Proposed mortgage cap 'suicidal' say 'property experts'

Really2

chewmylegoff wrote: »

what law requires banks to write down their mortgage books in violation of the accounting rules to which they have to adhere.

It is banking regulations not accounting rules.

I agree write-downs look like bad bebt provision and they are in company terms but not for banks

Revaluation of securities, loans, or other assets when the market value is lower than the book value at which the asset is carried. Marketable securities carried as Trading Account Assets for a bank's trading account or held for other institutions must be adjusted to market value (Mark to the Market) daily, by either writing down or writing up. Loans and leases are carried to maturity at the original book value, unless a bank is required to write down their value by a banking regulatory agency

Banks are writing down assets now even thoug repos are not that high.
HBOS RBS etc are not writedowns just based on repo rates.

Really2

chewmylegoff wrote: »

it's nice that you think that, unfortunately the banks have to adhere to the rules that apply to the preparation of their accounts though.

again, the "toxic assets" of the banks are trading book, not the banking book assets, and are therefore subject to different valuation principles.

for the last time, it is very basic, mortgages are valued in a bank's accounts at book value less bad debt provision. that is how it actually happens. in real life.

So is my house worth what ever figure I write on my balance sheet.

Or is it market value?

A mortgage book is an asset and is subject to regulation like all assets.

Lets face it an overnight 70% drop would kill the banks.

Blunty

Anyone fancy a drink?

Oh, well ... I'll get my coat...

(Fascinating discourse just now, though!:T)

chewmylegoff

Really2 wrote: »

It is banking regulations not accounting rules.

I agree write-downs look like bad bebt provision and they are in company terms but not for banks

Revaluation of securities, loans, or other assets when the market value is lower than the book value at which the asset is carried. Marketable securities carried as Trading Account Assets for a bank's trading account or held for other institutions must be adjusted to market value (Mark to the Market) daily, by either writing down or writing up. Loans and leases are carried to maturity at the original book value, unless a bank is required to write down their value by a banking regulatory agency

Banks are writing down assets now even thoug repos are not that high.
HBOS RBS etc are not writedowns just based on repo rates.

the accountancy rules that the banks have to adhere to are enshrined in banking regulations.

chewmylegoff

Really2 wrote: »

Banks are writing down assets now even thoug repos are not that high.
HBOS RBS etc are not writedowns just based on repo rates.

not surprising since their write-downs are primarily to do with their investment banking divisions, and not their mortgage books.

MrFonzerelli

Many mortgages are re-packaged as CDOs, these are valued on mark to market basis and have experienced substantial write downs.

dopester

The best thing about a rule of x3 is it would speed up what needs to happen, and would happen anyway, instead of too many years of misery playing out on on all sides - especially for younger people.. who should really be focussed on productive economic activity.

Get it done, then we can get about to rebuilding from the wreckage - get the economy moving again.

A sharp shock to address the huge imbalances. I would have thought the banks are now, if they are not been doing already, lending at only x3 salary to the few FTBs who can meet the stricter borrowing qualifications. And the authorities warming to it, is likely to make the lenders tighten up even further.

Banks don't like to lend £1 of good real money, as a loan to to see used to buy something where each pound is later worth 90p, 80p, 70p, 60p, 50p... because like Really suggests... that is marked up for market-value one way or another in their books.

b0rker

So say this does go ahead. We are left with the following:

1) Low house prices (say 60% off from the top of the market so average house is about £70K).

2) According to chewmylegoff, low SVRs (to protect the people who took out mortgages in the past 10 years). If we have forced low SVRs then we must need to have low interest rates with the BOE as surely we cannot have low SVRs and a high base rate/fixed rates/trackers. So we will have to have low interest rates for say the next 10 years until we have given those who took out a mortgage in the last 10 years a chance to recover. So we will have low house prices and low interest rates. Sounds a lot like a bit of a mess to me.

3) Banks with assets worth less than half of what they were 2 years ago. Whether they have to write these down and therefore bankrupt themselves is currently in hot debate.

What else will we have?

Will we have more or less unemployment?
How will our imports/exports be affected?

There must be loads of pros and cons for this. I cannot see a lot of pros other than housing becomes more affordable. In saying that we are in a mess right now so why not go from one mess to another. Seems pretty standard for the UK economy.

Kenny4315

chewmylegoff wrote: »

true, but that would also be happening anyway, so it would only cause more repossessions to the extent that the mortgagee would have been able to remortgage without the additional price fall, and to the extent that they could not afford the SVR should they not be able to remortgage.

In a rising market repossessions drop .... why ..... because the house owner can at the last resort sell up and move on with a little in the bank to start again..... in a falling market .... this can't happen because negative equity forces the issue, it removes ability to keep the roof over your head so people wait hope for the best which often doesn't come and repos and price falls build gradually .... in a collasping market which would occur if there was a strictly enforced cap..... even with interest rates at virtually zero ... as everyone would instantly no possible recovery could not take place ... the country will be up sh8te creek without a certain paddling instrument .. when interest rates correct upwards ... due to the cost of imports and other countries coming out of recession .... YOU CAN TURN THE LIGHTS OFF.

The country has spent this money over the past 10 years of consumer boom, both the individual and the government ... if house prices can spell economic good times the evidence also would suggest that it can spell the reverse ... especially if it over-corrects by 35%. We are now the water from previous years has passed under the bridge, and a 70% fall from now would be devasting.

HOPE YOU have a couple of hundred grand in cash to take advantage of such a terrible situation.

b0rker

Kenny4315 wrote: »

without a certain paddling instrument

A paddle?

...