting apps. in massive numbers atm, the demand has not fallen of a cliff because sensible folk have suddenly become aware of 'peak houses' the UK sheeple would have continued buying if the money (mortgage product was there). <_<

Edited by Converted Lurker

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Yes, there is no doubt about it. The new myth on the block is the myth of mortgage shortages. It has become a euphemism for what is REALLY going on, which is that prices are still too high and people are waiting for them to drop further. In a long succession of government AND media lies (there is no point in suggesting they are anything but lies) this one takes the biscuit. "Economists call for mortgage support", "RICS report says mortgage availability is dead", "Housing Minister blames slowdown on Mortgage famine", ad nauseam.

The fact is that mortgages are not only available, but lenders are falling over themselves to attract business, but this time they want solid borrowers who are not seeking 8 times income, who are not lying about income, and who wish to buy a property at a sensible price. In other words, Mortgages are now merely WHAT THEY ALWAYS WERE before the self-cert, BTL madness that started a decade ago. What dumfounds me is firstly how so many people can be taken in by these blatant lies, and secondly how compliant (and therefore complicit) the media is in repeating this myth without the slightest pause to reflect, examine or research the FACTS. It seems that almost any vaguely property-related profession can spout any untruths they wish and the whole media will willingly repeat them without the slightest qualm.

Where property is concerned, the vast majority of financial journalists and the WHOLE broadcasting media have utterly suspended their critical faculties. Let's look at the long list of myths which have been shamlessly promoted in the last year, ALL of which have proven to be completely untrue:

1. There is a desperate shortage of houses - FALSE - there is an unprecedented number of properties available to buy.

2. There won't be a crash, just a small correction - FALSE - there is now the fastest crash in modern history

3. The economic fundamentals are sound - FALSE - we are in deep sh1t

4. Food inflation is caused by shortages and rising costs - Mostly FALSE - it is largely caused by a shift in speculation from property to commodities

5. The UK banking system is fundamentally sound - FALSE - most lenders have existed for years on a wing and a prayer

6. Lowering interest rates will "save" the housing slump - FALSE - it won't make the slightest difference

7. It's different this time - FALSE - no explanation needed

8. Rents are rising fast because of shortages - FALSE - rents will exactly reflect sale values and there is no shortage whatsoever taking the nation as a whole

Every single one of these myths were, at the time they were promoted, utterly untrue and the simplest investigation reveals that. At each point when every myth, one by one, is exploded and the truth can no longer be avoided, the media goes on to the next myth and hangs on to it for as long as possible until, in turn, that myth is revealed as nonsense too, and the next myth is invented, and so on, ad infinitum. This is no ordinary manipulation; it is a serious and sinister attempt to control rather stupid people who seem to have lost any ability to think for themselves, or investigate beyond the headlines and platitudes they are fed daily. But this stupidity is also emanating from people who are, in normal circumstances, perfectly intelligent and in all other respects reasonably discerning. It must therefore be that so many people are directly or indirectly attached to their own vested interest in property staying forever inflated that they simply cannot bear to face the truth, and thereby hang on to each myth as a kind of straw clutching in order to stave off reality.

VP

Yes top post. If only I could get ALL my friends and family to see this as I do I would be a happy man. I gave up ages ago even talking to them about what is going on although I have had to stop myself a few times on the verge of a "I told you so" moment ;)

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Nope, I can't agree with you on this. The money is not "there" it can be if the (balance sheet) banks/lenders want to lend to someone with an impeccable background. The money is not there as proved by the fact that 75% of mortgage product has been stripped from the market, this surely equates to roughly 75% less money available and this was primarly money sourced from the markets which is as frozen now as in September 2007. As for applicants sitting on their hands, applications are way down, perhaps by half, but that's also because more and more brokers/lenders are rejecting before an application has even been filled in, "I dont think I'm going to be able to help you" is a phrase not used for approx. 4-5 years.

Lenders are also rejecting apps. in massive numbers atm, the demand has not fallen of a cliif because sensible folk have suddenly become aware of 'peak houses' the UK sheeple would have continured buying if the money (mortgage product was there). <_<

If 120,000 people went to their lenders last month with a 10% deposit, provable income, borrowing 3or4 joint income on a repayment basis they would all get a mortgage approved. The money is there. What is happening is that of the 120,000 people

a large % know the market is overvalued and are not getting a mortgage approved

a large % cannot prove their income

a large % have less than a 10% deposit

a large % would need to borrow 6 times income

a large % cannot afford a repayment mortgage and would need interest only

which leaves 42,000 last month

so throwing money at the mortgage lenders is not going to help, lowering rates is not going to help.

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If 120,000 people went to their lenders last month with a 10% deposit, provable income, borrowing 3or4 joint income on a repayment basis they would all get a mortgage approved. The money is there. What is happening is that of the 120,000 people

a large % know the market is overvalued and are not getting a mortgage approved

a large % cannot prove their income

a large % have less than a 10% deposit

a large % would need to borrow 6 times income

a large % cannot afford a repayment mortgage and would need interest only

which leaves 42,000 last month

so throwing money at the mortgage lenders is not going to help, lowering rates is not going to help.

erm...ok... :unsure: still doesn't alter the fact that your claim is deeply flawed "the money" is not there vis a vis this time last year, two years ago, three years ago..... There is a small pool of money available to lend out to mainly applicants considered worthy.

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If 120,000 people went to their lenders last month with a 10% deposit, provable income, borrowing 3or4 joint income on a repayment basis they would all get a mortgage approved. The money is there. What is happening is that of the 120,000 people

a large % know the market is overvalued and are not getting a mortgage approved

a large % cannot prove their income

a large % have less than a 10% deposit

a large % would need to borrow 6 times income

a large % cannot afford a repayment mortgage and would need interest only

which leaves 42,000 last month

so throwing money at the mortgage lenders is not going to help, lowering rates is not going to help.

The Crosby report suggests otherwise, though. It's saying that there is a lack of money due to the shut-down of the MBS market. By implication, the market couldn't service 120,000 people. It can only service a much smaller number, and naturally the bankers prefer the cream rather than the dregs.

http://image.guardian.co.uk/sys-files/Guar...osbyextract.pdf

Peter.

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4. Food inflation is caused by shortages and rising costs - Mostly FALSE - it is largely caused by a shift in speculation from property to commodities

I disagree, there's hardly any speculative element in food price increases.

Food inflation is due to rising costs, ie oil for fertilisers and transport.

Food inflation is due to land being re-purposed to growing bio-fuels.

Food inflation is due to changing diets and rising incomes in emerging markets.

Food inflation is not due to shortages, harvests for the last two years have generally broken records.

Food inflation is not due to speculators, futures bets are placed both up and down, futures are a relatively small part of the market, no futures markets exist for most food items.

Food inflation is not due to global warming, this may (or may not) be a factor in the future but recent yields are up.

Food inflation is not due to profiteering supermarkets, supermarket profits are down and food inflation is seen even in countries without supermarkets.

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The Crosby report suggests otherwise, though. It's saying that there is a lack of money due to the shut-down of the MBS market. By implication, the market couldn't service 120,000 people. It can only service a much smaller number, and naturally the bankers prefer the cream rather than the dregs.

http://image.guardian.co.uk/sys-files/Guar...osbyextract.pdf

Peter.

Exactly ... no MBS market = a return to some form of proper reserve banking system that will rely upon savers in a nation with a virtually negative savings rate ... :blink::blink: ... work that one out if you can.

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There is no lending log jam, the money is NOT there, a fraction of people now meet the criteria that was standard until 8 years ago.

So why the fuss?[/b]

There is only enough to meet the previous more conservative criteria. The carry trade and overvalued packaged securities have gone. There is not enough money to service the existing mortgage requirement based on the liquidity they gave.

I think this is maybe what you are saying? but I am unsure.

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Nope, I can't agree with you on this. The money is not "there" it can be if the (balance sheet) banks/lenders want to lend to someone with an impeccable background. The money is not there as proved by the fact that 75% of mortgage product has been stripped from the market, this surely equates to roughly 75% less money available and this was primarly money sourced from the markets which is as frozen now as in September 2007. As for applicants sitting on their hands, applications are way down, perhaps by half, but that's also because more and more brokers/lenders are rejecting before an application has even been filled in, "I dont think I'm going to be able to help you" is a phrase not used for approx. 4-5 years.

Lenders are also rejecting apps. in massive numbers atm, the demand has not fallen of a cliff because sensible folk have suddenly become aware of 'peak houses' the UK sheeple would have continued buying if the money (mortgage product was there). <_<

If you think that the pool of money available for lending is restrictively small, then could you explain why banks aren't offering higher savings rates to attract more?

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erm...ok... :unsure: still doesn't alter the fact that your claim is deeply flawed "the money" is not there vis a vis this time last year, two years ago, three years ago..... There is a small pool of money available to lend out to mainly applicants considered worthy.

surely the real point is that the money is there - in roughly the same sort of volumes it was just under a decade ago, when the majority of applicants were successful. So rather than throwing money at the "problem" the real solution is simply to let prices drop to c1999 levels?

"what elephant?" said the occupants of the room

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  • 399 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%



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