Proposed mortgage cap 'suicidal' say 'property experts'

Kenny4315

Max_Headroom wrote: »

The house price should be irrelevent in this instance (on the basis it covers the debt either way). Lending should be done on the basis of affordability, not asset value/risk.

Again, it's this thinking that got us in this mess (oh we can lend them that huge amount, doesn't matter if thy can't really afford it, the asset value covers it).

In a falling market deposit is important, it wipes out the equity and results in the issue of NEGATIVE EQUITY.


Why on earth would risk of not paying not come into the equation ? Why do you think that a higher deposit means a lower interest rate. A person who has accumulated a £30k deposit but earns say £25k, is a better bet than someone who has a £15k% deposit but earns £30k.A salary of £30k pa can be wiped out within a few weeks if someone if made redundant. In the current job market a bird in the hand is worth plenty of bush.

What screwed the market was a lack of deposits and purchases made by guys who depended on a rising market and the ability to continually remortgage at cheap rates, ie lending to people who present to much long term risk.

piggeh

Really2 wrote: »

Which adds to my argument future HPI would be deposit lead rarther than mortgage.

Cash sloshing around always finds somewhere to go. I realy see 3X Salary is just delaying it for a few years and stoping the next generation.

That is why I think afordability is fair, it takes everything in to account, not just one size fits all.

Regardless of multipliers - in either scenario surely it will ultimately be deposit lead? As long as house prices are kept affordable, then maybe deposits will always push prices higher. I guess there's a crossover between maximum multiplier, and deposit needed. The only difference in either scenario is probably a)letting banks regulate themselves and decide what's affordable or someone else do it b)the time it will take for individuals to get a suitable deposit together to go with their 'level of affordability'.

If we cap it - probably longer to save a deposit. If we don't,probably stretching the limits of affordability again (if banks decide on prudency we would end up with 3.5x multipliers again anyway probably).

Kenny4315

Max_Headroom wrote: »

So better people are getting paid more, but all supported ultimately by end purchasers over borrowing?

How is that possibly a good thing, it ends with the same false unsupportable economy we had two years ago.

It is better living in a high value economy than a lower value one, imports are cheaper in relation to wages, etc. Tax is higher and thus infrastructure investment is higher. Where would you rather be a high value country like the UK or a lower one say like Romania ? It's obvious.

The thread is what would happen if 3 X salary was strictly enforced. Not whether a true correction of around the 35% from peak occurred. The result of 3 X salary would be catastrophic, and would put the UK right in the wilderness.

The HPI has happen and much of the money is spent, to take us back to 3X salary from now would bankrupt the country without doubt.

b0rker

piggeh wrote: »

I thought there was a theory that short sharp shocks are better than long slow slumps? How about if you say, let the market fall by 30% and then introduce 3x multipliers? Would you get the best of both worlds? How about if you introduced it during a period of high inflation as well (there would be a lot less NE then)?

I think it's the proverbial rock & hard place - do you place your trust in the FSA or the Banks?

Lending needs to be done in stirct relation to affordability.

This is what should have been happening for the last 10 years but incentivisation made people greedy so that people were offered mortgages that they very obviously could not afford.

If the FSA concentrated on ensuring that the banks do thorough affordability checks and keep interests rates more competative for those with a higher deposit (i.e. a lower LTV gets a better interest rate as is now) then things will work themselves out.

The FSA are more responsible than most for the property bubble in the UK. In fact much more so than many innocent people who purchased in the last few years. These are the very same people that the FSA are suggesting should go to the sword despite that fact that it was the who FSA allowed this situation to occur in the first place.

No. I do not trust the FSA.

piggeh

b0rker wrote: »

If the FSA concentrated on ensuring that the banks do thorough affordability checks and keep interests rates more competative for those with a higher deposit (i.e. a lower LTV gets a better interest rate as is now) then things will work themselves out.

I would imagine if this happened we'd be going back to similar levels anyway? Maybe not 3x, but 3.5x, possibly 4x max. No qualms but someone needs to ensure Banks DO lend responsibly - left to their own devices, I don't believe they will.

Kenny4315

piggeh wrote: »

Wages will be downgraded for construction related professions. Didn't they also go up in correlation with house prices in the first place though? If builders expect the same wage as before they're living in the same dream bubble as those that expect house prices to always go up.

The major component cost for housebuilders was the cost of land. If house prices drop then the cost of land will drop in line with it, it's entirely realistic that profits will still be achievable if houses dropped to a 3x multiplier as had been the case historically.

The biggest cost of construction is labour. Not land as a proportion of the total cost of each separate build, to buy a piece of land might sound expensive but on an estate/appartment block when divided by the total number units it isn't as much as you think. Why do you think so many Polish came over in the building trade ?

In development of existing buildings its and even bigger factor, as they are more complicated than new builds.

A complete meltdown in house prices and construction isn't just going to effect those working within the industry, it will spiral off into other sectors. Public sector spending depends on taxation, although Mr Clown doesn't seem to realise this. Tax revenues from income tax, VAT, stamp duty, inheritance tax, etc all which will get caned. Consumer goods demand will go down, as many related industries are effected, restuarants, gyms, cars, etc. In other words it will effect all aspects of salaries even those who think that a meltdown would be great, because they have a job in Currys selling TV's, which no-one can then afford, or an office in a unrelated field.

kennyboy66_2

MrDT wrote: »

The government wouldn't be stipulating the price of a house, they'd be limiting levels of borrowing. We're no longer in the land of 100% ltv you know. They already control the price of fags booze and fuel to a similar degree, how much per litre is duty do you think?

If you want a more expensive house it's simple, save a bigger deposit, or earn a higher salary. Why should an unsustainable amount be lent to you to buy a house? What's wrong with saving up to buy things, why does everything have to be bought on tick?

The 'want it now' attitude in this country is laughable.

My aunt asked a few months ago if I had been to view any more houses recently, I said no, gonna save more before I bother with more viewings, looking to put down 25% as a deposit. She looked at me as though I were insane, that it simply couldn't be done. Thing is, add my savings to 'er indoors and we're already at around 40%, I'd just like to make it a round 25% each if you know what I mean.

My aunts son, on the other hand, is deep in negative equity already (to the tune of about 40k would be my guess) having bought last year. Aunt still thinks I'm worse off. Obviously her son is in a better position than me, he lives in "his own house", bricks an' mortar innit. I'm pitied for being a poor renter lol :rotfl: I'm happy to rent, I'll eventually buy a house that'll never give me sleepless nights, it won't ever be taken away from me.

I'd agree with your anger towards the "want it now" attitude, however if you think rigid government regulation is the answer you are deluded.

Individuals and banks have badly got risks and affordability badly wrong, but setting fixed borrowing limits is ludicrous interference in what should be a free market.

It should be the decision for banks to make alone and affordability is very different at 14% interest rates compared with a 10 year fix at around 5%.

Perhaps we should all go back to the halcyon days of the 1970's when BT was the only phone provider and you had to wait months to get a phone line installed.

Really2

lostinrates wrote: »

So savings lead rather than debt lead? Seems more sensible to me. I suppose the concern here is gifted deposits? Well, I suppose thats a case of c'est la vie, or inheritance planning for those who concern themselves with that. for the rest of us it would be a matter of prioritisation, like it is for most FTBs on this board.

BTW: I'm an affordabilty gal too, but I think a multiple is a good place to look at afordabilty from...some peope can afford less, some more.

I agree savings is great just savings lead HPI is just as much a nightmare for any FTB. (as buyers get older the nexg generation get pushed further away)

I think some on here are kidding themsleves that 3X todays IR rates is not going to cause lots of cash sloshing around looking for somthing to fill.

I Agree if IR was 15% 3X would be good (perhaps excessive)

But we all know the world can change over night (well a few months)
and to not have a flexible system could cause unwanted problems further down the line.

Like yourself 3X would possibly stop you doing what you wanted to do.
If you did buy some where at 3X you would have £xxxx sloshing around doing nothing (well on curent IR).

I think some forget the more you earn does not increase your expenditure it increases your disposable income.

Why not let you take a calculated risk if you are happy and the bank are covered?

dopester

b0rker wrote: »

Lending needs to be done in stirct relation to affordability.

This is what should have been happening for the last 10 years but incentivisation made people greedy so that people [STRIKE]were [/STRIKE][strike]offered[/strike] took out mortgages that they very obviously could not afford.

If the FSA concentrated on ensuring that the banks do thorough affordability checks and keep interests rates more competative for those with a higher deposit (i.e. a lower LTV gets a better interest rate as is now) then things will work themselves out.

The FSA are more responsible than most for the property bubble in the UK. In fact much more so than many innocent people who purchased in the last few years. These are the very same people that the FSA are suggesting should go to the sword despite that fact that it was the who FSA allowed this situation to occur in the first place.

No. I do not trust the FSA.

http://diy.despair.com/output/poster41003469.jpg

chewmylegoff

Kenny4315 wrote: »

It is better living in a high value economy than a lower value one, imports are cheaper in relation to wages, etc. Tax is higher and thus infrastructure investment is higher. Where would you rather be a high value country like the UK or a lower one say like Romania ? It's obvious.

The thread is what would happen if 3 X salary was strictly enforced. Not whether a true correction of around the 35% from peak occurred. The result of 3 X salary would be catastrophic, and would put the UK right in the wilderness.

The HPI has happen and much of the money is spent, to take us back to 3X salary from now would bankrupt the country without doubt.

it didn't seem to bankrupt the country in the last property crash. yes, this time the HPI was stupider, but the principle is the same. property values realigning themselves with the average trend is not going to send us back to the stone age. it might trap a lot of people in negative equity - but guess what, they'll just have to pay the debts that they already agreed to pay, and would have had to pay regardless of HPI.