Mortgages: 'Fixed rates could reach 6pc within weeks'

StevieJ

tara747 wrote: »

To answer your question properly, it will completely !!!! the housing market. As rates go up, the amount people can afford to borrow goes down, as they can only afford to pay a certain amount each month. So house prices will most certainly go down even further from here.

Which is a good thing.

Not true, the problem at the moment is deposits and actually securing a mortgage, higher SVR can easily be supported, providing liquidity returns and deposits reduced.

Thrugelmir

StevieJ wrote: »

Not true, the problem at the moment is deposits and actually securing a mortgage, higher SVR can easily be supported, providing liquidity returns and deposits reduced.

Why would the requirement for deposits be relaxed?

As a banker I can lend as much money as I have available without increasing my risk?

Generali

mbga9pgf wrote: »

Thing I dont understand is this,

Why are banks doing this now when the housing market is at its most fragile? Surely a recovery in the UK housing market would help them?

So why the desperate scamble for cash? I know they need to restore balance sheets, but this could in my mind be only for one (or both) of the following reasons...

They are aware of Turner's regulation of the mortgage market requiring more capital reserves which will probably introduce lending limits (a la tories will anyway, as published today in the telegraph)

Or... They are aware of further heavy writedowns on the horizon and are trying desperately to get the cash together to protect themselves from running out when this happens.

Either scenario is bad for house prices, but the banks thinking may be along the lines of that a further correction is still due, so hike rates whilst the going is good.

Game theory answers questions like this.

Imagine you run a bank that make most of it's profit from a bubble in the housing market and the housing market takes a turn for the worst. What do you do?

You can keep lending huge sums against houses hoping that everyone else does the same. If all the other banks keep pumping money in then you're all saved. If the others stop and you carry on lending then you're screwed. If the others all keep lending and you stop then you'll be ok but could have done better.

So what would you do?

If you carry on lending then the chances are you're ruined unless everyone else follows you.

If you stop lending then you'll probably do about the same as your competitors, perhaps slightly worse.

roseland69

Aren't tracker mortgages a bad thing if we get rates shooting up over 10%?

We have just sold and are going to rent. We had thought about buying but "the right" house has not come up. We are aware about the real risk of future rate rises. So what we save in prices dropping we lose (to an extent) in having to pay more per month repaying any loan we eventually do get.

Swings and roundabouts!

StevieJ

Thrugelmir wrote: »

Why would the requirement for deposits be relaxed?

As a banker I can lend as much money as I have available without increasing my risk?

Same reason they were relaxed in the past.

purch

Imagine you run a bank that make most of it's profit from a bubble in the housing market and the housing market takes a turn for the worst. What do you do?

Accept the severance package I was offered, and run for the hills !!!!! :cool:

Generali

purch wrote: »

Accept the severance package I was offered, and run for the hills !!!!! :cool:

That's the answer the theory predicts and that's where I think we are right now.

I guess everyone else realises that too which is why we dont have many bank bosses from 2005 still in place.

Thrugelmir

StevieJ wrote: »

Same reason they were relaxed in the past.

I don't expect to see another credit driven boom in my lifetime.....

StevieJ

Thrugelmir wrote: »

I don't expect to see another credit driven boom in my lifetime.....

I am not talking about credit driven booms I am talking about the norm, I certainly can't remember a time when you needed a 25% deposit to buy a house (I do accept that MIG was paid previously for insurance).

Generali

StevieJ wrote: »

I am not talking about credit driven booms I am talking about the norm, I certainly can't remember a time when you needed a 25% deposit to buy a house (I do accept that MIG was paid previously for insurance).

Normal would be 10% deposit with no MIG if everything else was spotless. Max 95% LTV (inc MIG).

<75% LTV would be "Ask no questions and I'll tell no lies" territory. The bank is fine so long as they value properly.

My opinion FWIW.