Friday, January 28, 2011

“David Cameron is totally contradicting Shapps”

A house divided

Prime Minister David Cameron and housing minister Grant Shapps are in a tug-of-war over mortgage policy. Shapps is focusing is on long-term stability in the property market and a gradual reduction of house prices in relation to wages while Cameron has called for a return to “respectable lending” from banks to get the market moving again........Jonathan Cornell (Consulting director Jonathan Cornell) says “Shapps is looking at a long-term sustainable industry. We are looking at it from a short-term, grim survival point of view.”

Posted by jack c @ 04:49 PM (1981 views)
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9 thoughts on ““David Cameron is totally contradicting Shapps”

  • Cornell is even more blunt about their ability to make any difference: “Cameron is doing his usual politicking whereas Shapps just talks for the sake of it.”

    Sums it up.

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  • Good cop bad cop, that’s all.

    Cameron is in the pocket and thus shows it.

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  • sibley's b'stard child says:

    Exactly Dill, while Shapps talks about wanting to see a gradual chipping away at HPs, I see absolutely nothing to corroborate this stance. Conversely, perhaps the gov realise the game is up re: HPC so Shapps is ‘taking the credit’ early, so to speak.

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  • Jack

    In this article is specifically quotes :-

    Cameron said: “If you are a single person and you are earning a decent salary, you go to the bank or building society, you are actually quite a good risk but they will not give you 80 per cent of the value, they will not give you four times your salary.

    Is this true ?

    I find it hard to believe that with a 20% deposit lenders won’t go to 4 times a single income.
    Sexist as it may be though I’m not sure they should count a second salary as that simply fuels the cost of land.

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  • mark wadsworth says:

    We did this one before – if you assume 20% and 4 x salary, the mortgage payments will almost certainly be ‘unaffordable’ using the FSA’s test, i.e. if your monthly mortgage repayments are more than 35% your net salary. Workings on my blog.

    That’s joined up government for you.

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  • str 2007 – assuming the DC quote is genuinely accurate it is a bit of a sweeping statement – for starters what does he mean by a “decent salary”? – mortgage lenders work on very specific earnings, secondly he appears to be making a judgement that the person is actually quite a good risk whereas the lender will determine this by taking into account credit history, the property type and employment status/prospects of the applicant (think of his impending cuts ! then think of Bristol waterfront appartments).

    Lenders are starting to look much more closely at affordability rather than just straight income multiples and this is having an impact of an individuals ability to borrow – the days of cheap and easy N Rock style credit are gone. The MMR that Sibs and myself are keeping a close eye on will also have a dramatic impact if it goes through in its proposed format.

    However to pick up on your point higher income multiples are still available – N Rock salary over £32.5K on high credit score = 4.5 salary multiple. Woolwich from Barclays on High score = 5 salary multiple.

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  • str 2007 – my post has just crossed with that of MW’s above but his workings further evidence the problems (if thats the correct term) faced by borrowers particularly in the light of new FSA proposals. This surely must add further downward pressure on residential prices.

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  • Hmmm is this PR vote winning then from Cameron?

    I wonder why he isn’t quizzed over affordability issues with just a small increase in mortgage rates ?

    Frankly irresponsible to be suggesting higher multiples should be leant.

    FWIW I don’t think the government owned banks are checking multiples if biggish deposits are in place. Which would leave me to believe the government are trying to support the housing market.

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  • I wondered if bank appointed surveyors have started valuing property more conservatively (read realistically) prior to issuing a new mortgage. Could this be manipulated politically as a way of gently reducing prices?

    I realise lower price values by surveyors mean less debt (not good for banks if buyer is good credit risk) but better chance of debt being serviced? It would be useful to have the bank’s surveyor on your side as a FTB, trying to convince the seller that his/her asking price is unrealistic, and the bank simply wont lend that amount?

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