Sunday, May 11, 2014

This is deflationary. Will cause rates to fall.

Borrowers left in chaos by mortgage crackdown : Lenders grappling with new affordability rules are preventing sales from going through

MMR will achieve the opposite of what it aims to achieve, like most government intervention. By forcing lenders to consider interest rate rises, less lending will occur, putting downward pressure on prices (deflationary forces) causing interest rates to plunge for those who qualify for loans. However, this could be great for businesses, because less lending on mortgages means more cash available for business lending. Could help to buy have been a tool to cushion the blow of implementing these Basel requirements? Also, note, having children will vastly reduce your ability to borrow. Thus, the housing "crisis" was engineered on purpose to allow government to control who can borrow what and live where. They had to create a crisis to justify this totalitarian control over mortgages.

Posted by libertas @ 02:46 PM (3883 views)
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15 thoughts on “This is deflationary. Will cause rates to fall.

  • This week we got turned down for a mortgage in principal. We wanted to borrow £100k 50% LTV @ 1.99% over 30 years. Over £50k household income.

    I would have thought it would be quite easy to get a mortgage, but I was wrong. They stress tested my incom ~£35k against the £100k and ignored my wife’s income as she is in a probationary period. They said we couldn’t afford to borrow £100k.

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  • Greater London area?

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  • khards, that is unbelievable.

    As Libby points out, a lot of this stuff is just a domestic forerunning of Basel, so there’s not that much scope for the govt. to reform it if it does severely limit mortgage access, as Basel will be trickling through soon anyways (2016-19 IIRC).

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  • @piotr – south west.

    I’m not to bothered about not being able to obtain a mortgage at the moment, becaseu if I can;t get one then nobody else can so steep price falls are a dead cert.

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  • Its gone way too far the other way. Its a joke that on those numbers you cant get a mortgage but there is someone else in the forums with very similar numbers and situation and he got refused too. So its not isolated. Assume age wise you are fine. Any kids?

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  • @Khards

    Refused for a “£100k 50% LTV @ 1.99% over 30 years”

    I’m not sure what you mean by that. Borrowing £100K on and £200K property?

    That you would be refused on that seems astounding. I have arranged a decision in principle interview a few weeks from now. If your story is typical, the interview will be more interesting than I expected.

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  • @quiet guy – That’s correct – looking for a principal amount of £100k and have been refused on the basis that it’s unaffordable on an income of £35k (ignoring the o/h income since she has just changed job and is in probationary period).
    The last mortgage we took out in 2006, I has an offer for £140k on £29k salary.

    I shall see how things pan out over the next 6 months. I can’t really see us buying anywhere soon, but it’s a bit pointless looking at Rightmove when you have no offer in principal.

    When I was in Ireland I managed to get an offer for €78k on €40k salary. Seemed a bit tight, but at least you could get something offered. BTW, there are no debts or kids.

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  • If probation income is ignored, how on earth can people move jobs?

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  • stillthinking says:

    khards, that would seem to knock everybody out. Anyway we shall soon see from the number of mortgages granted. It would be interesting to know how the new requirements impact on budding BTLs but there probably aren’t that many about..

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  • stillthinking says:

    Sorry to double post. There must be millions of people carrying mortgages that they don’t qualify for anymore, which means that they can never switch providers. They may be in a position where they get fleeced blind with no options.

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  • Thecountofnowhere says:

    Its the silly asking prices that are the problem not the amount people can borrow…simple solution…OFFER LESS…DROP YOUR PRICE BEFORE EVERYONE ELSE REALISES THE GAME IS UP.

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  • britishblue says:

    [email protected] These people are then completely vulnerable to their existing providers when they come to an end of an agreed period of a fxed rate. Because they are considered a higher risk they may have to face higher varaible rates that a customer that could switch. slowly cooking crabs comes to mind.

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  • @britishblue – we were kind of stuck in that rut with a norhern rock together mortgage we took out in 06, we wanted to move so we just sold up and repaid it in full. It’s fair enough to say that we could have repaid a large chunk of it and switched providers, but we wanted out anyway.

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  • “libertas said…If probation income is ignored, how on earth can people move jobs?” – taking into consideration probation periods is nothing new and indeed is quite sensible, why would anyone (me included) want to lend money to someone within say a 3-6 month probation period ? the employee doesn’t make the grade and the employer terminates them ! better to wait and see if they come through it and secure genuine permanent employment.

    stillthinking said…”There must be millions of people carrying mortgages that they don’t qualify for any-more, which means that they can never switch providers. They may be in a position where they get fleeced blind with no options” – I would estimate hundreds of thousands maybe not millions but basically what you are saying is correct – all part of the interest only time bomb which I repeatedly flagged up years ago !

    The mortgage market is changing – any self employed (SE) lurkers on this thread best find themselves an employed position as SE are currently treat like lepers by the lenders !

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  • stillthinking @9 – One report in the DM about 3 weeks ago had an un-named source saying:

    “Some borrowers will be surprised to find they may not pass the test to get a loan they currently have no trouble repaying – even if the deal they are moving to is actually cheaper.

    “If this happens you need to appeal to some pragmatism from the bank. The whole point of these new rules is that they are not prescriptive”

    Don’t who said it or how true it is.

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