Proposed mortgage cap 'suicidal' say 'property experts'

lostinrates

b0rker wrote: »

A paddle?

...

Better than my guess, which was jelly shoes.

Kenny4315

chewmylegoff wrote: »

obviously if you bought on a discount mortgage and can't get another one, you would be screwed. but that is a silly practice anyway.

NO that's fairly standard practice ...buying a discounted or fixed rate mortgage ... i think, i could be wrong though ..... what do you think ?

Kenny4315

b0rker wrote: »

A paddle?

...

No a spoon ... paddles would be an unaffordable luxury ... when negative equity strikes. 2 spoons if the NE is less than £100k

chewmylegoff

b0rker wrote: »

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.

we already have very low SVRs anyway. the issue with people running into trouble when they got shoved on SVR dates back to before interest rates were slashed. most people going on to SVR now will going on to a lower rate, not a higher rate.

chewmylegoff

Kenny4315 wrote: »

NO that's fairly standard practice ...buying a discounted or fixed rate mortgage ... i think, i could be wrong though ..... what do you think ?

fixed rate yes.

discounted rate - not really, because they just charge you a massive fee which gets added on to the mortgage each time, so you're really paying normal interest, but deferring a portion, which means you can't really afford a mortgage.

people going from 2 year discounted rate to 2 year discounted rate couldn't actually afford to buy, any more than people with 125% mortgages could.

Kenny4315

chewmylegoff wrote: »

i'm happy for you both to give up though, as neither of you seems to understand (a) how bad debt provisions work

I'm a qualified straight A Chartered management accountant, seem to recalled on got between 70 and 80% on all the technical accounting papers. I was a senior SAP finance consultant at a multi-national firm , implementing multi-million pound finance system (in blue chip global rollouts), I a certified strategic enterprise consultant. I was a senior HQ finance mgr controlling £250m of spend, and also a divisional accountant with a P&L of about £100m after that.

So have had to explain some bad debt provisions to 'auditors' quite often but frankly I'd be able to convince them whether I calculated it or hit the random button, as they did not know my business well enough to challenge my decisions.

I am now a developer and landlord, so I know how the housing market works a bit aswell.

chewmylegoff

Kenny4315 wrote: »

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.

you can type in capitals as much as you want, it isn't a basis for saying that repossessions will be crippling. not sure why you necessarily think that 3x salary cap would mean a 70% fall in value from now.

http://business.timesonline.co.uk/tol/business/economics/article4513389.ece

a hasty google search reveals this, in august 2008, stating that the average buyer was putting down a 20% deposit and borrowing 2.94 times their average income. granted that is average, not the upper limit, but even so, it's not as if we are talking about a massive change from the lending that is already going on at the moment, and therefore not particularly indicative that property prices will completely collapse should a 3x salary max be brought in. property values may continue their downwards trend, back towards where they should sensibly be, but we are not talking about suddenly writing 70% off the value of everyone's house overnight.

Kenny4315

chewmylegoff wrote: »

fixed rate yes.

discounted rate - not really, because they just charge you a massive fee which gets added on to the mortgage each time, so you're really paying normal interest, but deferring a portion, which means you can't really afford a mortgage.

people going from 2 year discounted rate to 2 year discounted rate couldn't actually afford to buy, any more than people with 125% mortgages could.

Whether you choose to fix and discount is dependent on your view of rate movements. Fees will depend on the discount and will depend on the fix. Fromm my dealings I prefer fixed but I like the payment stability, but fees have always been similar. Fixed rate fees can get added to the mortgage, if you wish.

Kenny4315

the deposits where released from know doubt sales of houses that were going up in value ????? You can't release much of a deposit from your previous house if your in negative equity.

What's your estimate of the average house price if a 3 times salary cap were strictly imposed. With average salaries likely to be somewhere in the region of £25k nationwide ?

chewmylegoff

Kenny4315 wrote: »

I'm a qualified straight A Chartered management accountant, seem to recalled on got between 70 and 80% on all the technical accounting papers. I was a senior SAP finance consultant at a multi-national firm , implementing multi-million pound finance system, I a certified strategic enterprise consultant. I was a senior HQ finance mgr controlling £250m of spend, and also a divisional accountant with a P&L of about £100m after that.

So have had to explain some bad debt provisions to 'auditors' quite often but frankly I'd be able to convince them whether I calculated it or hit the random button, as they did not know my business well enough to challenge my decisions.

i am an ACA. i work in banking.

isn't it irritating when you have to explain how bad debt provisions work in your industry sector, and the person to whom your explaining them just doesn't get it.

still, practice what you preach eh.