Thursday, July 9, 2009

At last some sense, but not from all.

Vital mortgage reforms needs to help the first-time buyer

The treasury wants to enforce good practice for lending. The FSA are broadly in tune with the treasury, so far so good, or maybe not. Anne Ashworth a property journalist from the Times thinks otherwise! She can't see that if mortgages are restricted 75% LTV mortgages that prices will fall and FTB's will be able to buy but on sensible mortgage terms which they can afford . She thinks if this is adopted FTB's will have to save and rent for too may years! I think I'd rather go for cheaper houses that I can afford the repayments on, otherwise you could get a bit of a boom and bust! It could happen, no really!

Posted by tim miller @ 11:56 PM (1243 views)
Please complete the required fields.



14 thoughts on “At last some sense, but not from all.

  • A minimum of 25% wouldn’t be a problem for me. With a little more saving and a little more price falls it is within my sights now.

    However, I don’t think it is necessary. 25% is a huge percentage of a home to save. The sole purpose of a deposit is to cover any losses a bank may incur. In a stable market, the deposit only need cover the difference between a free market sale and a vacant sale. 10%-15% seems reasonable for this as long as prices fall to a sensible level.

    Perhaps the answer is that if house prices rise above wage multiples then the minimum legal deposit should be 10% + the full amount above the norm. Unfortunately, depending which ‘expert’ you ask, that would potentially put todays deposit requirements at anywhere between 10% and 50%. I also don’t think government controlled house prices would be a smart thing to do. It would surely be the first bit of legislation to go out the window when they wanted people to feel ‘rich’ again and give the economy an unsustainable kick.

    Reply
    Please complete the required fields.



  • This would be a momentous step forward, which is why it will probably never happen…

    “The Treasury, it is rumoured, envisages that the maximum loan-to-value ratio for all borrowers could be 75 per cent.”

    Still you have to love this old cherry…

    “The bottoming out of property prices means that there are opportunities for those who would rather not be renting.”

    Bottoming out though, yeah riiight.

    Reply
    Please complete the required fields.



  • japanese uncle says:

    The best solution is for the house price to come down to the level affordable for an FTB to pay in CASH after saving, say ten years, meaning 2 x annual salary. Why do we need banks? They rig the market so that they can boost their lending balance, hence their profits, at the cost of the 21-century slaves namely the borrowers, namely you. The presence of banks must be kept at minimum at all times. Otherwise they can cause horrific loss and damage to our society as we have clearly witnessed during the past two decades.

    Reply
    Please complete the required fields.



  • The Baldman says:

    Thye just do not get it. Let prices fall so peopel can afford without debt slavery.

    Reply
    Please complete the required fields.



  • Stopped reading about … here:

    “The bottoming out of property prices means that there are opportunities for those who would rather not be renting.”

    Reply
    Please complete the required fields.



  • I left my comment – it won’t be displayed; they never are.

    “The ‘prudent’ £8.1bn repaid by borrowers was simply a reflection of lower LTV’s demanded of borrowers by banks! i.e. new borrowers had to pump more money in to their homes.

    You really need to go back to school.”

    Reply
    Please complete the required fields.



  • mark wadsworth says:

    Tim, exactly. Easy credit does NOT benefit FTB’s, it benefits those selling up or trading down and shackles FTB’s with massive debts for evermore. Low interest rates do NOT benefit FTB’s for much the same reason.

    The same argument goes for taxes on property values, it doesn’t make housing more expensive, it makes it cheaper (as well as being a golden opportunity to replace a load of other stupid taxes).

    Reply
    Please complete the required fields.



  • JU, hear, hear!

    Reply
    Please complete the required fields.



  • mark wadsworth says:

    On the subject of debt-slavery, here’s a chart that Alice Cook prepared earlier. Deeply depressing.

    Reply
    Please complete the required fields.



  • george monsoon says:

    JU.. agreed.

    There is a very simple solution to this. Houses need to FALL to a level affordable by saving for say 10 years, rather than currently saving for 10 years might just give you enough wedge to put down a 10% deposit!!

    Reply
    Please complete the required fields.



  • stillthinking says:

    I don’t think restricting the LTV is a good idea. There could be a situation where rents are higher than repayment.

    I wonder if these restrictions will be coming in as a replacement for higher interest rates, just directly restrict lending. Banks should be allowed to lend what they think they can cover, and banks should be allowed to fail where they get it wrong. Government regulation of the market is certain to have bad side effects.

    Given that house prices are in freefall, you have to ask yourself why we are concerning ourselves with LTV at the moment… and I worry that arbitary loan restrictions are being planned to avoid necessary interest rate hikes. Suppose for example, that UK buyers who need (whether foolish or not) to borrow more than their “regulated” amount, simple borrow in a different currency from a foreign bank?

    The whole problem is that the banks were not allowed to fail, which they should have, we would have been much better off, so any new regulation should be based on the idea of the “will” as touted by King, the best idea of all. The rest is a distraction.

    Reply
    Please complete the required fields.



  • stillthinking says:

    Or even, as this purports to address asset price inflation relative to real economic growth, just include asset inflation in the inflation measurement and allow interest rate hikes to do the work. Even easier.

    The very worst outcome from this, would be when house prices eventually bottom, to leave a clear and open field for the cash buyers, and then subsequently lift the restrictions.

    This idea smells very strongly and who does it help? The outcome will be cheaper borrowing costs. Who benefits from that? Not the FTBs who are banned from borrowing. Only the existing debt holders. There are too many of these suspicious ideas at the moment. Do we really consider that a self-employed contractor should have restricted access to finance in comparison to a lower paid state worker, on the grounds they don’t have a regular monthly income? Suppose somebody wants to buy a car because cheaper than rail, do we block the loan until they have saved the full purchase price? Should we do the same for professional qualifications (expensive)?

    The reason the UK became powerful is because of economic imperialism. We had a trusted bank behind us and so could expand credit to purchase foreign based facilities and assets, but the target country could not resist because they did not have a credible banking system. Japan and China, both relative successful newcomers to the global economy, put restrictions in place to protect the domestic market from foreign credit expansion. China still does, and so to a lesser extent does Japan.

    This poorly thought out rule places the FTB in the role of undeveloped nation, at a major disadvantage to the credit expansion of those already holding assets, the boomers. One section of the population should not take the burden of fiscal discipline which should apply to ALL.

    Reply
    Please complete the required fields.



  • mark wadsworth says:

    This whole “restricting LTV” is a red herring – there are far too many loopholes.

    Further, if I earn £40,000 and want to buy a flat for £80,000, who cares if I take out a 95% mortgage? It’s the high income multiples that are the killer.

    Reply
    Please complete the required fields.



  • greenshootsandleaves says:

    How did “the bottoming out of property prices” suddenly become fact? “Because everybody says so” (read: “EAs’ friends quoting each other”), I suppose.
    By the way, don’t miss John, Birmingham’s (a) side-splitting and again unsubstantiated claim in the readers’ comments about how vital a recovery in the housing market is to the nation’s economy and (b) his take on HPC and its members!

    Reply
    Please complete the required fields.



Add a comment

  • Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
  • Please note that any viewpoints published here as comments are user´s views and not the views of HousePriceCrash.co.uk.
  • Please adhere to the Guidelines

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>