Permanent ban on 100% mortgages (merged)

ad9898_3

Dan: wrote: »

MrDT is right.

I could purchase on my credit card(s) if they go as low as your suggesting.

Would you ?, why ?, it just seems like a load of hassle with no gaurantees.

Dan:_4

ad9898 wrote: »

Would you ?, why ?, it just seems like a load of hassle with no gaurantees.

No I wouldn't because I only want one house and I already have it. It just would seem strange that the total of my available credit would be enough to purchase a house!

HelpWhereIcan

epz wrote: »

IMHO they are targeting the wrong thing, whats important is the ratio of house prices to average earnings.

If the average wage is 25K and the average house costs 75k then 100% mortgages arnt a problem, if the average house price is 150k then 100% mortgages are a problem.

It should be the banks job to manage this risk but as they have so clearly failed i would look to have some sort of independent committee which levies a tax on lending over a certain amount when the wages/prices ratio is above a certain level.

That would provide a brake against HPI and raise revenue to cope with any slowdown caused by them getting out of hand.


I know what matters to the mortgage payers the interest rates but IMHO the wages/prices ratio is a better indicator of things getting out of hand.

I kind of agree that this is the only sensible way to limit/regulate the amount of money being loaned - if that is want needs to be done.

However, I would not use the blunt tool of an income multiplier like 3.5 x salary as this fails to recognise the effect of interest rates*, the liklihood that people have more than one income source and the fact that people live within their means to varying extents. You also need to take into account modern life meaning investment income or income from maintenance etc is so much more common than it used to be.

*A mortgage at 3.5 x salary at 10% may cost more pm than one at 5 x salary at 4%. This means that lenders can price more openly for risk - ie higher rate means less money. In that respect LTV becomes irrelevant as it forms part of the lender's pricing for risk.

eg a couple with no kids will live more cheaply than a couple with kids but would not receive the tax credits etc that the couple with kids may so why should they be offered the same basic multiple based on the same basic salary.

Life and incomes are much more complicated than they 'traditionally' were and lending needs to take this into account.

For that reason I would propose something like a maximum % of all net income from all sources than can be used towards debt repayment. That would keep affordability across all borrowings under control/constant while recognising the varying types of income more readily.

A number of lender independantly operate like this already (with varying levels of flexibility of which income types they will accept) and IMHO tend to be the ones that end up offering the most understandable maximum lending amounts - whether that is higher or lower than the average.

As a pleasant side effect it would also allow lenders to take more income into account without the need for self cert which could help battle fraud.

As well as that side there needs to be an acceptance of the role that insurance companies play in lending criteria through indemnity guarantee policies. Clearer guidelines on what is and is not acceptable would help keep the costs in that market down as well.

Cleaver

Just wondering if anyone's seen this story yet:

http://news.bbc.co.uk/1/hi/uk/7903985.stm

It's about Brown wanting to stop 100% mortgages. Pretty damn sure it hasn't been posted anywhere on this site yet.

dezmond76

MrDT wrote: »

I would buy two.

And that really sums up the attitude to housing here in the U.K. A house is for LIVING they should never be a vehicle for investment.

High house prices benefit no one, except to inslave generations with massive debt. Ask yourself this question, would you want your children inslaved in such away? The answer is of course, no.

dezmond76

leveller2911 wrote: »

.The only good thing will be house prices will drop further which I think is a good thing,unless you brought a house in the last 2yrs and need to sell within the next 2-3 yrs.

I would suggest anyone who purchased a house with a large LTV in the last 5 years, will have the threat on negative equity on thier shoulders.

leveller2911

I also think that when calculating the amount a bank will lend , the claculation should NOT,NOT NOT include child maintenance and working family tax credits as parents can stop paying maintenance and tax credits can be mesed up,stopped, mis-calculated etc, im very surprised on other threads how these seem to have been taken into account in the past.Talk about asking for trouble.

lethal0r

i dont like how GB NEVER admits to being wrong at anything. is putting me off him more and more.

MrDT

dezmond76 wrote: »

And that really sums up the attitude to housing here in the U.K. A house is for LIVING they should never be a vehicle for investment.

High house prices benefit no one, except to inslave generations with massive debt. Ask yourself this question, would you want your children inslaved in such away? The answer is of course, no.

You want family homes to sell for 3.5x single median income. If that were reality why wouldn't I buy a place of my own, the missus buy a place of her own, and we live in one, rent the other out? If it all goes tits up we'd have a house each no bother? Makes an awful lot of sense.

Family households aren't single income. Why would a family house be priced to suit a single income? Don't be daft.

PS - tenants would be living in my 'extra' house. Would that make you feel better? Doubt it. Personally, I'm glad I have lived in my rented house for a couple of years, it allows me to bide my time and eventually buy when it suits me. With a decent deposit. Or outright if your predicitons come true.

Cleaver

lethal0r wrote: »

i dont like how GB NEVER admits to being wrong at anything. is putting me off him more and more.

It's weird isn't it? It's very strange that one of his advising team doesn't come up with a plan around him getting on TV and saying, "You know what, we stuffed up on a few things. Sorry about that. However, this is our plan to get out of it". I'm paraphrasing there, but you know what I mean. I guess they think they'd lose votes, but I really don't think this would be the case.

I guess that's modern politics for you - trying to appeal to everyone and appear as a force that is never wrong on anything.