Sunday, July 12, 2009

We don’t need no regulation

Ban on 100% home loans dropped

Tough new curbs on mortgage lending to limit loans and force homebuyers to come up with far bigger deposits are being eased amid fears that they could wreck the emerging recovery in the housing market. Earlier this year, Gordon Brown asked the Financial Services Authority to consider a ban on mortgages with a high loan-to-value (LTV) rate. FSA executives told a parliamentary committee last week that such restraint could lock first-time buyers out of the market just as they were starting to regain confidence. Their warnings reflect a growing consensus in Whitehall that banning higher-risk mortgages may be counterproductive.

Posted by little professor @ 03:12 AM (2047 views)
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18 thoughts on “We don’t need no regulation

  • What the market needs is to be allowed to naturally regain it’s shape. What it doesn’t need is massaging the rules by the government. In a falling market 100% is crazy. Even in a rising market it’s good practice to have a buyer put down at least 5% of their own money. Allowing bad practices to come back just to help the market recover before an election is plain wrong.

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  • “Despite the crash, the gap between earnings and prices means many buyers would still struggle to raise a deposit.”

    Or indeed pay a mortgage without borrowing 5x’s or more loan to income and even then struggle at the rates lenders are currently offering 90% mortgage deals . But what a great idea getting another pile of FTB’s into negative equity .

    Ray Boulger, of mortgage broker John Charcol, said recently ” The cost to the lender of making one 90% LTV loan available can be four or five times the cost of offering a mortgage at 60% LTV,” he said. “We’re in a situation where the more lending a lender does at 90% the less lending they are able to do overall.”

    Rightmove said in their June HPI: “With limited funds to lend, rationing of mortgages by raising interest rates and requiring large deposits is likely, as demand recovers with the increased number of sales. Unless the markets for wholesale mortgage funding re-open, volumes will remain muted due to a distorted reliance on equity-rich buyers”

    So is Mr Brown going to give lenders another £150bn of QE to lend?

    I have a better idea, why not let the market fall to levels that are sustainable at sensible lending levels .

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  • Starteshooter says:

    stupid..stupid..stupid !!!!!!!!!!!!!!!!!!!!
    Lbour is only concerned about tomorrow and saving its skin !!!
    we will repeat the mistakes of the past..we need to start thinking about moving to a less debt society and keep debt rationed to sensible levels.
    if not..we will repeat the crunch in 10 yrs time..

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  • tenyearstogetmymoneyback says:

    In the current market self regulation might be working O.K.
    The question is will it be needed in the future when some new bank CEO comes up with
    a bright idea to increase market share.

    What is probably more important is regulation to stop people from lieing on their morgage
    applications. Five times salary is one thing but five times an fictional salary completely
    different.

    IMHO anyone who lies on their application is as guilty as Bernard Madoff and deserves
    a similar sentance.

    :- Duncan

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  • The Labour government once again, proves that they are the enemy of every student, young person, or anyone else who did not buy a house around 1998/1999/2000………….

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  • In response to tenyearstogetmymoneyback – to conclude it is the man who lies on his mortgage application that is the criminal is to fall short of acknowledging the real crime. The real crime being the reasons people had to lie to get mortgages in the first place. OK I know the arguments about house ownership not being a god given right , BUT if property had remained essentially “homes” for the populace , not investments , the market would not have inflated to such levels that not only broke the banks but led to people having to lie to get a mortgage driven by the market psychology that their property could only increase in value and they could buy another 2 next year. People were mesmerised believing property is wealth and would see them through to their old age. One MUST remember that the lenders knew people were not being truthful on their applications (which is why 70% were never checked), but they NEEDED FTB’s that could not afford to buy any other way. The CML figures show that people buying at peak were only borrowing 3.5 x’s income whilst Halifax had the figures at 6x’s , so let us not conclude that it is the man in the street that was allowed to lie on his mortgage application who is the one that is at fault and should be seen as the criminal.

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  • Yet again, we see vested interests (including those in Whitehall) framing the problem in such a way that the proposed solution benefits them first and homebuyers second.

    Instead of allowing the market to fall, it must be supported and propped up by getting buyers deeper and deeper into debt to allow them to buy houses off ageing property-rich owners.

    Why won’t the media see this? Ah. Newspaper editors own property too.

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  • the problem is that housing has become such a big industry in this country

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  • There is a hugh, hugh, hugh diffference between 100% mortgage and 95% mortgage.

    Up to 95% mortgage, FTBs have to SAVE. This is extremely important as it not only makes the FTBs think more about financial risk, in the process of saving, it also helps the FTBs to understand how difficult to make a major regular financial cotribution and how impossible it is to have 2/3 of your income taken straight out of your pocket before you even lay a finger on it.

    To give out 100% mortgages to FTBS is like letting a 16 years old fly a jet flight, on the basis that he got enough training by playing computer games. It is so dangerous, it would be safer just give people swine flu.

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  • charlie brooker says:

    “Their warnings reflect a growing consensus in Whitehall that banning higher-risk mortgages may be counterproductive.”

    You gotta love their audacity.

    Even the most fundamental lessons learnt from the crisis are being ignored in the pursuit of an election victory.

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  • charlie brooker says:

    I personally have no problem with these dangerous financial products being reintroduced to the economy provided all those who support the move are sent to act as guinea pigs in GlaxoSmithKline’s new cancer drug testing trials and other such dangerous tests in other industries.

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  • Planningforanepidemic says:

    “Their warnings reflect a growing consensus in Whitehall that banning higher-risk mortgages may be counterproductive”

    Counterproductive to what exactly? Do those that bought near the peak not realise that when prices fall, FTBs will be able to buy a house and spend their increased disposable income in the real economy which might actually start functioning again, thus supporting the their jobs and thus preventing them from being repossessed.

    @peter_2008
    If the transmissibilty of swine flu continues at the same level (as it has for the last 2-3 months) for another 2-3 months, half the population will have been infected by september/october (by which time natural herd immunity will kick it into touch). Don’t think injecting people with it will make a difference – the conspiraloons might actually find a use for their stores of baked beans, candles, etc.

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  • We don’t need no regulation…
    However we do obviously need better teaching of English.

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  • The Baldman says:

    High risk mortgages created the financail crisis..so the solution is high risk mortgages…priceless

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  • britishblue says:

    Peter @6. I agree aboutyour point of 95% or 100% mortgages.

    But the is also a huge difference between say 100% and 100% + mortgage. If you get a 100% mortgage you still have to save to pay for: Lawyers costs, stamp duty, removal costs, furnishings, etc. This could easily add to several thousand pounds. The mortgages we have seen in the last years have covered all these costs, plus personal debt and in effect have been easier to do than take out a contract for a rented property where 1-2 months deposit is required.

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  • When will the people of the UK wake up and realise that the Bankers control our house prices and decide how much we can all afford (or not) to pay for our homes. They calculate how far to stretch us all, and as long as our politicians get jobs with the Banks after they retire from Government (Tony Blair), we will be unable to do anything about this tyranny. It’s time to make a stand.

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  • We are assisting to an engineered housing recovery in order to protect the wealth that supposedly exists in the houses themselves but this will take us to another bailout and anther bailout and so on.

    The only problem is if the engineering process will not succeed, the confidence of genuine buyers will be gone for at least 20 years. And it will probably be the case because the debt will treated responsibly by the rest of the world and so it will the Conservative Party.

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  • Help sterling, FTB’s, savers and banks – put up interest rates. Keep 100% mortgages off the menu. House prices will drop like a stone, as they should, not the feeble low volume house price deflation going on at the moment.

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