FSA Rejects LTV/LTI Mortgage Caps......

Conrad

Hamish, on the front line here Iv'e got to say it looks like lending criteria will remain uber tight for 2+ years, until new investors get a full whiff of the terrific spreads on offer currently. I'd say 2 years minimum before a gradual easing process begins.

Yakubu22

SlimJ_GBR wrote: »

“We are also concerned that having a fairly blunt tool like a cap on loan-to-values could have an effect of denying first-time buyers access to the market, which would be unfortunate,”

Whats the problem with this? this to me is just common sense, it says to me you can't obviously afford to buy a house so we won't lend you the money until you can, thus protecting you from your stupid self in getting into debt you will struggle with!

Anyway, placing a cap on LTVs will eventually make houses affordable for EVERYONE!

exactly, surely that quote should read;

“We are also concerned that [STRIKE]having a fairly blunt tool like a cap on loan-to-values [/STRIKE] EXTORTIONATE HOUSE PRICES could have an effect of denying first-time buyers access to the market, which would be unfortunate,”

HAMISH_MCTAVISH

Conrad wrote: »

Hamish, on the front line here Iv'e got to say it looks like lending criteria will remain uber tight for 2+ years, until new investors get a full whiff of the terrific spreads on offer currently. I'd say 2 years minimum before a gradual easing process begins.

I'd totally agree, and it's something I've posted about in detail previously (elsewhere).

The existing shortage of funding is still leading to significant mortgage rationing. However the levels of funding for new purchase has increased pretty consistently for 5 months or so. Numbers of approvals, and average loan amount are both also increasing. And regardless of opinion, this has proven to be enough to raise prices, for now at least.

Securitised lending will resume a couple of years from now, but first prices have to stop falling and stabilise to lower percieved investor risk. By that time, investors will have tired of low returns elsewhere and the risk/return threshold will be breached to reopen the securitised lending merry go round. The products will be different, the risk rating methodology will change, but the basic principle will return.

And when it does, the floodgates will open as a wave of pent up demand is satisfied, mortgage margins will reduce as effective competition resumes, and affordability criteria will therefore be enhanced, leading to higher prices even if supply also increases, as it surely will at some point.

The next boom is built into the system already, due to population increase and supply lagging demand. The only question is when it will start, and how high will it get.

Fella

HAMISH_MCTAVISH wrote: »

...And when it does, the floodgates will open as a wave of pent up demand is satisfied, mortgage margins will reduce as effective competition resumes, and affordability criteria will therefore be enhanced, leading to higher prices even if supply also increases, as it surely will at some point.

The next boom is built into the system already, due to population increase and supply lagging demand. The only question is when it will start, and how high will it get.

One of the things that most bulls either can't, don't or won't understand is that when house price crashes occur there IS no pent up demand. For the very good reason that no asset is hated more than housing when prices begin to fall. I remember the '89 crash very well & people truly LOATHED housing after a short while. Tons of people were trapped with negative equity & the certain knowledge that the asset they couldn't unload would be worth even less in a year's time. It's hard to appreciate these days (after a 10-15 year love-in with property) but when prices start to fall properly there is no asset class more hated than housing. Any other falling asset can be sold - & losses minimised. But with housing many people cannot sell & thus the love turns to hate & then some.

IMO the current housing market is very analogous to the dotcom bust in it's early days. When BT shares, for example, fell from £15 to £12, loads of people thought they were now a great bargain & were waiting to jump in. However once they'd fallen from £15 to £5 no-one was wanting to jump in....

The same could be said of countless other tech shares & the same will undoubtedly be true of property. When prices resume their sure & steady decline the last thing on anyone's mind will be buying. Greed is replaced by fear & the general mindset swings from how much more the asset used to cost to how much less the asset will cost next year. And how much less the year after that. And suddenly no-one is thinking of the money they'll make from property anymore, they're all worrying about how much they might lose.


We're not there yet, this crash has barely started. IMO logic & commonsense both overwhelmingly suggest it's coming & it's unavoidable.


As I often say, we'll see.

mewbie_2

HAMISH_MCTAVISH wrote: »

The only question is when it will start, and how high will it get.

That's two questions.

Generali

Conrad wrote: »

Sorry, you've misunderstood.

Just about every lender has been using affordability models as opposed to income multiples for some time now.

Affordability models still result in some applicants being granted 6 x salary and others 3.

Those with high unsecured debt levels, simply ask Dad to repay it for them just prior to completion and the day after they can max out and pay Dad back, so as ever if determined enough, people will always beat the system.

In Aus the banks assume that any credit cards you have are maxed out when you take out a mortgage. It is normal these days for people to cut up all but one card and ask for the limit to be reduced on the remaining one.

Generali

HAMISH_MCTAVISH wrote: »

Securitised lending will resume a couple of years from now

This sounds like the rantings of an idiot (and TBH most of your posts come across like that old bean) but Goldmans I understand are putting together a new structured product which will work in a very similar way to CDOs in effect.

Whether or not they get any buyers is a different matter of course.

ad9898_3

Generali wrote: »

This sounds like the rantings of an idiot (and TBH most of your posts come across like that old bean) but Goldmans I understand are putting together a new structured product which will work in a very similar way to CDOs in effect.

Whether or not they get any buyers is a different matter of course.

I'm afraid your intellect is likely to be wasted on this one Gen, the word 'rant' is quite apt, debate is unlikely to happen as you will likely get 'laughed down and shouted down', Hamish's sole existance on the forums I have read is to laugh and stick the bird at people he perceives to be less fortunate than himself.

ad9898_3

HAMISH_MCTAVISH wrote: »

I'd totally agree, and it's something I've posted about in detail previously (elsewhere).

The existing shortage of funding is still leading to significant mortgage rationing. However the levels of funding for new purchase has increased pretty consistently for 5 months or so. Numbers of approvals, and average loan amount are both also increasing. And regardless of opinion, this has proven to be enough to raise prices, for now at least.

Securitised lending will resume a couple of years from now, but first prices have to stop falling and stabilise to lower percieved investor risk. By that time, investors will have tired of low returns elsewhere and the risk/return threshold will be breached to reopen the securitised lending merry go round. The products will be different, the risk rating methodology will change, but the basic principle will return.

And when it does, the floodgates will open as a wave of pent up demand is satisfied, mortgage margins will reduce as effective competition resumes, and affordability criteria will therefore be enhanced, leading to higher prices even if supply also increases, as it surely will at some point.

The next boom is built into the system already, due to population increase and supply lagging demand. The only question is when it will start, and how high will it get.

This is all wrong on so many levels, I can't even be bothered to explain them, utterly delusional.

Thrugelmir

Generali wrote: »

This sounds like the rantings of an idiot (and TBH most of your posts come across like that old bean) but Goldmans I understand are putting together a new structured product which will work in a very similar way to CDOs in effect.

Whether or not they get any buyers is a different matter of course.

In principle there's nothing wrong with securitised products. Providing when the wrapper is peeled off that the product contains what it should. Something which Lehmans were allowed to get away with.

The new Banking regulations will ensure that off balance sheet financing is counted as being as on balance sheet. Banks will be required to hold more Capital , so the risk of another NR style collapse will be greatly diminished.