Proposed mortgage cap 'suicidal' say 'property experts'

b0rker

dopester wrote: »

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

Your edit of my post suggests to me that you think that if the FSA had done their job and stopped the banks from giving mortgages to people that obviously couldn't afford them then people would still have been able to borrow that money. I know from your other posts that you are not that stupid.

ad9898_3

Really2 wrote: »

Sorry I disagree an expnading population and reasons stated such as China would prove that to be wrong.

Well TBH I've been out all day so haven't read the whole thread I started this morning, me bad:D. But on the expanding population issue, surely then if there aren't enough houses, we can build more, keeping the construction industry happy, and all the businesses that thrive in that sort of environment.

If we don't try to stop the pyramid situation, it will just start all over again at some point, and with it the misery. Surely we have to try and stop it, we owe it to our children so that they may live the life of the 'boomers', don't we ?

Really2

chewmylegoff wrote: »

well, the country may be in trouble because the banks are screwed, but that doesn't answer why house prices falling to 3x salary will send us over the edge? people will still have to pay the money back to the banks...

OK The banks would have to writedown their loan by £trillions over night.

Have they got the cash available to do that or would they be insolvent?

Also any loan that goes bad means they only get XX% for it they then have to get the shortfall back over a number of years thus compounding losses.

To me that means bankrupt banks.

Really2

ad9898 wrote: »

Well TBH I've been out all day so haven't read the whole thread I started this morning, me bad:D. But on the expanding population issue, surely then if there aren't enough houses, we can build more, keeping the construction industry happy, and all the businesses that thrive in that sort of environment.

If we don't try to stop the pyramid situation, it will just start all over again at some point, and with it the misery. Surely we have to try and stop it, we owe it to our children so that they may live the life of the 'boomers', don't we ?

V bad.:D

But expanding consumption the answer either.

Somthings got to give but I cant se an over night slash of the sword as the answer.

To me prudent affordability is sensible.

lostinrates

Really2 wrote: »

Any HPI is bad for FTB's

A multiple of 3X is pointles for people in your situation.
As a higher multiple would still be affordable due to you partners high wage meaning you have a large disposable income.

In a nutshell.;)

Well, not if the HPI is in line with average salary increase I guess.

If people had deposit lead ''increase'' it could lead to flurry of people like those here buying ...this pent up demand we hear about, but ultimately, the market would still be underpinned by FTBs at their saving rates. The difficulty with this, I submit, is we would have to accept lower turnovers in things people spend on rather than save, things might not seem as rich, but they'd be 'realer'.

I'm not sure, how in the long term this would drive massive HPI? Can someone explain that to me? We'd always be dependant on savings at the bottom, and they will always be in realation to salary etc.

Kenny4315

Some of the main banks are now government owned. An individual whoo can't pay will be repossessed and whatever cash can be obtained will be clawed back, but whataboout personal bankruptcy, IVA's and that stuff. In the end, if the person loses the house and has still £100k outstanding, the bank takes the hit, ie the government or taxpayer. Compound that across hundreds of thousands of households that will go under, and you've got a very very very serious problem. If a 3 times cap were enforced the whole market would collaspe, and the government would be left with an enormous pile of sh8te on every level, currency, tax, national debt, employment, imports, infrastructure support, etc.

dopester

For the future lending at x3, I'd like to lob in a few deflation grenades, on how it will further hit current house prices.

I wonder what the average wage will be in say 3 years time, x the multiple of 3.

Deflation, therefore, doesn’t just mean lower prices – it also means higher unemployment and lower wages. It will become much more difficult for those people who’ve lost their job or had to take a pay cut to continue repaying their debt.

Today's Telegraph

chewmylegoff

Really2 wrote: »

OK The banks would have to writedown their loan by £trillions over night.

Have they got the cash available to do that or would they be insolvent?

Also any loan that goes bad means they only get XX% for it they then have to get the shortfall back over a number of years thus compounding losses.

To me that means bankrupt banks.

why would the banks have to write down by trillions over night? they have to assess recoverability, not the market value of the security. the principle valuation criterion is default rate, not property price.

unless a mortgage cap suddenly caused everyone in the country to have their salary cut so that they couldn't afford their mortgage, then nothing material would happen to the recoverability of the bank's loan book. the loss on each repo might be more, but that's still not going to equate to meltdown.

plus, there are about 20,000,000 households in the country, with an average value of 200,000 or something like that, putting the total value of property stock at 4 trillion. given that only something like 60% of properties are mortgaged, i don't think banks are going to be starting £trillion losses in the face overnight, somehow.

Really2

lostinrates wrote: »

I'm not sure, how in the long term this would drive massive HPI? Can someone explain that to me? We'd always be dependant on savings at the bottom, and they will always be in realation to salary etc.

In china they save on average 50% of their wages.
To purchase a 1000sf apartment in shanghai.
It would take a person on an average wage to save 100% of their wages 20 years to get a 30% deposit or 50 years to buy outright.
That does not take in to acount inflation.

Ultimatly savers start pricing savers out of the market.
The older and more you earn the more you save but the above sounds nighmarish to me.

lostinrates

Really2 wrote: »

In china they save on average 50% of their wages.
To purchase a 1000sf apartment in shanghai.
It would take a person on an average wage to save 100% of their wages 20 years to get a 30% deposit or 50 years to buy outright.
That does not take in to acount inflation.

Ultimatly savers start pricing savers out of the market.
The older and more you earn the more you save but the above sounds nighmarish to me.

Don't they have a massively increasing population in China? (what I know about china I could write on a lemon pip.)