Saturday, February 6, 2010

Controversial idea?

Cap mortgages - let the bankers shriek

How much do you think a bank will lend someone who earns £30,000 a year? Maybe just over three times their income – say £100,000? Or maybe they should stretch to £120,000, four times income. But what about £190,000? Nonsense, you'd say, that's 6.3 times earnings, and the borrower would default when interest rates rise. Yet that's what one bank is doing, having learned nothing from the orgy of easy lending that has left taxpayers across the world having to bail them out. Banks are still offering loans that will become toxic when rates rise. It's time to bring to an end a bank's freedom to set its own lending criteria. If we had banned anyone from taking on a loan for house purchase of more than 4x salary, house prices would never have reached their current unaffordable levels.

Posted by little professor @ 10:17 AM (2285 views)
Please complete the required fields.



11 thoughts on “Controversial idea?

  • But it is what Gordon wants.

    Reply
    Please complete the required fields.



  • FSA in Britain said they will not ban 6 X salary mortgages in order not to affect recovery. What about buy to let getting 100 times their salaries to buy family homes? FSA said this is business and needs the Government to regulate in order to give FSA powers over Buy to Let. Nothing happened.

    Reply
    Please complete the required fields.



  • happy mondays says:

    It is now time to bring to an end a bank’s freedom to set its own lending criteria. Nice !

    The banks have held us to ransom to long & we, the public need to understand that our freedom has been compromised by these corporate terrorist too long & it is time to stop this insanity…
    Revolution Revolution Revolution A turn around of the whole corrupt system, from bent mp’s too sociopathic prime ministers & power hungry corporations…

    “If the American people ever allow private banks

    to control the issue of their money,

    first by inflation and then by deflation,

    the banks and corporations that will

    grow up around them, will deprive the people of their property

    until their children will wake up homeless

    on the continent their fathers conquered.”

    Thomas Jefferson.

    Reply
    Please complete the required fields.



  • HM @ 3

    Succinctly put.

    Reply
    Please complete the required fields.



  • mark wadsworth says:

    Well, it won’t happen and it’s probably unenforceable in practice, HOWEVER there is a better way of doing it.

    Quite simply, the bank has to ask each mortgage borrower how much he earns each year, and then mortgages get classified into 1x salary or less, 1x – 2x salary, 2x – 3x and so on, and then they have to disclose the different slices in their accounts and on their BoE returns, and all mortgages that are more than 3x salary and more than 75% of property value rank as unsecured and so get written down by 50% for purposes of calculating minimum capital ratios and so on (for example)

    Alternatively, we could just have LVT (in place of as many other taxes as possible) or even better LVT in addition to what I suggested above. Was Thomas Jefferson a Land Value Taxer?

    Reply
    Please complete the required fields.



  • If the gov would just let risk-negligent banks fail, the banks might develop some interest in who they’re lending to, and the gov wouldn’t have to keep complicating everything by adding one meddling regulatory idea after another.

    I believe Jefferson, in above quote, was referring to central banks – I agree – abolish them.

    Reply
    Please complete the required fields.



  • Don’t ban borrowers from anything, just stop all the moral hazard.

    – End insurance for bank deposits, and people will only deposit money in sound banks
    – Pass laws to prohibit any bailout of any financial institution, if you take too big risks, you go out of business.
    – End the central bank, and its role of insuring banks with overnight deposits.
    – End the central bank’s manipulation of interest rates
    – Cancel fractional reserve banking and banks can only lend what they have on deposit, interest rates will rise, increasing savings rates. This can be done incrementally by increasing reserve requirements over the space of say a decade.

    – Stop blaming the borrower, it is, in almost every case, the government that is at fault. Pity but do not totally blame the consumer who is desperate for a small place of their own to raise a family, like their parents could 30yrs ago. It is the inflation(fraud), dummy.

    Reply
    Please complete the required fields.



  • HM @ 3

    Yes very well put. Banks are just businesses.

    Reply
    Please complete the required fields.



  • Freeman, exactly, but they won’t because that means relinquishing control, the priority of those vile power egos.

    Reply
    Please complete the required fields.



  • markj69 str05 says:

    Wakey wakey Briton!

    If banks lend more than 4x salary, then it is surely incompetent, irresponsible, negligent, behavour.
    If an individual (Or couple) borrow more than 4x salary/s, then this too is incompetent, irresponsible, negligent, behavour.

    The former enticed into this behaviour due to green, and potential high-risk returns – Profit. The latter enticed because they want to improve their living conditions/standards. It’s unfortunate that the average person expects the banks/financiers to make the decision on affordability. Well, i’ve never met a salesman who’s said ‘No you shouldn’t buy that. It’s beyond your means’. They wouldn’t be doing their job.

    Yes, there needs to be regulation/restrictions to protect both borrower and lender. And if teh FSA don’t have the balls to lay down outline recommendations/guidelines, or are not screaming at government for restrictions, then what on earth are they doing?

    Business is business. It’s unfortunate that lenders make their money feeding our own desire and need to progress.

    Reply
    Please complete the required fields.



  • markj69 str05 says:

    oops. Greed, not green. Doh!

    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>