Sunday, November 21, 2010

FSA climb down

Borrowers offered a mortgage lifeline

Millions of borrowers who feared that they could be shut out of the property market have been thrown a lifeline. Interest-only borrowers, the self employed and first-time buyers without a chunky deposit or wealthy parents all stand to benefit after the Financial Services Authority climbed down over its plans to push through its controversial Mortgage Market Review reforms.

Posted by quiet guy @ 07:35 PM (3028 views)
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16 thoughts on “FSA climb down

  • So here we go again: UK property bubble 2.0 is on its way 🙂

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  • Er… they have only benefitted short terk.
    Long term, this kind of risky lending keeps house prices higher than they would otherwise be.

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  • Just for the record, the FSA hasn’t yet posted any press releases regarding the consultation which ended on 16th November – not even a response report. So I’m not sure where the Journalist here got her information from. It’s certainly not official.

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  • dill

    journos usually have excellent sources so this could well be true

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  • @dill

    Well spotted. I suppose we’ll jsut have to wait and see. I asked google which yielded another rehash of the article on the Daily Mail but nothing on the FSA’s own website.

    http://www.dailymail.co.uk/money/article-1331624/A-window-opens-new-mortgage-deals-Stricter-rules-bank-lending-hold.html

    I find this alleged climb down quite plausible so my guess is that we will get official confirmation that the FSA is at least stalling until summer.

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  • greenshootsandleaves says:

    I think someone’s trying to use this lifeline to prevent a rescue boat (in the shape of falling house prices) from reaching the scene.

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  • What Peter says.

    What VOR says.

    What GSAL says.

    Ah, sod it, I’ll just have to postpone buying for another couple of years, see if I care.

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  • And I think someone is/some people are dictating to the FSA what’s going to happen. And the BOE, and government.

    How do we assess and measure the performance of these organisations? Would it matter if they actually had targets (Such as keeping inflation below a certain rate)????

    We can vote for a government, but we can’t change the people in control.

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  • Modern Democracy = the freedom to vote for whichever totalitarian classist government you wish to rule over you.

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  • OK, figured it out. Looks like journalistic licence and selective interpretation.

    The probable source is the speech, made by Sheila Nicoll (Director of the Conduct Policy Division, FSA) entitled ‘ MMR: Dispelling the myths’

    Worth a read: http://www.fsa.gov.uk/pages/Library/Communication/Speeches/2010/1118_sn.shtml

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  • Why should this possibility suprise anyone.

    We are talking about the ‘FSA’ here.

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  • This falls in line with what I’ve been saying in the last few days about my experiment to see howling money is about.

    IMO whether currently overpriced or not, if more funds become available then prices won’t be going down far.

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  • My 2p:

    If house prices crash it will drastically reduce bank capital (as the bank debt is secured against a property value) and there will be another banking crisis and the powers that be know they cannot convincingly bail the banks out all over again – they’ve already use ALL their amunition there with 0.5% base rates and QE1&2. This would mean a full-blown banking crisis and a European (German) IMF bail-out like Ireland, Greece etc.

    “They” are steering the economy into what they hope will be industrial growth and sufficient inflation to erode government, bank and personal debt and want to keep sterling low (hence the Euro/Ireland aid as a Euro crisis means the pound appreciates reducing inflation and hampering exports) and to stimulate and export-led recovery. This they hope will buy sufficient time for banks to recover capital and the industrial output to increase…..though that will take a number of years.

    Until market events overtake policy (which they will eventually, chickens still need to roost and all this policy just delays the inevitable) their hope is:

    Interest rates will remain low allowing banks to restore their capital base.
    Bank profits will be large to accomplish the above.
    Sterling will remain relatively weak – keeping imported inflation sufficiently high and to promote exports and industrial growth e.g. Rolls’ recent orders.

    There is so much uncertainty in all of this the stock markets are going to volatile enough without a property crash.
    All of this points to a POLICY of stagflation in the property market i.e. long slow real erosion of property values through stagnant property pricing and higher RPI and pay awards until they become affordable once more. The question is will something upset the applecart before this plays out….

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  • Thanks for the FSA link, Dill. It is shocking that 43% of all mortgage stock in the UK is interest-only and 75% of mortgages advanced between 2005 and 2010 have no specified repayment strategy. It’s not surprising that sensible borrowers are priced out of the market.

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  • Until they scrap MIRAS on Buy to let rental income you wont see interest only moprtgages disappearing any time soon.
    On top of that MIRAS for BTL landlords is a viscious spiral of added pressure on first time buyers being priced out of the market. In one fell swoop they could push a hell of a lot of housing stock into the marketplace, driving down prices for FTB’s and allowing mroe private tennants with a desire to own their own home at reasonabvle priced a chance to do so. I know a number of BTL landlords who only keep their portfolio going because they can 1. maintain an IR mortgage and 1. get MIRAS on the intrest element of it.

    take these two options away and watch prices tumble in the BTL world without much impact on banks (most BTL property had min 40% equity at time of Mortgaging)

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