Tuesday, Jan 20, 2015

The MMR Effect

Mortgage Strategy: Slow ahead

"Tighter lending criteria, which came as a result of the Mortgage Market Review, may also play a part in stifling the lending boom. In fact, one of the reasons for rock-bottom rates late last year was not just that expectations of a Bank of England base rate rise were put back but also because lenders were behind on their targets, which led to a price war to drive business."
MMR is a nostalgic return to the lending criteria of the '70s. Way back when average prices were 3xEarnings. Forget supply and demand, the real driver of prices is, and always has been, easy credit, and MMR has placed firm limits on it.

Posted by debtserf @ 03:53 PM (5308 views)
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8 Comments

1. reticent said...

"one of the reasons for rock-bottom rates late last year was not just that expectations of a Bank of England base rate rise were put back but also because lenders were behind on their targets, which led to a price war to drive business."

Well, that solves that mystery. It seems this price war pushed rates down as much as FLS, which still amazes me, in spite of this explanation.

Also, if you are struggling to get enough mortgages through the door because of new legislation, how would reducing prices increase volume?

I'm not saying it didn't happen. I just mean it seems stupid for lenders not to have realised that lack of interest wasn't the reason that they were missing their targets.

Tuesday, January 20, 2015 03:59PM Report Comment
 

2. debtserf said...

" seems stupid for lenders not to have realised that lack of interest wasn't the reason that they were missing their targets."

Just lack of creditworthiness.

Tuesday, January 20, 2015 04:33PM Report Comment
 

3. debtserf said...

”With the tough MMR rules now really having an impact, more borrowers are turning to unsecured borrowing as they struggle to get the mortgages they need.

“There are problems with the implementation of the MMR which need resolving. The regulator must urgently address the issue of older borrowers, for example, many of whom are now struggling to get a mortgage.

Rightmove released figures earlier this month showing a record monthly fall in property asking prices across England and Wales, which fell by £8,703 to £258,424 between November and December.

Unsecured borrowing; the breakfast of bankrupts.

Tuesday, January 20, 2015 04:43PM Report Comment
 

4. khards said...

At least there is now legislation, unlike back in 2008 when they would lend 125% to anyone who could fog a mirror. the article seems to imply that there is a problem, but is there really.
Perhaps the problem is to many estate agents and other parasites in the FIRE sector. How often do your really need to buy and sell a house these days anyway? If your unsure about your imminent future people rent these days, unlike back in the 80's when they would have bought a house for a few years.

Their rental market has killed their sales market.

Tuesday, January 20, 2015 05:16PM Report Comment
 

5. debtserf said...

Recently, one estate agent almost immediately tried to steer me away from buying a home for myself, into buying two 'investment' properties instead, which they would then helpfully manage on my behal by aforementioned agentf.

Round my way it seems that +50% of the activity is from BTLers manically flipping and wood-flooring back and forth amongst themselves, mutual financial fapping at its finest.

Tuesday, January 20, 2015 05:49PM Report Comment
 

6. hpwatcher said...

Nice little sovereign debt crisis heading this way c/o Greece. A number of UK banks may collapse just as a result of that.

Worried? Move you money to banks that do investment banking, go for retail banking only.

Wednesday, January 21, 2015 09:54AM Report Comment
 

7. hpwatcher said...

sorry, avoid banks that do investment banking. Only use retail banks.

Wednesday, January 21, 2015 09:55AM Report Comment
 

8. Minorproblem said...

Surely the MMR rules that stop banks lending to every man and his dog and limiting the multiples of salary are what you lot have been cheering about for a long time. The fact that house prices rises have stalled should be seen as a good effect from this legislation as it should mean that the flow of capital toward residential property is reduced. This can be seen in reduced sale prices across the UK as buyers are capped by there salary. This can only bring long term stability which benefits any housing market by allowing people to plan long term.

Wednesday, January 21, 2015 03:55PM Report Comment
 

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